The Wagner Law Group | Est. 1996

Sophisticated Legal Solutions And Boutique-Style Service

IRS Releases 2014 Limits for Welfare Benefit Plans

On Behalf of | Dec 15, 2013 |

The IRS has released the 2014 inflation-adjusted maximums for certain employee welfare benefit plans and the dollar amounts used for certain discrimination tests.

For the definition of “highly compensated employee”, which is used in several welfare plan discrimination tests, the threshold remains at $115,000 when determinations are based on compensation from the preceding year.

For adoption assistance plans, because of a change in the law, the maximum amount that can be excluded from an employee’s gross income for adoption expenses has increased to $13,190 (a $220 increase from 2013).

Eligible long-term care premiums that are treated as medical care expenses cannot exceed: $370 for individuals age 40 or less; $700 for ages 41 to 50; $1,410 for ages 51 to 60; $3,720 for ages 61 to 70 and $4,660 for those over age 70.

The 2014 limit on contributions to health savings accounts (“HSAs”) increases to $3,300 for a self-only HSA and $6,550 for a family HSA. For 2014, a high deductible health plan (“HDHP”) plan must have a minimum deductible of $1,250 for self-only coverage, and $2,500 for family coverage. The maximum out-of-pocket amount for a HDHP (including deductibles, co-payments and other amounts, not including premiums) cannot exceed $6,350 for self-only coverage and $12,700 for a family.

Employees’ pre-tax employee contributions to health care flexible spending account plans are limited to $2,500 per year as of the first day of the first plan year beginning on or after January 1, 2014.

In 2014, the monthly limit on non-taxable qualified parking expense reimbursements will increase to $250 (up $5 from 2013). However, because of an expiring law, the monthly limit on non-taxable qualified transportation expense reimbursements will decrease to $130 (a $115 reduction from 2013).

The maximum tax-exempt benefit from a dependent care assistance plan remains at $5,000, as this amount is not indexed to inflation.

Health Care Reform

IRS Reconciles Conflict Between PPACA & HSA Rules

The IRS has issued guidance (IRS Notice 2013-57) stating that a health plan will not fail to qualify as a HDHP merely because it provides the “preventive health services” required under PPACA.

In general, an individual is eligible to contribute to a HSA if he or she participates in a HDHP that meets certain statutory and regulatory requirements. In most cases, a qualified HDHP may not pay benefits until its deductible has been satisfied. However, in one exception to the general rule, expenses for “preventive care” may be paid before the deductible has been reached. Previously, in Notices 2004-23 and 2004-50, the IRS had defined “preventive care” for the purposes of HDHPs and HSA contribution eligibility.

PPACA requires non-grandfathered group health plans and other health insurance coverage offered in the individual or group market to cover “preventive health services” without imposing cost-sharing requirements. However, the definition of “preventive health services” in PPACA is different from the definition of “preventive care” that applies to HDHPs and includes:

  • services recommended by the United States Preventive Services Task Force;
  • immunizations recommended by the Advisory Committee on Immunization Practices;
  • preventive care and screenings for infants, children, adolescents and women provided for in guidelines supported by HHS’s Health Resources and Services Administration (“HRSA”); and
  • preventive care and screening for women supported by HRSA.

To reconcile these two sets of requirements, IRS has stated that, for purposes of HSA contribution eligibility, any coverage in a HDHP that meets the definition of “preventive care” under Notices 2004-23 and 2004-50 will continue to be considered “preventive care”, even if the coverage does not meet the PPACA definition of “preventive health services”, and any coverage that meets the definition of “preventive health services” under PPACA will also be considered “preventive care” for purposes of HSA contribution eligibility.

IRS Provides Transitional Relief from PPACA’s Individual Mandate Penalties

The IRS has issued guidance providing transitional relief from the individual mandate penalty contained in PPACA. This relief is limited to employees of employers that sponsor non-calendar year group health plans.

PPACA’s individual mandate requires all non-exempt taxpayers to maintain minimum essential coverage effective January 1, 2014. Taxpayers who fail to obtain minimum essential coverage by this date will be assessed a penalty equal to the greater of a flat dollar amount or a percentage of the taxpayer’s annual income above the tax-filing threshold.

The transitional relief allows employees and their spouses and dependents who are eligible to enroll in their employer’s non-calendar year health plan to avoid individual mandate penalties for the months between January 1, 2014, and the month in which the employer’s 2014 plan year begins.

IRS Provides Guidance on Application of PPACA to HRAs and Health FSAs

The IRS has issued Notice 2013-54 on the application of PPACA to health reimbursement arrangements (“HRAs”) and health flexible spending accounts (“health FSAs”). Most of the Notice focuses on how two of PPACA’s market reform provisions – the prohibition on annual dollar limits for essential health benefits (“EHBs”) and the requirement that certain preventive services be provided without cost-sharing – apply to HRAs and health FSAs.

HRAs and Individual Contracts.  The IRS has previously stated that HRAs with annual dollar limits on EHBs are permitted only if they are integrated with group health plans that have no such limits and if the HRA is available only to employees who are covered under the primary group health plan.

The Notice clarifies that an employer-sponsored HRA cannot be integrated with individual policies. Thus, employer-sponsored HRAs that are paired with coverage purchased on the individual market will violate PPACA’s annual dollar limit prohibition and preventive services requirement.

Integration of HRAs with Group Health Plans.  The Notice explains that HRAs can be integrated with a group health plan through one of two methods.

Under the first method, an HRA is integrated with a group health plan if:

  • The employer offers a group health plan that provides minimum value, meaning the plan’s share of the total cost of covered benefits must be at least 60%;
  • Employees enrolled in the HRA are also enrolled in any group health plan that provides minimum value, regardless of whether the employer sponsors the plan; and
  • The HRA is available only to employees who are enrolled in group coverage that provides minimum value.

Under the second method, an HRA is integrated if:

  • The employer offers a group health plan that does not consist solely of excepted benefits;
  • Employees enrolled in the HRA are also enrolled in a group health plan;
  • The HRA is available only to employees who are enrolled in a non-HRA group health plan, regardless of whether the employer sponsors the plan; and
  • The HRA only provides reimbursements of copayments, coinsurance, deductibles and premiums of the group health plan, and medical care that is not essential health benefits.

HRAs and Opt-out Provisions.  HRAs must now give employees an option to opt out of the HRA. This opt-out must be offered at least once a year to allow certain employees to claim a premium tax credit through the Exchange.

Health FSAs and PPACA’s Market Reforms.  The IRS previously issued interim final regulations exempting health FSAs from the prohibition on annual dollar limits for EHBs. The Notice clarifies that this exemption applies only if the health FSA is offered through a Code Section 125 cafeteria plan.

The Notice explains that health FSAs remain subject to PPACA’s preventive services requirements unless the health FSA is an “excepted benefit.” Health FSAs are excepted benefits if: (i) the employer also offers a group health plan coverage that is not limited to excepted benefits, and (ii) the maximum benefit payable to the participant is not more than two times the participant’s salary reduction amount for the health FSA for that year (or, if greater, the participant’s salary reduction amount for the year plus $500).

In other words, the typical employee-contribution-only health FSA is an excepted benefit if the employer also offers a group health plan.

The guidance provided in Notice 2013-54 applies for plan years beginning on or after January 1, 2014. Notice 2013-54 can be accessed at:

IRS Issues Proposed PPACA Reporting Regulations

The IRS has issued two sets of proposed regulations on the reporting requirements under PPACA. The first set of regulations covers the reporting of “minimum essential coverage” while the second deals with health insurance coverage offered by large employers.

The reporting requirements were originally supposed to take effect as of January 1, 2014. However, the effective date was delayed at the same time as the employer shared responsibility (or pay-or-play) provisions. As a result, the first reports will be due in early 2016 for the 2015 calendar year.

The first proposed regulations are directed at entities that provide their employees with “minimum essential coverage” that individuals must obtain to avoid a tax penalty under PPACA.

For insured group health plans, the insurer will be responsible for this reporting. However, self-insured plans must file their own information which includes:

  • the name, address and taxpayer identification number of each “responsible individual” (e.g., the insured employee) and other covered individuals (e.g., spouse and dependents);
  • whether the health insurance coverage is a qualified plan offered through an Exchange;
  • the months for which the individual was enrolled in coverage; and
  • the name, address and EIN of the employer maintaining the plan.

This information must also be sent to the responsible individual, but not to other covered individuals, along with the insurance policy number (if applicable) and the reporting entity’s name, address and contact number.

The second set of reporting requirements applies to large employers (50 full-time employees or equivalents) and relates to the employer pay-or-play rules. To determine if an employer is considered a large employer, all members of a controlled or aggregated group will be treated as a single employer.

The regulations “require those employers to report to the IRS information about their compliance with the employer shared responsibility provisions…and about the health care coverage they have offered employees.”

Along with some duplicative information, this regulation requires employers to report to IRS and to employees:

  • the length of any waiting period for the group health plan;
  • a certification as to whether the employer offers its full-time employees, and their dependents, the opportunity to enroll in minimum essential coverage under the plan;
  • the months of the year for which coverage was available under the plan; and
  • the monthly premium for the lowest cost option in each of the enrollment categories under the plan.

The IRS has stated that it hopes to simplify these reporting rules before final regulations are issued. One proposal would allow certain information to be transmitted to employees via Form W-2, rather than through separate communication.

PPACA’s Final Individual Shared Responsibility Rules Issued

The IRS has finalized its regulations on the individual shared responsibility provisions contained in PPACA. Despite the delay, until 2015, for the employer shared responsibility penalties, the individual shared responsibility provisions, and penalties, will be effective for 2014. Under these provisions, all individuals (with certain limited exceptions) must either be insured by “minimum essential coverage” or pay a penalty on their federal tax returns.

The final regulations make only minor changes to the proposed regulations that were issued earlier this year.

Minimum Essential Coverage. For purposes of the shared responsibility penalty, an individual is considered to have minimum essential coverage for any month in which he or she is enrolled in one of the following types of coverage for at least one day:

  • Employer-sponsored coverage (including COBRA and retiree coverage);
  • Coverage purchased in the individual market; or
  • Government-sponsored coverage, such as Medicare, Medicaid, the Children’s Health Insurance Program, or TRICARE.

Under the final regulations, employer-sponsored coverage includes plans offered “on behalf of employers” such as multiemployer plans or plans offered by a third party such as a professional employer organization.

The final regulations do not address arrangements in which an employer provides subsidies or funds a pre-tax arrangement for employees to use to obtain coverage in the individual market. According to IRS, “it is anticipated that future guidance will address the application” of the regulations to these types of arrangements.

Minimum essential coverage does not include specialized coverage such as vision care or dental care, workers’ compensation, disability policies, or coverage for a specific disease or condition. The final regulations state that certain limited TRICARE programs are also excluded from the definition of minimum essential coverage and that more details will be provided under future regulations.

Calculating Shared Responsibility Penalty. The penalty is the greater of a flat dollar amount or a specific percentage of income. For 2014, the penalty amount will be the greater of $95 per adult and $47.50 per child under age 18 (maximum of $285 per family) or 1% of income over the tax-filing threshold (currently, $19,500 for a 2012 joint return).

The preamble to the final regulations states that a taxpayer will be liable for the penalty imposed on his or her dependent, regardless whether the taxpayer actually claims the individual as a dependent or whether another person is legally obligated to provide the child’s health care coverage. However, HHS may grant a hardship exemption if the child is ineligible for Medicaid or CHIP.

The 2014 shared responsibility penalties are payable when individuals file their 2014 federal income tax returns in 2015. If the penalty applies for less than a full calendar year, it is prorated to 1/12 of the annual penalty for each month without coverage.

DOL Issues Guidance on PPACA’s Exchange Notice Requirement and 90-Day Waiting Period Limit

The DOL has issued Part XVI of its Frequently Asked Questions (“FAQs”) on the implementation of PPACA. This set of FAQs address questions relating to the distribution requirements for the Notice of Coverage Options (also called the Exchange Notice) and PPACA’s 90-day waiting period limit for coverage.

Exchange Notices. PPACA requires employers to provide the Exchange Notice, which explains the coverage options available under the Health Insurance Exchanges (also called Health Insurance Marketplaces) that will open January 1, 2014. Employers must provide Notices to all employees, regardless of whether the employees are enrolled in, or eligible for, its group health plan. The DOL has previously issued Technical Release 2013-02, which provided employers with guidance on this topic along with model Notices employers can use to satisfy this obligation.

The FAQs explain that an employer can satisfy its obligation to furnish Notices to its employees by engaging a third party to distribute the Notice. Third parties would include insurance companies, third party administrators and multiemployer plans. If the third party fails to provide Notices to all of the employer’s employees, however, the employer remains obligated to provide the Notice to the excluded employees. For example, if the third party only provides Notices to employees who are enrolled in the employer’s group health plan, the employer must provide the Notice to all employees who are not in the plan.

90-day Waiting Period Limit.  PPACA also mandates that group health plans and health insurance issuers offering group health coverage cannot impose waiting periods that exceed 90 days. The FAQs confirm that plans and issuers may continue to rely on the guidance provided in the proposed rules until 2014.

The FAQs acknowledges that the DOL will issue final rules on this topic sometime in the near future. To the extent that these final rules contain provisions that are more restrictive than those found in the proposed rules, such provisions will not become effective before January 1, 2015, in order to provide plans and issuers with sufficient time to comply.

FAQ Part XVI can be accessed at:

Agencies Issue PPACA’s Final Wellness Program Regulations

IRS, DOL and HHS have issued final regulations addressing employee wellness programs under the PPACA. These regulations apply to insured and self-funded group health plans (including grandfathered and non-grandfathered plans) for plan years beginning on or after January 1, 2014.

The final regulations:

  • Retain the concepts of “participatory” and “health-contingent” wellness programs:
  • Participatory wellness programs focus on participation and do not base rewards on meeting specific health status factors. Examples include programs that reward participation in a health education seminar or pay for part of the cost of membership in a fitness center.
  • Health-contingent wellness programs provide a reward for satisfying a standard related to a health status factor. Under these programs: 1) individuals must be given the opportunity to qualify for the reward at least once per year; 2) rewards must be available to all similarly-situated individuals; 3) the total reward for meeting a health standard generally must not exceed 30% of the cost of employee-only coverage; 4) there must be a reasonable connection between a wellness program’s health standard and the promotion of good health; and 5) materials that describe the plan must disclose that an alternative health standard is available.
  • Categorize health-contingent programs as either “activity-based” or “outcome-based”:
  • Activity-based programs do not require individuals to attain specific health outcomes. Examples include walking, diet or exercise programs.
  • Outcome-based programs require individuals to attain a specific health outcome. Wellness programs associated with achieving a certain BMI, cholesterol level or nonsmoker status are considered outcome based.
  • Maintain the requirement that health-contingent programs must provide a reasonable alternative standard under which participants can obtain the reward:
  • Activity-based wellness programs must provide reasonable alternative standards to individuals who do not meet the initial standard due to a medical issue or condition (e.g., individuals who cannot participate in a walking program due to recent surgery or medical condition).
  • Outcome-based wellness programs must provide reasonable alternative standards to individuals who do not meet an initial standard that is related to a health factor (e.g., individuals with high cholesterol). In a significant change from the earlier regulations, the alternative standard must be provided to all individuals who do not meet the program’s standards, regardless of any medical condition or other health status
  • Require wellness programs to provide greater deference to the opinion of an individual’s personal physician. Under the proposed regulations, where a personal physician found that a plan’s alternative standard was medically inappropriate for the individual, the plan was required to provide a different standard which accommodated the physician’s recommendations. The final regulations maintain this requirement. However, the final regulations also require the program to permit the individual to satisfy the recommendations of his or her personal physician as a second reasonable alternative under an outcome-based program, even where the program’s alternative standard is not medically inappropriate.

The Health Insurance Portability and Accountability Act (“HIPAA”) authorizes the IRS to impose an excise tax penalty of $100 per day of noncompliance for each affected individual on employers that sponsor noncompliant wellness programs. The DOL is also actively auditing plans for compliance with the wellness program rules and is empowered to bring a civil action against an employer to enforce these requirements.

To avoid costly penalties and unwanted litigation, employers that sponsor wellness programs are advised to consult with qualified benefits advisors to ensure that their programs meet the requirements contained in the final regulations.

Same-Sex Marriage

IRS Confirms Same-Sex Marriages Will Be Recognized for Federal Tax Purposes

IRS has issued guidance (Revenue Ruling 2013-17) confirming that same-sex couples will be considered married for federal tax purposes if they are married in a state or foreign country that recognizes same-sex marriages, regardless of where the couple resides. In addition, IRS has released Frequently Asked Questions related to this guidance for same-sex spouses and group health plan sponsors.

The guidance follows the Supreme Court’s decision inUnited States v. Windsor that declared as unconstitutional Section 3 of the Defense of Marriage Act, which previously prevented the federal government from recognizing same-sex marriage.

According to the Revenue Ruling, which is generally effective September 16, 2013, but has some retroactive effects, group health plan sponsors must begin to treat all individuals in same-sex marriages as married for federal tax purposes. In response, plan sponsors are advised to take the following steps:

  • Stop imputing income for the value of employer-paid health care coverage provided to an employee’s same-sex spouse;
  • Allow pre-tax contributions through a cafeteria plan for an employee’s share of the cost of group health coverage provided to his or her same-sex spouse;
  • Make adjustments for income tax withholding that was over-withheld from an affected employee during the current year;
  • File an amended payroll tax return to claim a refund of federal payroll taxes paid on previously imputed income and on after-tax employee contributions for all open years (the IRS intends to issue streamlined procedures for employers claiming refunds);
  • Allow reimbursements of qualifying medical expenses of an employee’s same-sex spouse (and spouse’s children) from Health FSAs and HRAs; and
  • Allow reimbursements of qualifying dependent care assistance expenses for an employee’s disabled, same-sex spouse under a Dependent Care Assistance Plan (“DCAP”).

Individuals may file amended tax returns based on this ruling for all open tax years.

The guidance does not address whether IRS’s recognition of same-sex marriages is considered a change of status event under Section 125 of the Internal Revenue Code that would allow an employee to change his or her election mid-year to: (i) enroll a spouse in an employer-sponsored health and welfare plan or change benefit options, or (ii) increase Health FSA or DCAP contributions. IRS, however, has indicated that it will issue additional guidance on the retroactive application of the Windsor decision to employee benefit plans and arrangements.

Revenue Ruling 2013-17 is available at:, and the IRS FAQs regarding same-sex marriages are available at:

IRS Notice Provides Procedures to Correct Overwithholdings and Overpayments Related to Same-Sex Spousal Benefits

The IRS has issued Notice 2013-61, which outlines special administrative procedures for employers to use to correct overwithholdings of income taxes and overpayments of payroll taxes for 2013 and prior open tax years with respect to employer-provided, same-sex spousal benefits. This guidance supplements Revenue Ruling 2013-17, which clarified that under the Supreme Court’s decision in Windsor, the IRS will recognize all legally-married, same-sex couples for federal tax purposes, regardless of where the couple lives.

Correction Methods for 2013. Notice 2013-61 offers the following alternatives for employers that have treated the value of same-sex spousal benefits as compensation on their Forms 941 for the first three quarters of 2013:

  • Employers may correct overwithholding and overpayments for the first three quarters of 2013 on the fourth quarter’s Forms 941 if employees are reimbursed for overwithholdings and overpayments by December 31, 2013.
  • Employers that do not reimburse employees for the overwithholdings and overpayments by December 31, 2013 may file one Form 941-X for the fourth quarter of 2013 to correct FICA overpayments for all quarters in 2013. This alternative allows employers to avoid having to file separate Forms 941-X for each quarter of 2013.

Under the second alternative, however, employers cannot make an adjustment for income tax overwithholding. Instead, employees will receive a credit for the overwithholding when they file their 2013 federal income tax returns.

Correction Methods for Prior Years 

2010 through 2012

For calendar years 2010 through 2012, Notice 2013-61 authorizes employers to file a single Form 941-X for the fourth quarter of the applicable year to correct for FICA overpayments made in any or all quarters of that year.

While Notice 2013-61 allows employers to file only one Form 941-X to correct overpayments, it does not relieve employers of their obligation to file Forms W-2c (to allow employees to correct their prior income tax returns), obtain written consent from affected employees, and reimburse employees for FICA overpayments.

Procedural Issues. The special administrative procedures provided in Notice 2013-61 are optional and are intended to relieve filing and reporting burdens associated with the retroactive application of Revenue Ruling 2013-17. Employers may still use standard procedures for correcting income tax overwithholding and FICA overpayments.

All Forms 941 and Forms 941-X filed pursuant to Notice 2013-61 must include the name “WINDSOR” in dark, bold letters across the top of page one to alert the IRS that the forms are related to adjustments in response to Revenue Ruling 2013-17.

Recommendations.  In consideration of the guidance provided by Notice 2013-61, employers are advised to determine any income taxes that were overwithheld in 2013 and make the necessary corrections on the fourth quarter 2013 Form 941. Employers should also consider whether it would be more advantageous to simply file refund claims for prior years or to take a credit.

IRS Notice 2013-61 is accessible at:

DOL Guidance Confirms FMLA Leave Available to Same-Sex Spouses in States Recognizing Same-Sex Marriage

The DOL has issued guidance on the application of the Family and Medical Leave Act (“FMLA”) to same-sex spouses. In particular, the guidance provides that employees in same-sex marriages are eligible to take FMLA leave to care for their spouses only if they reside in a state that recognizes same-sex marriage.

Among other things, FMLA entitles eligible employees to 12 weeks’ leave to care for a seriously ill or injured spouse or to deal with “exigencies” related to their spouse’smilitary deployment. It also provides employees with up to 26 weeks’ leave to care for a spouse who has a military service related illness or injury.

DOL’s guidance comes in the wake of the Supreme Court’s decision this past June in Windsor, which struck down the provision in the Defense of Marriage Act (DOMA) limiting the definition of “marriage” and “spouse” under federal laws to heterosexual marriages.

Current FMLA regulations say the term “spouse” only includes a spouse if the marriage is recognized under the laws of the state in which the employee resides. However, while DOMA was in effect, the federal government would not recognize same-sex spouses.

DOL says the Supreme Court’s decision means that married same-sex couples residing in states where same-sex marriage is recognized must now be afforded spousal FMLA rights. On the other hand, employers are not required to make FMLA leave available to same-sex spouses who reside in a state that does not recognize same-sex marriage.

DOL Secretary Tom Perez recently commented that this guidance is “one of many steps” the agency will take to implement the Supreme Court’s decision in Windsor, leaving open the possibility that current regulations will be changed to give all same-sex marriages FMLA rights, regardless of the state of residence.

The updated guidance is available at:

Massachusetts Health Care Reform

Massachusetts Health Care Reform

Massachusetts Eliminates State’s Premium Conversion Plan Requirement 

The Massachusetts Health Connector (the “Connector”) has issued Administrative Bulletin 03-13 which eliminates the requirement that employers maintain premium conversion plans that allow most employees to purchase health care coverage with pre-tax contributions. The Bulletin resolves a conflict between the Massachusetts requirement and IRS rulings under PPACA.

Massachusetts’ Premium Conversion Plan Requirement.

Under the Massachusetts Health Care Reform Act, employers doing business in Massachusetts with 11 or more full-time equivalent employees had to adopt and maintain a premium conversion plan that allowed all its employees (with certain exceptions, such as employees who work fewer than 64 hours per month) to pay their share of health care premiums with pre-tax dollars. Most full-time employees would use a premium conversion plan to pay employee contributions for their employer’s regular group health plan coverage. However, those employees who did not meet the eligibility requirements for their employer’s regular plan also had the right to pay for health care coverage (generally from the Connector) through a premium conversion plan.

Recent Federal Guidance Regarding Section Premium Conversion Plans. 

IRS Notice 2013-54 provides that, beginning in 2014 (with transition rules for non-calendar year plans), PPACA prohibits employers from making contributions to premium conversion plans for employees to use for the purchase of individual health insurance contracts, unless the employer’s contribution is taxable to the employee. This guidance is broad enough to encompass even employee-pay-all premium conversion plans and prohibit their use to purchase individual contracts.

Consequently, Massachusetts’ premium conversion plan requirement directly conflicts with the guidance provided in Notice 2013-54.

Administrative Bulletin 03-13

According to Bulletin 03-13, the Connector will immediately seek to have the Massachusetts legislature repeal the premium conversion plan requirement. Pending the repeal, the Connector will not enforce the premium conversion requirement nor assess penalties for failure to comply with the requirement.

Massachusetts’ Fair Share Penalty Repealed despite Delay in Employer Mandate

On July 3, 2013, the Massachusetts Senate passed legislation repealing the state’s Fair Share Employer Contribution law, effective immediately. The Massachusetts Fair Share Employer Contribution law, which was the state’s version of the employer mandate, required employers with eleven or more Massachusetts full time equivalent employees to offer subsidized health care coverage to employees or pay a $295 penalty per full-time equivalent employee.

Governor Patrick’s administration originally had agreed to eliminate the state’s Fair Share Employer Contribution law because PPACA’s employer mandate was set to take effect in January 2014. Following the Obama administration’s announcement of a one-year delay in the effective date of PPACA’s employer mandate, Governor Patrick commented that he would still not block the repeal of the state’s employer mandate.

On July 12, 2013, Governor Patrick held true to his word and signed legislation repealing the Massachusetts Fair Share Employer Contribution law.

Plan Sponsor Or Plan Adviser: Final Reminder For Required Annual Notices

If you are a Plan Sponsor, it is time for the final reminder about annual notices, as year-end deadlines are literally just around the corner. Certain aspects of your plan’s tax qualification, as well as fiduciary compliance, are contingent upon proper notice being provided to participants. If you are a financial adviser or consultant to retirement plan clients, you also should be tracking the annual notice requirement. For many clients you are more than a service provider – you are the “go to” resource on all questions involving the plan. It may be helpful to remind your Plan Sponsor clients that required annual notices, if applicable, must be sent to participants and beneficiaries on a timely basis and these notices can be combined for distribution.

Required Notices

  • Defined contribution retirement plans generally must send updated participant fee disclosures no later than 12 months following the date that the plan’s prior disclosure was issued. However, the Department of Labor granted a one-time extension of up to 18 months to issue the disclosure. Thus, if the 2013 disclosure was extended, it must be distributed within 18 months following the date the 2012 disclosure was provided, and if the 2013 disclosure was not extended, the plan may postpone the 2014 disclosure for up to 18 months following the date the 2013 disclosure was issued.
  • Defined contribution retirement plans that use a qualified default investment alternative (“QDIA”) to invest the accounts of participants without investment elections must provide an annual notice describing the QDIA to participants at least 30 days prior to the beginning of each plan year. Thus, for a calendar year plan, the 2014 notice must be distributed by December 1, 2013.
  • Defined contribution retirement plans with an automatic enrollment feature (e.g., an eligible automatic contribution arrangement or qualified automatic contribution arrangement) must provide an annual notice to all participants on whose behalf contributions may be automatically made to the plan at least 30 days prior to the beginning of each plan year. Thus, for a calendar year plan, the 2014 notice must be distributed by December 1, 2013.
  • Defined contribution retirement plans that rely on a “safe harbor” to satisfy required nondiscrimination testing must provide an annual “safe harbor” notice describing the plan’s contribution features and certain other plan features at least 30 days prior to the beginning of each plan year. Thus, for a calendar year plan, the 2014 notice must be distributed by December 1, 2013.
  • Defined benefit plans must send an annual notice to participants describing the plan’s funded status for the past two years, a statement of the plan’s assets and liabilities and certain other information relating to the plan’s funded status within 120 days after the end of the plan year. For calendar year plans, the deadline is April 30. The deadline for small plans that cover fewer than 100 participants is the due date for the plan’s Form 5500 Annual Return/Report.

403(b) Plans. For those of you involved with 403(b) plans, the required notices described above also may apply. In addition, remember that Plan Sponsors must comply with IRS regulations for a written plan document, which were effective December 31, 2009. Insofar as many 403(b) Plan Sponsors are not yet in compliance, the IRS has provided for corrective action under the Employee Plans Compliance Resolution System (EPCRS). There is a 50% fee reduction available under the EPCRS procedure if the written plan is submitted as a voluntary correction on or before December 31, 2013.