Welfare Benefits – ERISA Benefits Law

IRS Announces 2024 HSA Contribution Limits, HDHP Minimum Deductibles and HDHP Maximum Out-of-Pocket Amounts

The IRS has announced 2024 HSA and HDHP limits as follows:

Annual HSA contribution limitation. For calendar year 2024, the annual limitation on deductions for HSA contributions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $4,150 (up from $3,850 in 2023), and the annual limitation on deductions for HSA contributions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $8,300 (up from $7,750 in 2023).

High deductible health plans. For calendar year 2024, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,600 for self-only coverage or $3,200 for family coverage (up from $1,500 and $3,000 in 2023), and with respect to which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $8,050 for self-only coverage or $16,100 for family coverage (up from $7,500 and $15,000 in 2023).

Rev. Proc 2023-23

IRS Announces 2023 HSA Contribution Limits, HDHP Minimum Deductibles and HDHP Maximum Out-of-Pocket Amounts

The IRS has announced 2023 HSA and HDHP limits as follows:

Annual HSA contribution limitation. For calendar year 2023, the annual limitation on deductions for HSA contributions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,850 (up from $3,650 in 2022), and the annual limitation on deductions for HSA contributions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $7,750 (up from $7,300 in 2022).

High deductible health plans. For calendar year 2023, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,500 for self-only coverage or $3,000 for family coverage (up from $1,400 and $2,800 in 2022), and with respect to which the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $7,500 for self-only coverage or $15,000 for family coverage (up from $7,050 and $14,100 in 2022).

Rev. Proc 2022-24

IRS Announces COLA Adjusted Retirement Plan Limitations for 2022

The Internal Revenue Service today released Notice 2021-61 announcing cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2022.

Highlights Affecting Plan Sponsors of Qualified Plans for 2022

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $19,500 to $20,500.
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,500.
The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains is increased from $13,500 to $14,000.
The limit on annual contributions to an IRA remains unchanged at $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $230,000 to $245,000.
The limitation for defined contribution plans under Section 415(c)(1)(A) is increased for 2022 from $58,000 to $61,000.
The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $290,000 to $305,000.
The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of “key employee” in a top-heavy plan is increased from $185,000 to $200,000.
The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five year distribution period is increased from $1,165,000 to $1,230,000, while the dollar amount used to determine the lengthening of the five year distribution period is increased from $230,000 to $245,000.
The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $130,000 to $135,000.

The IRS previously updated Health Savings Account limits for 2021. See our post here.

The following chart summarizes various significant benefit Plan limits for 2020 through 2022:

Type of Limitation	2022	2021	2020
415 Defined Benefit Plans	$245,000	$230,000	$230,000
415 Defined Contribution Plans	$61,000	$58,000	$57,000
Defined Contribution Elective Deferrals	$20,500	$19,500	$19,500
Defined Contribution Catch-Up Deferrals	$6,500	$6,500	$6,500
SIMPLE Employee Deferrals	$14,000	$13,500	$13,500
SIMPLE Catch-Up Deferrals	$3,000	$3,000	$3,000
Annual Compensation Limit	$305,000	$290,000	$285,000
SEP Minimum Compensation	$650	$650	$600
SEP Annual Compensation Limit	$305,000	$290,000	$285,000
Highly Compensated	$135,000	$130,000	$130,000
Key Employee (Officer)	$200,000	$185,000	$185,000
Income Subject To Social Security Tax (FICA)	$147,000	$142,800	$137,700
Social Security (FICA) Tax For ER & EE (each pays)	6.20%	6.20%	6.20%
Social Security (Med. HI) Tax For ERs & EEs (each pays)	1.45%	1.45%	1.45%
SECA (FICA Portion) for Self-Employed	12.40%	12.40%	12.40%
SECA (Med. HI Portion) For Self-Employed	2.90%	2.90%	2.90%
IRA Contribution	$6,000	$6,000	$6,000
IRA Catch-Up Contribution	$1,000	$1,000	$1,000
HSA Max. Contributions Single/Family Coverage	$3,650/ $7,300	$3,600/ $7,200	$3,550/ $7,100
HSA Catchup Contributions	$1,000	$1,000	$1,000
HSA Min. Annual Deductible Single/Family	$1,400/ $2,800	$1,400/ $2,800	$1,400/ $2,800
HSA Max. Out Of Pocket Single/Family	$7,050/ $14,100	$7,000/ $14,000	$6,900/ $13,800

COVID Stimulus Bill provides Free COBRA Coverage

On March 11, 2021, the American Rescue Plan Act of 2021 (“ARPA”) was signed into law by President Biden. The ARPA includes several significant health, pension funding, executive compensation and other tax changes. Notably, the ARPA provides temporary COBRA and Affordable Care Act subsidies intended to help people maintain health insurance during the pandemic.

Six months of free cobra

The ARPA provides employers a 100% COBRA subsidy for “assistance eligible individuals” where the qualifying event is an involuntary termination of employment or reduction in hours. An “assistance eligible individual” is any COBRA qualified beneficiary who loses group health coverage on account of a covered employee’s reduction in hours of employment or involuntary termination of employment. The subsidy applies not only to federal COBRA coverage, but also to state law programs that provide comparable continuation coverage.

For a period of up to six months, an “assistance eligible individual” is treated as having paid their COBRA coverage in full if the individual timely elects COBRA coverage. This means the person to whom the premiums are usually paid cannot collect the premium from the assistance eligible individual. One hundred percent of the premium is subsidized by the federal government via a tax credit mechanism.

Tax Credit

The tax credit works by allowing the “person to whom premiums are payable” (the employer for a self-insured plan and the insurer for a fully insured plan) to claim a tax credit for the COBRA premium assistance that was provided to an assistance eligible individual for any period of COBRA coverage during the subsidy period of April through September 2021.

This credit applies against that entity’s liability for the Medicare Hospital Insurance (“HI”) tax (i.e., the 1.45% Medicare payroll tax). It also applies as a credit against any applicable similar tax under the Railroad Retirement Tax Act (“RRTA”) imposed on compensation paid to railroad employees and representatives. The amount of the credit generally cannot exceed the HI tax (or RRTA tax), reduced by any credits otherwise allowed under other COVID-19 relief acts (the Coronavirus Aid, Relief, and Economic Security Act or the Families First Coronavirus Response Act).

The ARPA provides that the IRS could allow such credits to be advanced, and the IRS may issue further guidance about the mechanics of such an advance.

DURATION OF SUBSIDY PERIOD

The ARPA COBRA subsidy period is between April 1, 2021 and September 30, 2021. Importantly, the ARPA subsidy is available only to those whose initial COBRA period ends (or would have ended if COBRA had been elected/did not lapse) either during or after this six-month period. The subsidy does not lengthen the COBRA period.

OPTIONAL New Election Right

Employers are permitted to allow individuals who are eligible for ARPA COBRA relief to change elections to other plan options that have the same or lower cost premiums. This election right is optional and employers are not required to offer it.

Notification Requirement

Plan administrators must notify eligible employees by May 31, 2021 (60 days after April 1, 2021), and the notice must include a description of the extended election options as well as certain plan information. The U.S. Department of Labor is required to issue model COBRA notices addressing the subsidy, and we expect the government agencies to issue guidance on various issues related to the subsidy in the coming weeks.

Please reach out to your ERISA Benefits Law contact if you have any questions about the implementation of this COBRA relief.

American Rescue Plan Act of 2021, H.R. 1319

Webinar: The Must-Do’s and Common Mistakes of Employee Benefit Planning

Lisa Dursey joins Stephanie Rising of The Rising Effect in a 15-minute webinar discussing the must-do’s and common mistakes of administering employee benefit plans. This webinar provides a concise primer on how to structure and correctly administer your plans.

Stephanie starts the webinar by explaining the importance of your new-hire process, and then dives more deeply into traditional and lifestyle benefits that attract and retain talented employees. Lisa then outlines the common mistakes that are made in administering those benefits, and how to correct them.

Contact ERISA Benefits Law to discuss your benefit plan administration or for help resolving any plan errors. Please note that in addition to general benefits advice, ERISA Benefits Law attorneys are well versed in designing sick leave policies for COVID-19.

Corinavirus Impact on Arizona Paid Sick Time; Vacation Pay; and WARN Act Compliance

This post addresses the paid sick time, vacation pay, and WARN Act issues that employers should keep in mind as the Coronavirus causes escalating business disruptions, including both voluntary and government-ordered business closures.

We stand ready to assist employers with WARN Act notice, Arizona paid sick time, vacation/PTO and severance compliance issues raised by the business disruptions Arizona businesses are experiencing due to the Coronavirus. In addition, we will continue to update our clients as legislation affecting employee benefits is enacted in response to the Coronavirus outbreak. Together we will weather this storm, like we did in 2001 and in 2009.

Arizona Paid Sick Time

Arizona’s paid sick time law permits employees to use paid sick time for the following circumstances that may apply to the coronavirus outbreak:

Closure of the employee’s place of business by order of a public official due to a public health emergency

Therefore, if the local, state or federal government orders the closure of an Arizona business, you will need to permit employees to receive paid sick time under Arizona law for the time of the closure, up to the amount of paid sick time they have available.

An employee’s need to care for a child whose school or place of care has been closed by order of a public official due to a public health emergency.

Therefore, most Arizona businesses already need to provide paid sick time leave to parents who need to stay home to care for children whose school or daycare center has been closed by order of the state.

Care for oneself or a family member when it has been determined by the health authorities having jurisdiction or by a health care provider that the employee’s or family member’s presence in the community may jeopardize the health of others because of his or her exposure to a communicable disease, whether or not the employee or family member has actually contracted the communicable disease.

This provision could arguably be construed to cover employees who are staying home and self-quarantining in the current circumstances. Therefore, if an Arizona business voluntarily closes (without being ordered by the state, local or federal authorities to close), it should evaluate whether to permit employees to use paid sick time under Arizona law for the time of the closure, up to the amount of paid sick time the employee has available.

Arizona Employers can Require Employees to Use their Paid Sick Time in Certain Circumstances

While Arizona law does not explicitly provide that an employer can designate leave time as earned paid sick time when an employee has not requested to use earned paid sick time, the Arizona Industrial Commission FAQs explain that the Industrial Commission will not pursue enforcement when an employer designates an employee’s time off from work as earned paid sick time, provided that the employer has a good faith belief that the absence meets the requirements of earned paid sick time usage.

Therefore, we recommend that if a local, state or federal authority orders your Arizona business to close, you notify all of your employees that you will treat the closure time as paid sick time under Arizona law to the extent employees have paid sick time available.
Further, if you voluntarily close, without being ordered to, you should give serious consideration to treating the closure time as paid sick time under Arizona law to the extent employees have paid sick time available, and further letting your employees know that if they do not want to take the time off as paid sick time they should let you know (within a short time period, and definitely before your next payroll deadline) that they do not want to use the time as paid sick time.

Paid Vacation or Paid Time Off

Most employers will also allow their employees to use paid time off or vacation to offset earnings losses the employees would otherwise incur during a business shutdown. However, that may not be required – i.e. it may be possible to not permit employees to take the time off as paid leave under the employer’s policy. This is entirely dependent on the provisions of your policy. If you have any questions about this, give us a call.

The WARN Act

The Worker Adjustment and Retraining Notification Act (WARN) protects workers, their families, and communities by requiring employers with 100 or more employees (generally not counting those who have worked less than six months in the last 12 months and those who work an average of less than 20 hours a week) to provide 60 calendar days advance written notice of a plant closing and mass layoff affecting 50 or more employees at a single site of employment.

WARN requires employers who are planning a plant closing or a mass layoff to give affected employees at least 60 days’ notice of such an employment action. Damages and civil penalties can be assessed against employers who violate the Act.

Fortunately, WARN makes certain exceptions to the requirement of giving employees prior notice when the business closure or layoff occurs due to unforeseeable business circumstances, faltering companies, and natural disasters. specifically, a government-ordered closure of an employment site that occurs without prior notice may be an unforeseeable business circumstance. Notice to employees and to the Arizona State rapid Response Coordinator is still required.

Pending Legislation Will Add Complexity

Legislation currently pending in Congress may provide emergency paid leave benefits for people dealing with the coronavirus outbreak (paid by the Social Security Administration), amendments to FMLA, and a new federal paid sick leave law. This legislation is in flux. When it becomes law, we will update our clients as to how to deal with it.

IRS Announces 2019 HSA Contribution Limits, HDHP Minimum Deductibles and HDHP Maximum Out-of-Pocket Amounts

The IRS has announced 2019 HSA and HDHP limits as follows:

Annual HSA contribution limitation. For calendar year 2019, the annual limitation on deductions for HSA contributions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,500 (up from $3,450 in 2018), and the annual limitation on deductions for HSA contributions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $7,000 (up from $6,900 in 2018).

High deductible health plans. For calendar year 2019, a “high deductible health plan” is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,350 for self-only coverage or $2,700 for family coverage (unchanged from 2018), and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,750 for self-only coverage or $13,500 for family coverage (up from $6,650 and $13,300 in 2018).

Rev. Proc. 2018-30

Supreme Court Rules ERISA Equitable Relief Can’t Reach Nontraceable Settlement Proceeds

Employee benefits plans regulated by the Employee Retirement Income Security Act of 1974 (ERISA or Act) often contain subrogation clauses requiring a plan participant to reimburse the plan for medical expenses if the participant later recovers money from a third party for his injuries.

On January 20, 2016, the US Supreme Court held, in MONTANILE v. BOARD OF TRUSTEES OF THE NATIONAL ELEVATOR INDUSTRY HEALTH BENEFIT PLAN that if an ERISA-plan participant wholly dissipates a third-party settlement on nontraceable items, the plan fiduciary may not rely on a subrogation provision in their health plan to bring suit under ERSA §502(a)(3) to attach the participant’s separate assets. Plan fiduciaries are limited by §502(a)(3) to filing suits “to obtain . . . equitable relief.” The Court previously held that whether the relief requested “is legal or equitable depends on [1] the basis for [the plaintiff’s] claim and [2] the nature of the underlying remedies sought.” Sereboff v. Mid Atlantic Medical Services, Inc., 547 U. S. 356, 363. In Montanile, the Court held that the Plan was not seeking equitable relief because it sought to recover against the defendant’s general assets, not specifically traceable assets. The lesson for Plan fiduciaries wishing to assert subrogation claims is to (1) put participants on specific notice of the subrogation claim as soon as the Plan learns of a significant incident of a type that might give rise to a subrogation claim (such as an accident); and (2) pursue the claim diligently before the participant receives settlement proceeds. We routinely include in our welfare wrap plan documents a vigorous subrogation reservation to protect Plans’ subrogation rights to the fullest extent practical.

IRS Extends 2015 Deadlines for Health Information Reporting Returns

IRS announced today that it is extending the due dates for the 2015 information reporting requirements under sections 6055 and 6056 of the Code. Specifically, Notice 2016-4 extends the due date:

(1) for furnishing to individuals the 2015 Form 1095-B, Health Coverage, and the 2015 Form 1095-C, Employer Provided Health Insurance Offer and Coverage, from February 1, 2016, to March 31, 2016, and

(2) for filing with the Service the 2015 Form 1094-B, Transmittal of Health Coverage Information Returns, the 2015 Form 1095-B, Health Coverage, the 2015 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically.

The extensions of due dates provided by Notice 2016-4 apply only to section 6055 and section 6056 information returns and statements for calendar year 2015 filed and furnished in 2016 and do not require the submission of any request or other documentation to the IRS.

BACKGROUND

Section 6055 requires health insurance issuers, self-insuring employers, government agencies, and other providers of minimum essential coverage to file and furnish annual information returns and statements regarding coverage provided. Section 6056 requires applicable large employers (generally those with 50 or more full-time employees, including full-time equivalents, in the previous year) to file and furnish annual information returns and statements relating to the health insurance that the employer offers (or does not offer) to its full-time employees.

Section 6721 of the Code imposes a penalty for failing to timely file an information return or filing an incorrect or incomplete information return. Section 6722 of the Code imposes a penalty for failing to timely furnish an information statement or furnishing an incorrect or incomplete information statement. Section 6721 and 6722 penalties are imposed with regard to information returns and statements listed in section 6724(d) of the Code, and section 6724(d) lists the information returns and statements required by sections 6055 and 6056.

Final regulations, published on March 10, 2014, relating to the reporting requirements under sections 6055 and 6056, specify the deadlines for information reporting required by those sections. See our prior posts here and here.

The regulations under section 6055 provide that every person that provides minimum essential coverage to an individual during a calendar year must file with the Service an information return and a transmittal on or before the following February 28 (March 31 if filed electronically) and must furnish to the responsible individual identified on the return a written statement on or before January 31 following that calendar year. The Service has designated Form 1094-B and Form 1095-B to meet the requirements of the section 6055 regulations.

The regulations under section 6056 require every applicable large employer or a member of an aggregated group that is determined to be an applicable large employer (ALE member) to file with the Service an information return and a transmittal on or before February 28 (March 31 if filed electronically) of the year following the calendar year to which it relates and to furnish to full-time employees a written statement on or before January 31 following that calendar year. The Service has designated Form 1094-C and Form 1095-C to meet the requirements of the section 6056 regulations.

The preambles to the section 6055 and section 6056 regulations provide that, for 2015 coverage, the Service will not impose penalties under section 6721 and section 6722 on reporting entities that can show that they have made good faith efforts to comply with the information reporting requirements, and that this relief applies only to furnishing and filing incorrect or incomplete information, including TINs or dates of birth, reported on a return or statement and not to a failure to timely furnish or file a statement or return. Notice 2015-87 reiterates that relief, and Notice 2015-68, provides additional information about that relief with regard to reporting under section 6055. The preambles also note, however, the general rule that, under section 6724 and the related regulations, the section 6721 and section 6722 penalties may be waived if a failure to timely furnish or file a statement or return is due to reasonable cause, that is, the reporting entity demonstrates that it acted in a responsible manner and the failure is due to significant mitigating factors or events beyond the reporting entity’s control.

PENALTIES

Employers or other coverage providers that do not comply with the extended due dates provided by Notice 2016-4 are subject to penalties under section 6722 or 6721 for failure to timely furnish and file. However, the Service is encouraging employers and other coverage providers that do not meet the extended due dates to furnish and file, and the Service will take such furnishing and filing into consideration when determining whether to abate penalties for reasonable cause. The Service will also take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting the required information to the Service and furnishing it to employees and covered individuals, such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the Service, or testing its ability to transmit information to the Service. In addition, the Service will take into account the extent to which the employer or other coverage provider is taking steps to ensure that it is able to comply with the reporting requirements for 2016.

Notice 2016-4

Cadillac Tax Delayed Until 2020

The 2016 omnibus spending bill unveiled by Congressional leaders on December 15 and signed by the President on December 18 includes a two year delay in the Cadillac Tax. In addition to delaying the Cadillac Tax until 2020, the bill makes the tax deductible for employers.

We will keep an eye on further developments in this field and will continue to update our readers as necessary. In the meantime, we recommend employers continue to monitor their glide-path toward implementation of the tax, so they can take appropriate steps to avoid incurring the tax, or minimize its impact. This includes obtaining an assessment of the likelihood of incurring the tax based on current plan design and participant behavior.

Consolidated Appropriations Act, 2016

Prior Post: IRS Proposes Various Approaches to Cadillac Tax Implementation