CCH Tax BrieﬁngSUPREME COURT UPHOLDSHEALTH CARE LAWJune 29, 2012 Special Report HIGHLIGHTS Supreme Court Upholds Health Care Individual Mandate To Take Law; All Tax Measures Preserved Effect Starting In 2014 T he U. S. Supreme Court has upheld effective since 2010 and 2011, others have All Tax Provisions Upheld the constitutionality of the 2010 been in force only this year, and many health care reform legislation, in- other major provisions apply starting in Penalty On States For cluding its linchpin individual mandate that 2013, 2014 or later. Refusing Expanded Medicaid requires individuals to pay a penalty if they fail to carry minimum essential health in- COMMENT. Uncertainty over the health Unconstitutional surance (National Federation of Independent care legislation has been abated by the Premium Assistance Tax Business, et al. v. Sebelius, SCt, 2012-2 USTC Supreme Court’s decision, but clearly not Credit To Help Offset ¶50,423). In its landmark 5 to 4 decision eliminated. Concerns remain over how handed down on June 28, 2012, the Court the IRS will interpret parts of the law as it Cost of Coverage cleared the path for President Obama’s sig- continues issuing guidance to implement Limits On Health nature health care law, the Patient Protec- it. Also adding to uncertainty are renewed tion and Affordable Care Act (PPACA) and pledges made by the presumptive GOP- FSAs And Other the Health Care and Education Reconcili- nominee for president Mitt Romney to Arrangements Continue ation Act (HCERA), to move forward on repeal the PPACA if elected, and by GOP schedule. However, the mechanism used to leaders on Capitol Hill to dismantle the Small Employer force states to expand Medicaid eligibility health care legislation. In the meantime, Health Insurance Tax did not pass constitutional muster. however, employers and taxpayers must as- Credit Preserved sume that key provisions will go into effect This special Briefing describes the tax measures in 2013, 2014, and beyond, or risk being New Rules For Charitable preserved by the Court’s decision along with the unprepared to fully comply in time for the Hospitals Move Forward related guidance issued by the Treasury Depart- law’s complex provisions. ment, the IRS, United States Department of Codiﬁed Economic Substance Health and Human Services (HHS), and the Doctrine Sustained United States Department of Labor (DOL). SUPREME COURT’S ANALYSIS IMPACT. The PPACA was passed by Con- INSIDE gress and signed into law by President The Supreme Court heard three days of oral Obama in March 2010. Since then, the arguments in March 2012 on whether theSupreme Court Analysis ........................1 IRS and other federal agencies have issued Anti-Injunction Act (Code Sec. 7421) ap- final regulations, temporary regulations, plies, whether the individual mandate (CodeIndividual Tax Provisions ...................... 2 proposed regulations, and other guid- Sec. 5000A) is a proper exercise of Congress’Business Tax Provisions ........................ 7 ance on many of the tax provisions in the taxing power or its power under the Consti- PPACA (also known as the ACA). Many tution’s Commerce or Necessary and ProperEffective Dates Chart ............................ 9 businesses and employers have waited to Clauses; and whether the PPACA’s expan- fully implement these regulations until the sion of Medicaid exceeds the government’sIRS Guidance Chart ..............................11 Supreme Court determined the fate of the spending authority. The Court also heardReporting................................................11 health care reform law. Now that the Court arguments on the viability of the PPACA has spoken, all taxpayers—businesses large without the individual mandate.Additional Provisions .......................... 12 and small, as well as individuals—must prepare in earnest for implementation of Writing for the majority, Chief Justice John the PPACA. Some requirements have been Roberts said that the government’s reading
June 29, 2012 3through a third party, the means of satisfy- thered health plan (discussed below), cover- exchange may qualify for a premium assis-ing the requirement is to purchase insurance age under Medicaid and Medicare, and oth- tance tax credit under Code Sec. 36B unlessfrom a private company.” er government-sponsored coverage, subject they are eligible for other minimum essen- to some exceptions. tial coverage, including employer-sponsored IMPACT. Chief Justice Roberts, writing coverage that is affordable and provides for the majority, recognized the tremen- Calculating the penalty. The penalty is minimum value. dous impact of the individual mandate: generally calculated by taking the greater of “By requiring that individuals purchase a flat dollar amount and a calculation based COMMENT. The 3% Withholding health insurance, the mandate prevents on a percentage of the taxpayer’s household Repeal and Job Creation Act of 2011 cost-shifting by those who would oth- income, and is imposed on a monthly basis amended the Code Sec. 36B credit to erwise go without it. In addition, the (one-twelveth per month of this ‘greater of ’ include Social Security benefits in a tax- mandate forces into the insurance risk amount). The annual flat dollar amount is payer’s modified adjusted gross income pool more healthy individuals, whose assessed per individual or dependent with- (MAGI) for purposes of the credit. premiums on average will be higher than out coverage and is scheduled to be phased their health care expenses. This allows in- in over three years ($95 for 2014; $325 for Minimum value. A plan fails to provide surers to subsidize the costs of covering the 2015; and $695 in 2016 and subsequent minimum value if the plan provides less unhealthy individuals the reforms require years, indexed for inflation after 2016; one- than 60 percent coverage of the total allowed them to accept.” half of these amounts for individuals under costs. If employer-sponsored coverage fails to provide minimum value, an employeeIndividuals who are exempt. Some in- may be eligible for the Code Sec. 36B credit.dividuals are exempt from the individual “The Supreme Court In Notice 2012-31, the IRS requested com-mandate. They include (not an exhaustive ments on how to determine if health cov-list) individuals covered by Medicaid and has left standing all tax erage under an employer-sponsored planMedicare, incarcerated individuals, indi- provisions within PPACA provides minimum value. The IRS describedviduals not lawfully present in the United several approaches: An actuarial value cal-States, health care ministry members, mem- and HCERA.” culator (AV calculator) or a minimum valuebers of an Indian tribe, and members of a calculator (MV calculator); design-basedreligion conscientiously opposed to accept- safe harbors in the form of checklists; anding benefits. No penalty will be imposed on the age of 18). The flat dollar amount is for plans with nonstandard features thatindividuals without coverage for fewer than compared to a percentage of the extent to preclude the use of the AV calculator or the90 days (with only one period of 90 days which the taxpayer’s household income ex- MV calculator without adjustments, an ap-allowed in a year). Generally, individuals ceeds the income tax filing threshold. The propriate certification by a certified actuarywith employer-provided health insurance, if applicable percentage is 1 percent for 2014, that the plan provides minimum value.it satisfies minimum essential coverage and 2 percent for 2015, and 2.5 percent foraffordability requirements, are also exempt. 2016 and subsequent years. The taxpayer’s Eligibility. In final regulations (TD 9590, penalty is equal to the greater of the flat dol- 5/18/12), the IRS explained that eligibilityAdditionally, no penalty will be imposed on lar amount or the percentage of household for the Code Sec. 36B credit is determinedindividuals who are unable to afford cover- income. The amount cannot exceed the na- by the relationship of the taxpayer’s house-age (generally, an individual will be treated tional average of the annual premiums of a hold income to the federal poverty levelas unable to afford coverage if the required “bronze level” health insurance plan offered (FPL). A taxpayer’s household income forcontribution for employer-sponsored cover- through a health exchange. the tax year must be at least 100 percent butage or a bronze-level plan on an Exchange not more than 400 percent of the FPL forexceeds eight percent of the individual’s IRS guidance pending. In March 2012, the taxpayer’s family size. A taxpayer’s fam-household income for the tax year). Those IRS Chief Counsel William Wilkins said ily includes the individuals for whom theapplicable individuals whose household in- that guidance on the individual mandate taxpayer claims a deduction for a personalcome is below their income thresholds for would wait until after the Supreme Court exemption under Code Sec. 151 for thefiling income tax returns are also exempt. hands down its decision. tax year. The final regulations clarify that a family may include individuals who are notMinimum essential coverage. Under the subject to the penalty for failing to maintainPPACA, minimum essential coverage gen- Premium Assistance Tax Credit minimum essential coverage.erally includes (not an exhaustive list) cov- Beginning in 2014, eligible lower-incomeerage under an eligible employer-sponsored individuals who obtain coverage under a Employer-sponsored coverage. The finalplan, an individual market plan, a grandfa- qualified health plan through an insurance regulations treat an employer-sponsored CCH Tax Brieﬁng
June 29, 2012 5qualified medical expenses are generally in- 31, 2012. The tax is imposed on the lesser of IMPACT. This 3.8 percent tax would becluded in the beneficiary’s gross income. an individual’s net investment income for the on top of any increase in the dividends/Distributions included in gross income are tax year or modified adjusted gross income capital gains/ordinary income rates thatsubject to an additional tax of 10 percent of in excess of $200,000 ($250,000 for married some lawmakers are currently consideringthe included amount, unless made after the couples filing a joint return and $125,000 for upon expiration of the Bush-era tax cutsbeneficiary’s death, disability, or attainment married couples filing a separate return). at the end of 2012.of the age of Medicare eligibility. Effective fordistributions made after December 31, 2010, Net investment income is the excess of the Home sales. A home sale may result in athe additional tax on HSAs and Archer MSAs sum of the following items less any other- capital gain that increases net investmentincreases from 10 percent to 20 percent, in wise allowable deductions properly alloca- income. Net investment income includesthe case of HSAs, and from 15 percent to 20 ble to such income or gain: interest, dividends, annuities, royalties, cer-percent, in the case of Archer MSAs, of the tain rents, and certain other passive businessamount included in gross income. income as well as the amount of capital gain on a home sale that exceeds the amount “Employers and others that can be excluded from taxation. UnderAdditional Medicare Tax current law, single individuals may exclude must assume that keyFor tax years beginning after December 31, up to $250,000 in capital gain, and mar-2012, an additional 0.9 percent Medicare provisions will go into ried couples may exclude up to $500,000tax is imposed on wages and self-employ- effect in 2013 and 2014 or in capital gain. A home sale may also gener-ment income of higher-income individu- ate a capital gain that increases a taxpayer’sals. The additional Medicare tax applies to risk being unprepared to modified adjusted gross income above theindividuals with remuneration in excess of fully comply in time.” general threshold for the 3.8 percent tax.$200,000; married couples filing a joint re-turn with incomes in excess of $250,000;and married couples filing separate returns Adoption Creditwith incomes in excess of $125,000. Gross income from interest, dividends, The PPACA made the adoption credit re- annuities, royalties and rents unless such fundable for 2010 and 2011. The PPACAIRS guidance pending. The IRS has not income is derived in the ordinary course also increased the amount of the credit toissued formal guidance on the additional of any trade or business (excluding a $13,360 for 2011. The IRS issued guid-Medicare tax as of the date of this Briefing. passive activity or financial instruments/ ance on the temporary enhancements to the commodities trading); adoption credit in Notice 2010-66. IMPACT. Unlike the general 1.45 percent Other gross income from any passive Medicare tax, the additional 0.9 percent trade or business; and COMMENT. The PPACA’s enhancements tax is on the combined wages of the em- Net gain included in computing taxable to the adoption credit have expired. ployee and the employee’s spouse, in the income that is attributable to the dispo- Pending legislation would permanently case of a joint return. sition of property other than property extend the enhancements (HR 4373). held in any trade or business that is not COMMENT. Employers must withhold a passive trade or business. on the higher rate if the employee re- Indoor Tanning Excise Tax ceives wages in excess of $200,000. The IMPACT. Investors will be scrambling to Amounts paid for indoor tanning services employer may disregard the amount of determine the parameters of this addi- performed after June 30, 2010, are subject wages received by the employee’s spouse. If tional 3.8 percent tax, especially within to a 10 percent excise tax. Tanning salons the Medicare tax is not withheld by the the context of passive investment income. are responsible for collecting the excise tax employer, the employee is required to pay The IRS has not issued formal guidance and paying over the tax on a quarterly ba- the tax. as of the date of this Briefing, although sis. Tanning salons that fail to collect the tax IRS officials had said in April 2012 that from patrons are liable for the excise tax. proposed regulations would be releasedMedicare Tax On soon. However, they said not to expect IMPACT. The excise tax does not applyInvestment Income resolution at that time of the relation- to phototherapy performed by a licensed ship between this tax and the Code Sec. medical professional.The PPACA imposes a 3.8 percent Medicare 469 rules governing passive activity losses,contribution tax on unearned income effec- which has been an area that continues to The IRS quickly issued final regulationstive for tax years beginning after December generate confusion. (TD 9486, 6/14/10) on the indoor tanning CCH Tax Brieﬁng
June 29, 2012 7Indian Tribes COMMENT. By January 1, 2014, each in certain circumstances, employers have State must establish an American Health six months to determine whether a newly-The PPACA excludes from gross income Benefit Exchange and a Small Business hired employee is a full-time employee andqualified health care benefits provided to Health Options Program (SHOP Ex- will not be subject to a shared responsibil-the member of an Indian tribe, the mem- change) to provide qualified individuals ity payment during that six-month periodber’s spouse or the member’s dependents. and qualified small business employers, re- with respect to that employee.The exclusion applies to benefits and cover- spectively, access to qualified health plans,age provided after March 23, 2010. thus rounding out coverage from the large employer down to the self-employed indi- Small Employer Health vidual, and all workers in-between. Insurance Tax CreditBUSINESSTAX PROVISIONS In Notice 2011-36, the IRS requested com- The PPACA created the temporary Code ments on the issue of who is a full-time em- Sec. 45R small employer health insurance ployee, including a potential “look-back/ tax credit. For tax years 2010 through 2013,Shared Responsibility stability period safe harbor” method for the maximum credit is 35 percent of healthFor Employers determining full-time status of an em- insurance premiums paid by small busi- ployee. In Notice 2012-17, the IRS posted ness employers (25 percent for small tax-The PPACA’s employer shared responsibil- frequently asked questions about employer exempt employers). The credit is scheduledity provisions (also known as the “employer shared responsibility, noting that the “look- to increase to 50 percent for small businessmandate”) specify that an applicable large back/stability safe harbor” is expected to employers (35 percent for small tax-exemptemployer may be subject to a shared respon- allow look-back and stability periods not employers) after 2013 (but will terminatesibility payment (also known as an “assessable exceeding 12 months. In Notice 2011-73, after 2015). However, in tax years that be-payment”) if any full-time employee is cer- the IRS described a safe harbor allowing gin after 2013, an employer must partici-tified to receive an applicable premium tax employers to use an employee’s Form W-2 pate in an insurance exchange in order tocredit or cost-sharing reduction payment. wages (as reported in Box 1) instead of claim the credit, and other modificationsGenerally, this may occur where either: household income in determining whether and restrictions on the credit apply. coverage offered is affordable. The employer does not offer to its full- In Notice 2010-44, the IRS provided guid- time employees (and their dependents) IMPACT. In Notice 2012-17, the IRS ance on the small employer health insurance the opportunity to enroll in minimum reported that future guidance is expected tax credit, including transition relief for tax essential coverage under an eligible em- to provide that, at least for the first three years beginning in 2010 with respect to the ployer-sponsored plan; or months following an employee’s date of hire, requirements for a qualifying arrangement. The employer offers its full-time em- an employer that sponsors a group health The IRS expanded on the guidance in Notice ployees (and their dependents) the plan will not, by reason of failing to offer 2010-82. The IRS explained in Notice 2010- opportunity to enroll in minimum coverage to the employee under its plan 82 that a qualified employer must have: essential coverage under an eligible during that three-month period, be subject employer-sponsored plan that either is to the employer shared responsibility. The Fewer than 25 full-time equivalent em- unaffordable relative to an employee’s guidance is also expected to provide that, ployees (FTEs) for the tax year; household income or does not provide minimum value (that pays at least 60 percent of benefits). EXCHANGES COMMENT. The provision applies to months beginning after December 31, 2013. The PPACA requires each state to establish an American Health Beneﬁt Exchange and Small Business Health Options Program (SHOP Exchange) toFor purposes of the employer shared re- provide qualiﬁed individuals and qualiﬁed small business employers accesssponsibility payment, an applicable large to health plans. Exchanges will have four levels of coverage: bronze, silver,employer is an employer that on average gold, or platinum. In early 2012, HHS reported that 34 states and the Dis-employed 50 or more full-time equivalent trict of Columbia have received grants to fund their progress toward build-employees on business days during the pre- ing Exchanges. HHS also provided an Exchange blueprint that states mayceding calendar year. A full-time employee use. If a state decides not to operate an Exchange for its residents, HHS willis an employee who is employed on average operate a federally-facilitated Exchange (FFE).at least 30 hours per week. CCH Tax Brieﬁng
June 29, 2012 9ployees on business days during either of the on the treatment of the retiree prescription transaction. Codification of the economictwo preceding years. drug subsidy under the PPACA. substance doctrine, and its related penalty of either 20 percent or 40 percent designed IMPACT. The provisions allow small to enforce it, apply to transactions entered employers to retain potentially discrimi- Limitation on Employee into or after March 30, 2010, the effective natory benefits for highly compensated Remuneration date of HCERA. and key employees while allowing other employees to enjoy the benefits of a caf- The PPACA limits the allowable deduction In Notice 2010-62, the IRS explained that eteria plan. to $500,000 for applicable individual re- it will continue to rely on relevant case law muneration and deferred deduction remu- under the common-law economic sub- COMMENT. A cafeteria plan is a sepa- neration attributable to services performed stance doctrine in applying the two-prong rate written plan maintained by an em- by applicable individuals that is otherwise conjunctive test. The IRS subsequently is- ployer for employees under Code Sec. 125. deductible by a covered health insurance sued several directives to its personnel about A cafeteria plan provides participants provider in taxable years beginning after application of the economic substance doc- with an opportunity to receive certain December 31, 2012. trine. In LB&I Directive 4-0711-015, the benefits on a pretax basis. IRS identified various factors that examin- In Notice 2011-2, the IRS explained that ers must consider to determine if applica- the provision may affect deferred compen- tion of the economic substance doctrine isRetiree Prescription Drug Subsidy sation attributable to services performed appropriate. In CC-2012-008, IRS ChiefThe Medicare Prescription Drug, Improve- in a tax year beginning after December Counsel provided instructions to its person-ment, and Modernization Act of 2003 pro- 31, 2009. The IRS also provided a de mi- nel on the economic substance doctrine invides a subsidy of 28 percent of covered nimis rule. examinations, reviews of proposed deficien-prescription drug costs to employers that cy notices (or notices of final partnershipsponsor group health plans with drug ben- administrative adjustment (FPAAs)), litiga-efits to retirees. PPACA requires the amount Economic Substance Doctrine tion, and administrative pronouncements.otherwise allowable as a business deduction HCERA codified the economic substancefor retiree prescription drug costs to be re- doctrine. A transaction is treated as hav- IMPACT. In Notice 2010-62, the IRSduced by the amount of the excludable ing economic substance under a conjunc- rejected calls to publish an “angel list”subsidy-payments received, effective for tax tive two prong test only if the transaction of transactions. The IRS emphasizedyears beginning after December 31, 2012. changes in a meaningful way the taxpayer’s that it does not intend to issue general economic position (not including federal, administrative guidance regarding theGuidance status. As of the date of this Brief- state, or local tax effects), and the taxpayer types of transactions to which the eco-ing, the IRS has not issued formal guidance has a substantial business purpose for the nomic substance doctrine either applies or does not apply. EFFECTIVE DATES OF SELECTED COMMENT. HCERA imposes a strict PPACA/HCERA PROVISIONS liability penalty of 20 percent (40 per- Small Employer Sec. 45R Credit Tax years beginning in 2010 cent for undisclosed transactions) of any underpayment attributable to the disal- Economic Substance Doctrine After 03/30/2010 lowance of claimed tax benefits by rea- OTC Limitations For Health Accounts Tax years beginning after 12/31/2010 son of the application of the economic Indoor Tanning Services Excise Tax On or after 07/01/2010 substance doctrine or failing to meet the requirements of any similar rule of law. Itemized Deduction For Medical Expenses Tax years beginning after 12/31/2012 The IRS has explained in LB&I Direc- Additional 0.9% Medicare Tax: After 12/31/2012 tive 4-0711-015 that until further guid- ance is issued, the related penalty provi- 3.8% Medicare Contribution Tax: After 12/31/2012 sions are limited to the application of the Medical Device Excise Tax Sales after 12/31/2012 economic substance doctrine and may not Employer Shared Responsibility After 12/31/2013 be imposed due to the application of any other “similar rule of law” or judicial Branded Prescription Drug Fees Calendar years beginning after 12/31/2010 doctrine, (for example, the step transac- Sec. 36B Premium Assistance Credit Tax years ending after 12/31/2013 tion doctrine, substance over form, or Excise Tax On High Dollar Insurance Tax years beginning after 12/31/2017 sham transaction). CCH Tax Brieﬁng
June 29, 2012 11less the health organization’s medical loss In Notice 2010-69, the IRS made report- individual for whom minimum essentialratio during the tax year is not less than 85 ing optional for all employers for 2011. In coverage is provided (Code Sec. 6055 re-percent. An organization’s medical loss ra- Notice 2012-9, the IRS provided transition porting). Additionally, every applicabletio is equal to the amount expended on re- relief for small employers. For 2012 Forms large employer (within the meaning ofimbursement for clinical services provided W-2 (and W-2s issued in later years, unless Code Sec. 4980H(c)(2)) that is required toto enrollees under its policies during the tax and until further guidance is issued), an meet the shared employer responsibility re-year divided by the organization’s total pre- employer is not subject to reporting for any quirements of the PPACA during a calendarmium revenue. calendar year if the employer was required year must file a return with the IRS report- to file fewer than 250 Forms W-2 for the ing the terms and conditions of the healthIn Notice 2010-79, the IRS provided transi- preceding calendar year, the IRS explained. care coverage provided to the employer’stion relief and interim guidance on the com- Whether an employer is required to file full-time employees for the year (Code Sec.putation of an organization’s medical loss fewer than 250 Forms W-2 for a calendar 6056 reporting). The reporting require-ratio. In Notice 2011-51, the IRS extended year is determined based on the Forms W-2 ments apply to calendar years beginning onthe transition relief and interim guidance that it would be required to file if it filed or after January 1, 2014.for another year to any tax year beginning Forms W-2 to report all wages paid by thein 2010 and the first tax year beginning af- employer and without regard to use of an In Notice 2012-32, the IRS requested com-ter December 31, 2010. In Notice 2012-37, agent under Code Sec. 3504. ments on how to implement reporting. Thethe IRS extended the transition relief and IRS asked for comments on how to deter-interim guidance in Notice 2010-79 and COMMENT. Certain types of coverage, mine when an individual’s coverage beginsNotice 2011-51 through the first tax year such as major medical, must be reported. and ends for purposes of reporting the datesbeginning after December 31, 2012. Other types of coverage are optional. The of coverage; how to minimize duplicative IRS identified the types of optional cover- reporting, and more. age in Notice 2012-9.REPORTING COMMENT. Reporting under Code Secs. 6055 and 6056 is separate from report- Health Care Coverage ReportingForms W-2 ing of health care coverage on an employ- The PPACA requires every health insur- ee’s Form W-2.The PPACA generally requires employers ance issuer, sponsor of a self-insured healthto disclose the aggregate cost of applicable plan, government agency that administersemployer-sponsored coverage on an em- government-sponsored health insurance Disclosuresployee’s Form W-2 for tax years beginning programs and other entity that provides Because the PPACA is being implementedon or after January 1, 2011. Reporting is for minimum essential coverage to file an an- by multiple federal agencies, the statuteinformational purposes only. nual return reporting information for each authorizes the IRS to disclose return in- formation to HHS and other agencies. IRS GUIDANCE FOR SELECTED Return information is scheduled to be disclosed for, among other purposes, eli- PPACA/HCERA PROVISIONS gibility for the Code Sec. 36B premium Branded Prescription Drug Fees: TD 9544 assistance tax credit. Code Sec. 36B Credit: TD 9590 In NPRM REG-119632-11, the IRS ex- Code Sec. 45R Credit: Notice 2010-44/Notice 2010-82 plained that it will disclose taxpayer identity Disclosure Of Return Information: NPRM REG-119632-11 information, filing status, the number of in- dividuals for which a deduction under Code Grandfathered Plans: TD 9506 Sec. 151 was allowed (“family size”), modi- Health Coverage Information Reporting: Notice 2012-32/Notice 2012-33 fied adjusted gross income, and the tax year to which the information relates or, alterna- Health FSA $2,500 Limitation Notice 2012-40 tively, that the information is not available. Indoor Tanning Services Excise Tax TD 9486 Where modified adjusted gross income is Medical Device Excise Tax: NPRM REG-113770-10 not available, the IRS will disclose adjusted gross income. Minimum Value: Notice 2012-31 OTC Limitations For Health Accounts: Notice 2010-59/Rev. Rul. 2010-23 COMMENT. The proposed regulations Summary Of Beneﬁts: TD 9575 further provide where some or all of the CCH Tax Brieﬁng
June 29, 2012 13matically enroll new full-time employees in have been preparing their SBCs for the coverage may not impose any preexistingone of the employer’s health benefits plans Fall 2012 health plan enrollment period. condition exclusion. The PPACA also pro-(subject to any waiting period authorized by hibits group health plans and health insur-law), and to continue the enrollment of cur- ance issuers offering group or individualrent employees in a health benefits plan of- Internal Appeals/External Reviews health insurance coverage from imposingfered through the employer. Employees may The PPACA generally requires non-grandfa- lifetime or annual limits on the dollar valueopt out of any coverage in which he or she thered health plans to provide internal and of health benefits. Additionally, a groupwas automatically enrolled. external claims and appeals processes for health plan, or a health insurance issuer of- adverse determinations. Adverse determina- fering group or individual health insuranceIn 2010, the IRS, HHS and DOL an- tions include denials, reductions, or termi- coverage, must not rescind coverage exceptnounced that employers would not need to nations of coverage. in the case of fraud or an intentional mis-comply with the automatic enrollment re- representation of a material fact.quirement until regulations are issued. The In 2010, the IRS, HHS and DOL issuedagencies have indicated in frequently asked interim final regulations, RIN 1545-BJ63/ COMMENT. A group health plan orquestions (FAQs) on the DOL website that TD 9494 (7/22/10), subsequently amend- group health insurance coverage mustregulations are expected by 2014. ed in 2011, RIN 1210-AB45, to imple- comply with the prohibition against pre- ment the requirements regarding internal existing condition exclusions; however, a claims and appeals and external review grandfathered health plan that is indi-Summary Of processes for group health plans and health vidual health insurance coverage is notBeneﬁts/Uniform Glossary insurance coverage in the group and in- required to comply with the prohibition. dividual markets under the PPACA. TheThe PPACA directed the IRS, HHS and interim final regulations describe internal The IRS, HHS and DOL issued interimDOL to develop standards for use by a appeals’ processes and external reviews of final regulations in 2010. The agencies ex-group health plan and a health insurance adverse determinations. plained that the prohibition against pre-issuer offering group or individual health existing condition exclusions generally isinsurance coverage in compiling and pro- COMMENT. Notices of adverse determi- effective with respect to plan years (in theviding a summary of benefits and coverage nations must be provided in a culturally individual market, policy years) beginning(SBC) that accurately describes the benefits and linguistically appropriate manner. on or after January 1, 2014. However, theand coverage under the applicable plan or The DOL has posted model notices of ad- prohibition became effective for enrolleescoverage. The PPACA also required the de- verse determinations on its website. who are under 19 years of age for plan yearsvelopment of standards for the definitions (in the individual market, policy years) be-of terms used in health insurance coverage. ginning on or after September 23, 2010. Preventive ServicesIn TD 9575 (2/9/12), the IRS described The PPACA requires that non-grandfa- The agencies also explained that the annualthe required elements for the SBC includ- thered group health plans and health in- limits do not apply to health flexible spend-ing a description of coverage, cost-sharing surance issuers offering non-grandfathered ing accounts (health FSAs), Archer medicalrequirements, exceptions or limits under group or individual health insurance cover- savings accounts (Archer MSAs) and healththe plan, and coverage examples. The IRS age provide benefits for certain preventive savings accounts (HSAs); and plans and is-explained that an SBC must be provid- health services without cost sharing. suers cannot rescind coverage unless an indi-ed by a group health insurer to a group vidual was involved in fraud or made an in-health plan; by a group health insurer and The IRS, HHS and DOL issued interim tentional misrepresentation of material fact.a group health plan to participants and final regulations in 2010, followed by finalbeneficiaries; and by a health insurer to rules for women’s health services in 2012.individuals and dependents in the indi- The IRS, HHS and DOL subsequently re- Business Information Reportingvidual market. An SBC must be provided quested comments on accommodating reli- The PPACA requires businesses, charitieson application for coverage, upon renewal gious organizations while ensuring contra- and government entities to file an informa-or reissuance, and upon request. The IRS ceptive coverage. tion return (Form 1099) when they wouldalso provided a glossary of terms used in make annual purchases aggregating $600health insurance coverage. or more to a single vendor, other than to Patient’s Bill Of Rights a vendor that is a tax-exempt organization, IMPACT. The SBC requirements apply The PPACA generally provides that a group for payments made after December 31, to both grandfathered and non-grandfa- health plan and a health insurance issuer of- 2011 and reported in 2013 and years there- thered health plans. Employers reportedly fering group or individual health insurance after. The PPACA also repealed the long- CCH Tax Brieﬁng
CCH Provides the Analysis You Can Trust Industry Leading Resources from the Experts in Legislative Coverage Internal Revenue Code: Income Tax Regulations, U.S. Master Tax Guide ®, Income, Estate, Gift, Summer 2012 — The 2013* — The industry’s Employment and Excise standard reference for leading tax guide provides Taxes, Summer 2012 — serious tax professionals, it reliable answers and Reflects all new statutory reproduces the mammoth explanations to tax questions tax changes through Treasury regulations that affecting 2012 federal May 1, 2012, and provides explain the IRS’s position, individual and business the full, unabridged text prescribe operational rules, income tax returns. It isof the complete Internal Revenue Code, and provide the mechanics for compliance designed for speed and comprehensivedealing with income, estate, gift, employment, with the Internal Revenue Code. Pub: June 2012 coverage and is loaded with time-savers suchexcise taxes and more. Pub: July 2012 • About • About 13,800 pages. as the Quick Tax Facts Card, taxpayer specific4,968 pages. return flowcharts, rate tables and depreciation eBook/Softcover Combo — Price: $237.44 tables. Bonus copy of Top Federal Tax IssueseBook/Softcover Combo — Price: $162.50 eBook only — Price: $189.95 CPE course (grading fee additional. VisiteBook only — Price: $130.00 Softcover only — Price: $189.95 • CCHGroup.com/CPE for details.) Pub:Softcover only — Price: $130.00 • Offer #: 04368501 Nov. 2012 • About 1,008 pages.Offer #: 04367501 eBook/Softcover Combo — Price: $113.69 eBook only — Price: $90.95Save 20% when you buy both Summer 2012 editions of Internal Revenue Code and Income Softcover only — Price: $90.95 •Tax Regulations. Offer #: 05953501 eBook Bundle — Price: $255.95 Softcover Bundle — Price: $255.95 • Hardbound only — Price: $117.00 • Offer #: 04366501 Offer #: 05883501What are the Consequences… and the Opportunities for You,Your Business and Your Clients? Do You Have the Resources You Need? Sunset of the 2001 & 2003 Tax Relief Acts: Law, Explanation & Analysis — CCH provides the critical explanation and analysis to help readers make sense of federal tax provisions enacted in 2001 and 2003 that are scheduled to expire December 31, 2012, so they can plan, respond and advise with confidence. CCH’s Law, Explanation and Analysis of the Sunset of the 2001 & 2003 Tax Relief Acts provides tax professionals with timely and practical guidance on the impending sunset of the tax cuts and benefits originally enacted as part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Act of 2003 (JGTRRA), CCH editors, together with leading tax practitioners and commentators, have created a complete practical analysis, guidance, examples and planning tips.The Internal Revenue Code provisions impacted by the sunset provisions of EGTRRA and JGTRRA are arranged in Code section sequence with cautionlanguage. CCH also provides several special tables and lists to facilitate quick and thorough understanding of how the sunset works, impacts theInternal Revenue Code, and how it affects taxpayers. Pub: May 2012 • About 450 pages.eBook/Softcover Combo — Price: $62.43 eBook only — Price: $49.95 Softcover only — Price: $49.95 • Offer #: 04004501 Buy the eBook, Get the Softcover for Only 25% More! Simply add the eBook and Softcover to your shopping cart and the discount will apply automatically.Special savings are available on select eBook/Softcover combos. eBooks and eBook combinations can be purchased online only. eBooks cannot be returned for credit,or put on standing order. Visit CCHGroup.com/eBooks to learn more about ordering eBooks online and to review the CCH end-user agreement. 2012-0248-7 Visit CCHGroup.com/Legislation for the latest updates as it happens.