Tag Archives: Health Care

Employee Benefits Statutory Civil Penalties

Calendar Year 2019

The following summary describes the most common penalties applicable to retirement, health, and welfare plans in 2019 through ERISA and other federal laws. This list serves as an important reminder that noncompliance with laws relating to your company’s benefit plans could result in significant penalties.

ERISA Penalties.

  • Furnish Reports. Failure to furnish reports (e.g., pension benefit statements) to certain former participants and beneficiaries or maintain records: $30 per employee.
  • COBRA. Failure to provide an initial COBRA notice or an election notice on a timely basis, as required by COBRA: $110 per day.
  • Form 5500. Failure or refusal to properly file annual Form 5500 report required by ERISA § 104: Up to $2,194 per day.
  • Notification of Benefit Restrictions. Failure to notify participants under ERISA §10(j) of certain benefit restrictions and/or limitations arising under Internal Revenue Code §436: Up to $1,736 per day.
  • Notification of Automatic Contribution Arrangement. Failure to furnish automatic contribution arrangement notice under ERISA §514(e)(3): Up to $1,736 per day.
  • Form M-1. Failure of a multiple employer welfare arrangement to file report required by regulations issued under ERISA §101(g): Up to $1,597 per day.
  • Information Requested by DOL. Failure to furnish information requested by the Secretary of Labor under ERISA §104(a)(6): Up to $156 per day, not to exceed $1,566 per request.
  • Blackout Notice. Failure to furnish a blackout notice under ERISA § 101(i): Up to $139 per day.
  • Right to Divest Notice. Failure to furnish a notice of the right to divest employer securities under ERISA § 101(m): Up to $139 per day.
  • CHIP Notice. Failure by an employer to inform employees of Children’s Health Insurance Program (CHIP) coverage opportunities (each employee is a separate violation): Up to $117 per day.
  • State Coverage Coordination. Failure by a plan administrator to timely provide to any State the information required to be disclosed regarding coverage coordination under ERISA §701(f)(3)(B)(ii); each participant/beneficiary is a separate violation: Up to $117 per day.
  • GINA.
    • Failure by any plan sponsor of a group health plan, or any health insurance issuer offering health insurance coverage in connection with the plan, to meet the requirements of ERISA §§702(a)(1)(F), (b)(3), (c) or (d); or §701; or §702(b)(1) with respect to genetic information: Up to $117 per day during non-compliance period.
    • Minimum penalty for de minimis failures to meet genetic information requirements not corrected prior to notice from the Secretary of Labor: $2,919 minimum.
    • Minimum penalty for failures to meet genetic information requirements which are not corrected prior to notice from the Secretary of Labor and are not de minimis: $17,515 minimum.
    • Cap on unintentional failures to meet genetic information requirements: Up to $583,830.
  • CSEC. Failure of Cooperative and Small Employer Charity Act (CSEC) plan sponsor to establish or update a funding restoration plan: Up to $107 per day.
  • Prohibited Distribution. Distribution prohibited by ERISA §206(e): Up to $16,915 per distribution.
  • SBC Distribution. Failure to provide Summary of Benefits Coverage under Public Health Services Act §2715(f): Up to $1,156 per failure.

Multi-Employer Plans.

  • Failure of a multiemployer plan to certify endangered or critical status under ERISA §305(b)(3)(C) treated as a failure to file annual report: Up to $2,194 per day.
  • Failure to furnish certain multiemployer plan financial and actuarial reports upon request under ERISA §101(k): Up to $1,736 per day.
  • Failure to furnish estimate of withdrawal liability upon request under ERISA §101(l): Up to $1,736 per day.
  • Failure by a plan sponsor of a multi-employer plan in endangered status to adopt a funding improvement plan or a multiemployer plan in critical status to adopt a rehabilitation plan. Penalty also applies to a plan sponsor of an endangered status plan (other than a seriously endangered plan) that fails to meet its benchmark by the end of the funding improvement period: Up to $1,378 per day.

Health Care Reform.

  • Failure to offer coverage to 95% of eligible full-time employees with Minimum Essential Coverage. Penalty applies if one full-time employee receives federal premium subsidy for marketplace coverage: $2,500 per full-time employee (minus the first 30).
  • Failure to offer affordable coverage (less than or equal to 9.56% in 2018 and 9.86% in 2019) or failure to provide “minimum value” coverage (60%+ of total allowed costs): $3,750 per full-time employee receiving a subsidy or $2,500 per full-time employee (minus the first 30).
  • Failure to comply with health care reform mandates: $100 per day.
  • Failure to file a correct 1094 or 1095 or failure to file the information returns on a timely basis: $270 for each return.
  • Failure to furnish correct 1095 payee statement on a timely basis or failure to include all of the information required to be shown on a payee statement or the inclusion of incorrect information: $270 for each return.

Miscellaneous Penalties.

  • MHPAEA. Failure to comply with MHPAEA requirements: $100 per day for each individual to whom a failure relates.
  • HIPAA. Failure to comply with HIPAA: Excise tax of $100 per day for each individual to whom the failure relates; civil penalties of $100 to $50,000 per violation, capped at $1.5 million per calendar year.

This summary is not intended to be a comprehensive list of all federal penalties that could apply to an employee benefit plan. Additionally, state and local law penalties are not included in this summary.

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Health Care Subsidies Upheld

Today, in King v. Burwell, the United States Supreme Court voted 6-3 to uphold the availability of subsidies provided by the Affordable Care Act (“ACA”) in federal Exchanges. This ruling means that, for most employers, the threat of ACA penalties is a reality.

The ACA requires most Americans to have health insurance coverage or pay a penalty, and the ACA provides subsidies for individuals within a certain income range in order to make health insurance more affordable. In addition, the ACA requires the creation of a health insurance marketplace, or “Exchange,” in each state in which people can compare and purchase health insurance. The Exchanges are the sole mechanism through which Americans can obtain health care subsidies. States were offered the opportunity to establish their own Exchange but states could also opt to have the federal government establish the Exchange on their behalf. Thirty-six states opted not to create a state-run Exchange and instead allowed the federal government to establish their Exchanges. Opponents to the ACA argued that the law only permitted ACA subsidies to participants in state Exchanges and were unavailable to participants in those states with federally run Exchanges.

In reaching its decision, the Court relied on the legislative intent behind the ACA in its interpretation of the statutory language. The phrase at issue declares that subsidies are available through “an Exchange established by the State.” The Court interpreted this phrase to include both state and federally-operated Exchanges. This interpretation is consistent with the regulations implementing the subsidies where the IRS defines “Exchange” as an Exchange established by the state or the federal government. As a result, this ruling permits individuals who purchase health coverage through a state or federally run Exchange to receive subsidized health care coverage.

Subsidies are a crucial component of the ACA and limiting their availability to state-run Exchanges would completely undermine the statutory scheme. Chief Justice Roberts, writing for the majority, reasoned that Congress enacted the ACA to improve the health insurance market, so the Court should strive to read provisions in the ACA in such a way that is consistent with Congress’s intent.

This decision resolves many of the ambiguities surrounding the implementation of the ACA’s requirements. Employers can now count on penalties for non-compliance with the ACA’s employer mandate. This mandate is often called the “Pay or Play Mandate” or “Employer Shared Responsibility Mandate,” and employers with an average of at least 50 full-time employees (and full-time equivalent employees) are subject to the mandate. Under the ACA, an employer must provide health coverage that is affordable and provides “minimum value” or pay a penalty.  The employer may be subject to two penalties: (1) the “no offer” penalty if an employer fails to provide minimum essential health coverage; and, (2) the “insufficient coverage” penalty if the employer provides minimum essential health coverage but the coverage is either unaffordable or does not provide minimum value. In either case, employer penalties are triggered only when an employee receives subsidized coverage through an Exchange. As a result, the statutory scheme is effective only where employers are subject to the threat of penalties which are triggered through the provision of health care subsidies to individuals. This ruling makes it clear that subsidies are available for all Exchange plans—whether offered through the state or the federal government—and; thereby, all employers in those states face the threat of ACA penalties. In light of this ruling, it is crucial for employers to evaluate the potential costs to their organization to determine whether they will pay the penalty or offer adequate coverage to full-time employees and their dependents.

If you have any questions regarding this alert, how this ruling impacts your organization or have any additional questions about your benefits plan, please contact your McGrath North attorney.

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Supreme Court to Issue Critical Health Care Reform Ruling

Supreme Court Health Care Ruling

The U.S. Supreme Court has agreed to review a challenge to health care reform subsidies.  At issue is whether the program of tax credits applies only in the state Exchanges and not in federally operated Exchanges.

The Court declined to wait for further action in lower federal courts, as the Obama administration had asked.  Now, the Court has ensured that it will rule on the case during the current term.  If it decides to limit the subsidies to the state-run Exchanges, it is widely understood that an unfavorable ruling on federal subsidies would destroy health care reform’s overarching structure.  The Court is expected to issue its ruling in June or July 2015.

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