Year-End EB Compliance Items to Address
By Karen Hooper | Published November 28, 2023
Question: What year-end compliance action items might you be missing as we near the start of 2024?
Short Answer: The CAA is nearing full implementation as it enters its fourth year, and a number of compliance deadlines are approaching as part of the process. These include the new gag clause prohibition compliance attestation requirement and the additional participant-level Transparency in Coverage (TiC) disclosures. Plus there are important ACA reporting changes to assess before the deadlines arrive early in 2024.
We have reached the time of year where benefits professionals have powered through open enrollment and are able to take a quick breath before diving in to finish off the remaining compliance items prior to looking ahead to 2024. This job is never boring! Here are some of the key year-end action items for employers to tackle before the ball drops in Times Square.
Year-End CAA Action Items
The Consolidated Appropriations Act, 2021 (CAA) has been implemented in multiple phases over the past three years. For year-end 2023, deadlines for two items are coming up quickly:
Gag Clause Prohibition Compliance Attestation (GCPCA): Due December 31, 2023
All employers need to ensure that their health plan contracts do not include provisions designed to restrict access to the following:
Provider-specific cost or quality of care information or data through a consumer engagement tool or any other means;
Electronic de-identified claims and encounter information or data for individuals upon request and consistent with HIPAA, GINA and the ADA;
The ability to share information or data described above (or to direct information be shared) with a HIPAA business associate, consistent with HIPAA, GINA and the ADA.
Plans must annually submit an attestation that they have not entered into any of the prohibited contractual restrictions. The first attestation is due by December 31, 2023 to cover the period beginning December 27, 2020 through the date of the attestation. Annual attestations will be required by December 31 of each year thereafter.
What does this mean for employers?
For employers sponsoring fully insured medical plans, the insurance carrier is directly responsible for completing the GCPCA. There is no need for the employer to separately complete the attestation. Employers should confirm that the carrier will be completing the attestation on the plan’s behalf.
Employers sponsoring a self-insured medical plan (including level funded plans) will need to consult with the TPA to determine which party will complete the attestation. While the plan (employer) is directly responsible for the GCPCA, many TPAs will agree to contractually assume the attestation requirement.
For more details: First CAA Gag Clause Attestation Due by the End of 2023
Expanded Participant-Level Transparency in Coverage (TiC): Starting January 1, 2024
Since the start of the 2023 plan year, health plans have been required to provide an internet-based tool designed to inform individuals of their personalized out-of-pocket cost information based on the cost-sharing terms of their plan and underlying negotiated provider rates for items and services.
In other words, this self-service tool provides participant access to actual out-of-pocket cost information prior to receiving a service or purchasing an item covered by the plan. In the initial phase, this requirement applied only to 500 specified items and services.
Starting with the first plan year beginning on or after January 1, 2024, health plans must add the remaining list of shoppable items to their internet-based price comparison tool.
What does this mean for employers?
For employers with fully insured medical plans, the employer can enter into a written agreement with the insurance carrier that ensures the carrier is responsible (and liable) for compliance with the TiC requirements.
For employers with self-insured medical plans (including level funded plans), the regulations also provide that the employer can enter into a written agreement with the TPA or other third-party to satisfy the TiC requirements. However, unlike with fully insured plans, the employer retains ultimate responsibility for compliance. Employers cannot realistically be expected to have any role in establishing, maintaining, or monitoring the internet-based tool, and should strongly consider contractual terms providing that the TPA assumes responsibility for the TiC rules in a manner that protects the employer from potential liability for any failures.
For more details: Additional Health Plan Transparency Disclosures Coming Soon
Reminder: Prescription Drug Data Collection (RxDC) Report Due June 3, 2024
Although the initial RxDC report was due at the end of 2022 (with a grace period through January 2023), the RxDC reporting in 2023, 2024, and beyond is due at the start of June.
The RxDC report due June 3, 2024 (June 1, 2024 is a Saturday) will report on the 2023 calendar year prescription drug and health care spending data.
What does this mean for employers?
Once again, employers with fully insured plans will rely on their insurance carrier to submit the report but should confirm this with the insurance carrier. Self-insured employers (including level funded plans) should confirm with their third-party administrator (TPA) or pharmacy benefit manager (PBM) that they will complete the report on the plan’s behalf.
Even where the carrier or TPA is fulfilling the RxDC report for a self-insured plan, the carrier/TPA will often ask the employer to provide information that the carrier/TPA does not have access to but which is needed to complete the filing (referred to as the P2 and D1 data elements). If requested by the carrier/TPA, employers should provide such information to ensure proper and timely filing of the report.
For more details: RxDC Reporting Considerations for Employers
Year-End ACA Action Items
Initially implemented in 2015, ACA reporting has had a sprawling variety of forms of relief and extensions that have been difficult for employers to track. The good news is that we are finally settling into a regular routine and standard deadlines going forward. Nonetheless, there is an important update for employers to be aware of heading into the early 2024 ACA reporting season:
Electronic Filing Required for ACA Reporting in 2024: In prior years, employers could file their ACA reporting forms by paper if filing fewer than 250 returns. Employers that have been relying on paper filing with the IRS as a cost-saving measure will therefore need to change course for the next ACA reporting season. Starting in 2024, employers filing 10 or more returns in aggregate (includes Form W-2s, 1099s, 1095s) must file their reporting forms electronically. All ALEs will need to file their 2023 Forms 1094-C and 1095-C electronically in the first quarter of 2024. Virtually all non-ALEs sponsoring a self-insured health plan will also need to file their 2023 Forms 1094-B and 1095-B electronically in the first quarter of 2024.
What does this mean for employers?
The technical expertise required to complete electronic ACA filing via the IRS AIR system makes the task impractical for nearly all employers. Accordingly, all employers subject to ACA reporting should ensure that they engage with a third-party vendor (e.g., ACA reporting specialty vendor, benefits administration system, payroll system) that can complete the electronic filing on their behalf in 2024.
For more details: IRS to Require Electronic Filing for ACA Reporting in 2024
Reminder: Deadlines for ACA Reporting in 2024
Last year, the IRS finalized new ACA reporting regulations that make permanent the 30-day automatic extension from January 31 for employers to furnish the Form 1095-C to individuals. Accordingly, the ACA reporting deadlines for all ALEs in 2024 (regardless of plan year) are as follows:
Form 1095-C: Deadline to Furnish to Individuals
Due Date: March 1, 2024
Note: The 30-day extended deadline is typically March 2. However, because 2024 is a leap year, the 30-day extension puts the deadline at March 1.
Form 1094-C (+Copies of Form 1095-C): Deadline to Electronically File with IRS
Due Date: April 1, 2024
Note: The deadline is typically March 31. However, because March 31 falls on a Sunday in 2024, the deadline is April 1.
Non-ALEs sponsoring a self-insured plan (including level funded plans) must provide Forms 1095-B to employees by March 1 and file Forms 1094-B and 1095-B with the IRS by April 1, 2024.
For more details: ACA Reporting Deadlines and Compliance Requirements in 2024
Year-End Section 125 Cafeteria Plan Action Items
All cafeteria plans must undergo annual nondiscrimination testing. Each year employers procrastinate performing the dreaded cafeteria plan nondiscrimination testing (NDT) because of the hassle. While most employers will pass the majority of the required §125 tests easily, some dependent care FSA plans which have a large number of highly compensated employees (HCEs) participating may fail the 55% average benefits test required under §129 NDT. In that case, the employer must make adjustments to the HCEs elections by the end of the plan year (year-end for a calendar year plan) to preserve at least a portion of the HCEs’ pre-tax benefit.
For more details: The Dependent Care FSA 55% Average Benefits Test
Year-End State Law Action Items
States continue to expand and enhance Paid Family Leave (PFL) offerings across the country. Here are a couple notable changes taking effect at the start of 2024:
California SDI Payroll Tax Cap Eliminated Effective January 1, 2024: Governor Newsom signed into law SB 951 in September 2022, resulting in three significant changes to California’s State Disability Insurance (SDI) program, which includes Paid Family Leave (PFL) benefits:
The increased SDI benefit percentage levels that began in 2018 (up to 60%-70% of Average Weekly Wages (AWW)) have been extended through the end of 2024;
The SDI benefit percentage increases again to up to 63%-90% of AWW in 2025; and
These benefit enhancements are funded by the elimination of the taxable wage limit on individual wages subject to the annual SDI withholding rate ($153,164 in 2023) effective January 1, 2024.
In 2024, California employees will be taxed 1.1% of salary with no wage limit. Needless to say, the removal of the SDI wage ceiling has the greatest impact on high wage earners. For example, an employee earning $500,000 in 2024 will pay $5,500 in SDI/PFL payroll taxes (vs. $1,378 in 2023).
For more details: California SDI Payroll Tax Cap Eliminated in 2024
Colorado Paid Family Medical Leave: Leaves Effective January 1, 2024: Starting in 2024, employees who have earned at least $2,500 in wages during the base period will be eligible for up to 12 weeks of paid leave (capped at $1,100 per week) in a 12-month period, and up to an additional four weeks of paid leave for a serious health condition related pregnancy or childbirth complications.
The tangled web of employee benefits compliance requirements continues to expand and increase in complexity each year. Use this checklist as a shorthand for the items requiring immediate attention heading into 2024, but keep in mind that there are many more employee benefits compliance items that employers should consider that are not tied to these specific year-end deadlines. Newfront provides tools to help remain in compliance year-round and team members are always available to assist with questions.
Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship. Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).
VP, Senior Compliance Manager
Karen Hooper, CEBS, CMS, Fellow, is a Vice President and Senior Compliance Manager working closely with the Lead Benefit Counsel in Newfront's Employee Benefits division. She works closely with internal staff and clients regarding compliance issues, providing information, education and training.