2019 gave rise to many rules that appeared to be final, only to be withdrawn or modified by subsequent guidance, leading to numerous challenges for employers seeking to stay abreast with employee benefits compliance obligations. Check out some of the more perplexing challenges your organization and others faced in 2019.

A Year in Review

Persistent action on legislative compliance is critical to your organization. But compliance goes beyond filing specific paperwork by specific deadlines. It means understanding how laws and regulations apply to your employee benefits offerings and how to minimize the costs associated with noncompliance in order to maximize your organization's resources to ensure continuous operations, attracting and engaging employees, and overall organizational wellbeing.

Compliance Continuity is a monthly publication designed to help your organization sustain the total wellbeing and engagement of your workforce, pursue your business goals, and help you achieve better results by providing ongoing benefits and HR compliance guidance, key considerations, and action steps. While your best is finite, your better is never finished, particularly when facing frequent and sometimes conflicting guidance from oversight agencies and court opinions. 2019 certainly gave rise to many rules that appeared to be final, only to be withdrawn or modified by subsequent guidance, leading to numerous challenges for employers seeking to stay abreast with employee benefits compliance obligations. Check out some of the more perplexing challenges your organization and others faced in 2019.

  1. Plan. Monitor. Report. The government shutdown December 22, 2018 through January 25, 2019 was the longest in U.S. history and the second federal government shutdown involving furloughs during the tenure of President Trump. Recent events indicate that the end of 2019 may bring a second shutdown, and the federal government's handling of matters during the first shutdown provides guidance on what to expect. Although many U.S. federal workers were furloughed due to the partial shutdown in 2018-19, employers were nonetheless obligated to comply with applicable federal deadlines such as furnishing Forms 1095-C to employees and responding to Letters 226J. Employers should be aware that if another partial government shutdown occurs in 2019 or early 2020, employers will still be responsible for meeting their deadlines and should not rely upon hopes for extensions of deadlines at year-end or in early 2020. How will your organization monitor for any compliance requirements that a government shutdown might impact?

  2. Consider. Review. Wait? First, the background: In December 2017, a federal district court issued a ruling in AARP v. EEOC that vacated the portion of the Equal Employment Opportunity Commission (EEOC) regulations that limit wellness incentives under the Genetic Information Nondiscrimination Act (GINA) and the Americans with Disabilities Act (ADA). Almost exactly one year later, on December 19, 2018, the EEOC released final rules removing the wellness incentive regulations under both GINA and the ADA. In the final rules, the EEOC appears to have taken an administrative step to implement the district court's decision to vacate the incentive limits. The other requirements of the ADA and GINA wellness program rules remained applicable. Next, the catch: Based on the EEOC's fall 2018 Regulatory agenda, the EEOC was originally scheduled to issue proposed regulations under the ADA and GINA in June 2019; however, given the district court's ruling and the EEOC's action, this deadline proved untenable and passed without action. Finally, now what?: Since January 1, 2019, until the EEOC takes action on the incentive limit, employers offering wellness programs that include medical exams or disability-related inquiries (e.g., biometric screenings or health risk assessments), or solicit genetic information (e.g., an employee's family medical history) do not have clear guidelines outlining the amount of a wellness incentive, if any, that they may offer. What changes, if any, should your organization make to its wellness program incentives?

  3. Uphold? Strike? Rule. In March of this year, the Department of Justice (DOJ), in a dramatic reversal, declared that the entire Patient Protection and Affordable Care Act (ACA) should be struck down as unconstitutional. The DOJ took this position in a one-page letter that it sent to the Fifth Circuit Court of Appeals, on the same day that its opening brief was due in the case of Texas v. United States. In that case, Judge Reed O'Connor of the Federal District Court in Fort Worth, Texas issued a ruling last December finding that the ACA was unconstitutional in its entirety. In the lawsuit filed by 20 states, the plaintiffs argued that they were harmed by an increase in the number of people on their state-supported insurance rolls. The plaintiffs claimed that when Congress reduced to zero the tax penalty for the so-called individual mandate in 2017, it effectively eliminated the U.S. Supreme Court's rationale for finding the ACA constitutional in 2012. Judge O'Connor agreed with the argument put forward by the coalition of states and ruled that the ACA could no longer stand in the absence of a penalty for Americans who do not maintain health coverage for themselves. The case is now on appeal to the Fifth Circuit Court of Appeals, which is expected to release a decision in the final quarter of 2019 or early 2020. No one is certain what the Court of Appeals' decision will be. Will the ACA be upheld in its entirety? Will the ACA be struck down in its entirety? Will the individual mandate be struck down and severed from the remainder of the ACA? Regardless of the outcome, it is expected that the losing side will appeal to the United States Supreme Court. How would a ruling on the individual mandate from the U.S. Supreme Court impact your organization's medical plan offers of coverage?

  4. Calculate. Check. Revise. Each year, the IRS releases an affordability rate through which Applicable Large Employers determine whether their coverage is affordable under the ACA. During the last few years, the affordability rate has gone up and down. For 2020, the rate is down to 9.78%. In 2019, the rate was 9.86%. Fluctuating factors like premium-to-income-growth ratios, premium adjustment percentages, and the consumer price index make variations in the affordability rate inevitable. But even though the impact on employers may be small, a decrease in the affordability rate may make some employees who were previously provided affordable coverage based upon one of the IRS safe harbors (Form W-2 or rate of pay) now be considered to have unaffordable coverage. If your organization calculated employee-only premiums without consideration of the affordability rate for 2020, check the numbers to see if any new groups' or classes of employees' coverage will be deemed unaffordable in 2020. What has your affordability calculation shown with regard to the affordability of your offers of coverage in 2020?

  5. Read. Postpone. Monitor. Similar to a number of other healthcare reforms, the ACA's contraceptive coverage mandate has had its share of fits and starts since the ACA became effective. The contraceptive mandate requires non-grandfathered group health plans to provide coverage, without cost-sharing, of specified contraceptives, sterilization procedures, and patient education and counseling for women with reproductive capacity. The rules allow for an accommodation for certain employers who object to the mandate on religious or moral grounds. The mandate and the accommodation process have faced attack from multiple jurisdictions around the country, including litigation flowing from Pennsylvania, California, and Texas. Keeping up with the action is a daunting task. Courts in California and Pennsylvania issued preliminary injunctions to stop enforcement of expanded rules relating to the accommodations process. These cases were appealed to the Ninth Circuit and the Third Circuit, and were upheld in both circuits. Meanwhile, a Texas court enjoined the government from enforcing the contraceptive mandate and the accommodation against any entities or individuals, nationwide, who object, for religious reasons, to contraceptive coverage. Litigation continues in each of these jurisdictions. Thus far, the Supreme Court has declined to rule on the issue, but given the continued debate, it is increasingly possible that we will see the Supreme Court take up this issue. What is your organization doing to stay current on the status of the contraceptive mandate?

This is a preview of Compliance Continuity. For five more stumbling blocks to compliance in 2019, contact your Gallagher representative or the subscribe button and receive the full version of Compliance Continuity monthly.

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Compliance is a series of actions, not a final destination. As a trusted advisor, Gallagher has developed this Compliance Continuity series to help you pursue a path through employee benefits compliance issues as part of an overall continuing compliance plan. Employers should carefully evaluate their health and welfare plans to determine if they are in compliance with both federal and state law. If you have any questions about one or more of the compliance destinations listed above, or would like additional information on how Gallagher constantly monitors laws and regulations impacting employee benefits in order to support employers in their compliance efforts, please contact your Gallagher representative.

The intent of this analysis is to provide you with general information. It does not necessarily fully address all your organization's specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues should be addressed by your organization's general counsel or an attorney who specializes in this practice area.