Update on Employer Healthcare Coalition

Many of you may recall that last year we created an employer healthcare coalition and hosted a series of luncheons on various healthcare topics.

Earlier this year before COVID, we had planned a meet and greet back in February to formally launch the coalition.  Then, the end of the world happened.

We would like to update you about a few things and request your feedback:

  1. The Coalition is Official.  The coalition is official.  In October of 2019, we filed a certificate of incorporation to create a formal legal entity that will be known as the “Oklahoma Employers Healthcare Alliance” or “OEHA.”
  2. Coalition’s Purpose.  The coalition’s basic purpose is to bring together leaders and decision-makers to share ideas and information and improve healthcare for Oklahoma employers and employees.  The coalition will likely host luncheons and educational seminars, and leverage our collective size to influence positive change.  There are large coalitions in other markets and the OEHA could also network with these other coalitions.
  3. We Have a Logo and a Website.  We have an initial logo and draft of a website, which you can access here:  www.oeha.org.  The logo is at the top of the website.  The website is still in draft form.  (Once it is finalized, the wild apricot references will disappear.)
  4. We Have a Management Company.  We are using and working with the same All-Star management team that manages the Southwest Benefits Association and the DFW Business Group on Health.  These people know what they are doing and they will help us launch and keep the organization moving forward in a positive way.

Are You Interested?  Please send me an email if you are interested in learning more about being a part of the coalition.

Think About How Your 401(k) Policies and Procedures Might Prevent and Discover Fraud

This past week the United States Department of Labor issued a press release involving alleged fraud by a key employee that resulted in theft from her company and her company’s 401(k) plan.

According to the DOL’s press release, the controller for a company in Kentucky allegedly created a scheme whereby she issued unauthorized checks made payable to herself and others.  She also used multiple company debit and ATM cards to withdraw cash and pay her own personal expenses; and made fraudulent payments from the company to an insurance company for the purpose of obtaining and maintaining health insurance for her family.  The controller’s fraud also resulted in a failure to remit 401(k) deferrals into the company’s 401(k) plan totaling $31,882.  The DOL’s press release indicates the controller stole the 401(k) deferrals and fraudulently altered the Company’s bank account statements to make it appear that proper remittances were made to the plan.  Her actions led to a total loss to the company of $633,044.

As a result of her bad actions, the controller was recently sentenced by a federal court to 94 months in prison, 36 months of supervised release, and $838,804 in restitution.

Unfortunately, great employers who try to do the right thing and work hard to properly manage their benefit plans can sometimes still nonetheless become the victim of a bad actor.  If someone wants to intentionally violate the law for their own benefit, it can be very difficult to be aware of this and/or to catch them.

Many employers have a 401(k) plan committee that reviews and monitors the plan’s investments on a quarterly basis, as well as other plan administrative matters.  Perhaps your committee might consider adding to its quarterly review some kind of a report or analysis that compares (a) your payroll information showing 401(k) deferrals and plan contributions; with (b) independent information from your recordkeeper that shows deposit information into the plan.  There may be a better idea.  But you might consider thinking about what policies and procedures you could put in place that might prevent, or at the very least quickly discover, fraud impacting your plan.

On a related note, during this audit season we received a number of questions about how quickly 401(k) deferrals should be deposited into a 401(k) plan’s trust.  The answer is:  As soon as possible.  For annual audit purposes, your auditor might tell you that they only consider 401(k) deferrals late if they are deposited beyond five or seven business days after payroll.  This may be the standard your auditor uses for audit purposes, but the DOL will expect 401(k) deferrals to go in much faster:  basically immediately coinciding with or after payroll.  Please do your best to ensure that 401(k) deferrals and loan repayments are deposited into your plan’s trust on the same day as payroll, or maybe – if you have a good documented reason why – a few business days after payroll.  If you have been depositing 401(k) deferrals later than that (e.g., one week after payroll), you should consider putting earnings into your plan to correct this and you should work to improve your process to get your employees’ money into the plan sooner.

IRS Announces Relief for Certain Form 1094/1095 Reporting Requirements

In a similar move as in previous years, the IRS has issued relief from certain Form 1094-C and 1095-C reporting requirements under the Affordable Care Act (the “ACA”) relating to employee health plans, as well as relief from certain reporting-related penalties.

As a refresher, the ACA generally requires four forms to be produced each year, and the names are anything but intuitive:

  • Form 1094-B: This is essentially a transmittal form used by insurance carriers to report the individual statements (Form 1095-B) to the IRS.
  • Form 1095-B: This form is used to report certain statutorily-required information to the employee under a fully-insured policy about his or her coverage.
  • Form 1094-C: This is used by applicable large employers (“ALEs”) to report whether the employer offered minimum essential coverage and to transmit the employee statements (Form 1095-C) to the IRS.
  • Form 1095-C: Finally, this form is used by ALEs to report certain statutory-required information to employees about their employer-sponsored health coverage.

Which form your plan would be required to file or furnish depends on whether you are an ALE., and how you fill out the form and whether you offer fully-insured or self-insured coverage. Large employers who are self-insured are typically going to use just Forms 1094-C- and 1095-C.

Extended Deadline for Participant Statements:

The IRS has extended the deadline for furnishing Forms 1095-B and 1095-C to individuals. The typical deadline to report 2019 plan information is January 31, 2021. However, the new relief extends the deadline to March 2, 2021. The extension is automatic, and the IRS has indicated that no further extensions will be granted, and it will not respond to such requests.

No Extension for IRS Filings:

Be aware that this extension does not apply to the 1094-B and 1094-C filings with the IRS. The deadline for submitting these filings to the IRS will remain March 1, 2021 (since the original due date of February 28 falls on a Sunday), for paper filings and March 31, 2021, for those filing electronically. However, while the automatic extension does not apply to these deadlines, filers may still request an extension from the IRS.

Penalty Relief:

Recognizing that the main purpose of Forms 1095-B and 1095-C was to allow an individual to compute his or her tax liability relating to the individual mandate, and because the individual mandate has been reduced to zero, the IRS has granted relief from furnishing certain documents to individuals.

The IRS indicated that it will not assess penalties for failure to furnish a Form 1095-B if two conditions are met. First, the reporting entity must post a prominent notice on its website stating that individuals may receive a copy of their 2020 Form 1095-B upon request, along with an email address, physical address, and phone number. Second, the reporting entity must furnish the 2020 Form 1095-B to the responsible individual within 30 days of receipt of the request. The statements may be furnished electronically if certain additional requirements are met.

The same reporting relief does not extend to ALEs who are required to furnish Form 1095-C. This form must continue to be furnished to full-time employees, and penalties will continue to be assessed for a failure to furnish Form 1095-C. However, the relief does generally apply to furnishing the Form 1095-C to participants who were not full-time employees for any month of 2019 if the requirements above are met. This would typically include part-time employees, COBRA continuees, or retirees.

Note that while these requirements for furnishing the 1095-B and 1095-C to individuals has been modified, these forms must still be transmitted to the IRS along with their Form 1094 counterparts.

Good-Faith Relief for Errors in Reporting:

In the final piece of good news from the IRS, it announced relief from penalties for incorrect or incomplete information on any of these forms. This relief applies to both missing and inaccurate taxpayer identification numbers and birthdays, as well as other required information.

The reporting entity must be able to show that it made a good faith effort to comply with the reporting requirements. A successful showing of good faith will show that an employer made reasonable efforts to prepare for the reporting requirements and the furnishing to employees, such as gathering and transmitting the necessary information to the person preparing the forms.

However, the relief does not apply to reporting entities that completely fail to file or furnish the forms at all.

Finally, and importantly, the IRS has indicated that this will be the last year that it will provide this good faith reporting relief.