Congress has passed, and President Trump has signed, appropriations legislation that includes provisions related to the Affordable Care Act (ACA) and other health and welfare plan topics (Pub. L. No. 116-94 (Dec. 20, 2019)). The Act also includes extensive provisions affecting retirement plans.
In a conforming amendment, the Act adds a new definition of "applicable employer-sponsored coverage" for purposes of the ACA's W-2 reporting requirements for employer-sponsored health coverage (26 U.S.C. § 6051(a)(14); see Practice Note, W-2 Reporting for Employer-Sponsored Health Coverage). Before the Act, that term was defined in part by cross-reference to the Cadillac plan rules. Under the Act, applicable employer-sponsored coverage is defined as group health plan coverage made available to the employee by an employer that either:
Is excludable from the employee's gross income under Code Section 106 (26 U.S.C. § 106).
Would be excludable if it were employer-provided coverage as defined in Section 106.
Additional PCOR-related provisions under the Act address:
How PCOR research priorities will be identified.
Composition of the PCOR governing board.
The Act also amends a provision addressing the PCOR research policy agenda to provide that the institute's research will be designed to reflect the full range of clinical and patient-centered outcomes relevant to patients, clinicians, policymakers, and others in reaching informed health decisions. Clinical and patient-centered outcomes will include potential burdens and economic impacts of using particular medical treatments, such as:
Medical out-of-pocket costs (for example, health plan benefit and formulary design).
Nonmedical costs to patients and their families (for example, caregiving).
Workplace productivity and absenteeism.
Effects on future costs of care.
Health care utilization.
The Act also includes provisions addressing reporting of the effectiveness of PCOR research activities.
Limited Prohibited Transaction Exemption for Pharmacy Benefit Services
The Act includes a limited-duration exemption from ERISA's prohibited transaction rules (and certain of its self-dealing prohibitions) for the offering of pharmacy benefit services to either:
A group health plan sponsored by a Code Section 501(c)(5) tax-exempt organization that was established in Chicago, Illinois, on August 12, 1881.
Any other group health plan sponsored by a regional council, local union, or other labor organization affiliated with such an entity.
The purchase of pharmacy benefit services by participants and beneficiaries of a group health plan sponsored by an entity described above.
The operation or implementation of pharmacy benefit services by such an entity.
Several conditions must be met for this limited exemption to be invoked. For example, the arrangement's terms must be at least as favorable to the group health plan as the plan could obtain in a similar arm's length arrangement with an unrelated third party. Under another condition, the plan must retain an independent fiduciary to monitor the plan's consultants, contractors, subcontractors, and other service providers regarding pharmacy benefit services offered by such entity or its related organizations. The independent fiduciary must also monitor the transactions of the entity and its related organizations to ensure that the exemption's conditions are met during the plan year.
The exemption is generally available for five plan years after the Act's enactment date.
Extension of Health Coverage Tax Credit
The Act extends through January 1, 2021, the health coverage tax credit (HCTC), a refundable tax credit that otherwise would have expired at the end of 2019 (see Standard Document, COBRA Election Notice: Reinstated Health Coverage Tax Credit (HCTC)). The HCTC permits certain individuals to receive a tax credit of up to 72.5% of the premiums paid for certain kinds of health insurance coverage (referred to as "qualified health coverage"), which includes payments for COBRA health plan continuation coverage (26 U.S.C. § 35; see COBRA Toolkit). The HCTC is available to certain individuals who either:
Lost their jobs because of the effects of international trade and who qualified for trade adjustment assistance (TAA) or alternate trade adjustment assistance (ATAA).
Repeal of TCJA Provision on UBTI and Fringe Benefits
The Act also repeals a TCJA provision that required tax-exempt organizations to treat as unrelated business taxable income (UBTI) amounts paid or incurred for benefits that included:
Repeal of the ACA taxes and fees addressed above, which were among the "pay-fors" for the ACA, will be welcome news for employers and others – some of whom have been calling for repeal of these provisions for several years. According to government estimates regarding the three repealed provisions, removal of the Cadillac plan tax and Section 9010 fees will have the most significant long-term budget consequences, while repeal of the medical device excise tax will have a somewhat lesser cost over the next ten years.