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2015 Year-End Employee Benefits Round-Up

November 25, 2015


As 2015 comes
to a close, plan sponsors may wish to review their employee benefit plans and
programs and consider various new rules that take effect in 2016.  The summary below highlights a number of
today’s important benefits issues and the related deadlines.
  Of special interest are the latest provisions
to take effect under t
he Patient Protection and Affordable Care Act and its
companion law, the Health Care and Education Reconciliation Act (jointly, the “Affordable
Care Acts” or “ACA”).

Health
Care Plans

Employer
Mandate for Employers
With 50 to
99 Employees Goes Into Effect

On
January 1, 2016, the employer shared responsibility rules under the Affordable Care
Acts, and applicable penalties, go into effect for employers with 50 to 99 full-time
equivalent employees.  (The rules went
into effect on January 1, 2015 for employers with 100 or more full-timers.)  Employers that are subject to the so-called “employer
mandate” must offer acceptable health coverage to at least 95% of their full-time
employees.

Employers
should be monitoring their employee headcount to determine whether they are
subject to the mandate starting in 2016.
If the rules apply, employers must ensure that they are offering essential
health benefits coverage that provides at least “minimum value,” and that the
cost of such health coverage does not exceed the statutory limit (generally,
9.5% of W-2 income).
 

ACA
Reporting Obligations
 

For
2015, “applicable large employers” or “ALEs” are required under the ACA to file
information returns regarding employer-provided health insurance.  Generally, an ALE is an employer that, during
the year in question, had 50 or more full-time equivalent employees.

In
addition, all employers providing self-insured health coverage — whether ALEs or
not — must file information returns for 2015, giving information not only about
employees, but about other covered individuals (spouses, dependents) as well.

The
forms to be used depend on the employer’s status:

  • An
    ALE, including a self-insured ALE, should file a Form 1095-C for each employee who was a full-time employee for any month
    of 2015.  Form  1094-C (a transmittal form giving employer
    information) must accompany the Forms 1095-C.
  • A
    self-insured non-ALE should file Forms 1095-B
    with a simple transmittal form, Form 1094-B.

The
Internal Revenue Service (IRS) will accept paper forms from non-ALEs and from ALEs
filing less than 250 Forms 1095-C.  An
ALE filing 250 or more Forms 1095-C must file electronically.  Paper filings are due by February 28, 2016,
while electronic filings are due by March 31, 2016.

Important:  Each employee must receive a copy of the Form
1095-B or 1095-C giving his/her individual information.  In the case of an ALE, forms must be mailed
to employees by January 31, 2016,  which is before the required IRS filing date.

 

Fees Due in
January for
ACA Reinsurance
Program

The
Affordable Care Acts require insurance issuers and self-funded group health
plans to pay fees for 2014, 2015, and 2016 to fund the “Transitional
Reinsurance Program.”  Typically,
insurers will remit the fees for fully insured plans.

This
year, there is good news for some plans — self-funded plans are generally not
required to pay the fees for 2015 and 2016.

Where
required, the fee for 2015 is $3.67 per participant per month (or $44 per
participant per year).  The fee can be paid
in one installment or two:

  • If
    paying in one installment, the 2015 fee is due January 15, 2016.
  • If
    paying in two installments, the first installment of $33 per participant is due
    January 1, 2016, and the second installment of $11 per participant is due
    November 15, 2016.

For additional details on how to pay the fee, click here .

Increase in
Health FSA Limit

Under
the ACA, a cafeteria plan was originally required to limit the amount that a
participant could contribute to a health flexible spending arrangement to
$2,500 per year (or less).  Since the
contribution limit has now risen to $2,550, cafeteria plans should be amended
to incorporate the increased limit.

Tax-Qualified
Retirement Plans

December 1 Notice Deadline for Calendar-Year 401(k) Plans

Administrators
of calendar-year 401(k) plans may need to issue the following year-end notices
to plan participants by December 1, 2015:

QDIA
Notice
.  Where a 401(k) plan uses a qualified default
investment alternative (“QDIA”) as the investment fund for participants who
fail to make timely investment elections, the employer must provide an annual
notice describing the QDIA and the rights of participants at least 30 days
before the beginning of each plan year.

Automatic
Enrollment Notice
.  Where a 401(k) plan contains automatic
enrollment features, the employer must provide an annual notice explaining
automatic enrollment and the right to opt out at least 30 days before
the beginning of each plan year.

Safe
Harbor Notice
.  Where a 401(k) plan provides safe harbor
contributions designed to automatically satisfy applicable nondiscrimination
requirements, the employer must provide an annual notice explaining the safe
harbor design at least 30 days before the beginning of each plan year.

News About Determination
Letters

Plan sponsors
whose employer identification numbers end in -5 or -0 are in “Cycle E” of the
IRS’s determination letter program.
Cycle E plan sponsors must apply for new determination letters by January
31, 2016
.  Each determination letter
application must be accompanied by an amended and restated plan document.

After Cycle E
closes on January 31, 2016, plan sponsors will no longer be required to request
new determination letters every five years.
The IRS has announced that it is scaling back its determination letter
program — effective January 1, 2017, it will issue determination letters only
to new plans and terminating plans.

The scope of
the determination letter program is changing, the IRS says, because the IRS
needs to “more efficiently direct its limited resources.”  Going forward, the IRS intends to focus on
different ways to help plan sponsors comply with the qualified plan document
requirements.

Discretionary Plan Amendments

Any plan
sponsor that made discretionary changes to a tax-qualified retirement plan
during the 2015 plan year must formally adopt a written plan amendment
embodying the changes by the last day of the plan year — December 31, 2015 for
calendar-year plans.

Fiduciary Duty to Review Plan Asset Performance

Sponsors of
pension, 401(k), and 403(b) plans have a fiduciary duty to monitor the
investment performance of plan assets. Many observers suggest that it is
appropriate for investment performance reviews to take place on a quarterly
basis.  It is generally acknowledged that
a plan sponsor is well served by hiring a qualified investment advisor to help
with reviews.

Even in the
case of a 401(k) or 403(b) plan that provides for participant-directed
investments, investment performance reviews are required, because the
suitability of the investment choices available to plan participants must be
assessed periodically.  Such fiduciary
concerns also apply to investment of plan assets under a nonqualified deferred
compensation plan.

As the
calendar year comes to a close, plan sponsors should begin to focus on a year-end
review early in the first quarter of next year. And, to the extent that a plan
sponsor has not implemented a periodic review process, strong consideration
should be given to developing appropriate plan administrative procedures.  At a minimum, such procedures would deal with
engaging a qualified investment advisor, developing and drafting investment
policy statements for each plan, setting periodic review dates, and creating a
process by which all these actions are memorialized.

Defined Contribution Plans Must Allocate Forfeitures by Year-End

In general,
qualified defined contribution plans may not carry unallocated suspense
accounts from one plan year to the next. The IRS makes specific exceptions to
this rule for suspense accounts arising from (a) the correction of excess
annual additions and (b) assets
transferred from a terminated defined benefit plan to be allocated over a
seven-year period.  Otherwise, the IRS
expects all plan assets to be allocated among participant accounts at year-end.

Generally,
whether a defined contribution plan reallocates forfeitures, applies them as a
credit toward employer contributions, or applies them as a credit toward plan
expenses, there should be no unallocated forfeitures remaining at
year-end. Plan documents may contain language specifically addressing when forfeitures
must be applied.

Benefit
Limits for 2016

Most
benefit limits affecting tax-qualified retirement plans remain unchanged for
2016.  However, sponsors of defined
benefit plans will experience an increase in PBGC premiums.  The limits for 2016 are shown below:

Annual
Benefit Plan Limits

IRS:  Contributions and Benefits

2015
Limit

2016
Limit

Maximum compensation for benefit
purposes (401(a)(17) limit)

 

$265,000

 

$265,000

415 annual maximums


> accrued defined benefit


> defined contribution allocation

 

$210,000

$
53,000

 

$210,000

$
53,000

401(k) plan, 403(b) plan, and 457(b)
maximum salary reduction

 

$
18,000

 

$
18,000

Catch-up contribution limit

$
6,000

$
6,000

Highly compensated employee

$120,000

$120,000

Key employee (for top-heavy) is an
officer earning more than

 

 

$170,000

 

$170,000

Pension
Benefit Guaranty Corporation

 

 

Maximum monthly benefit guaranteed
by the PBGC

$
5,011

$
5,011

Premiums


> fixed premium (single-employer plan)


> variable premium per $1,000 underfunded

 

$         57

$         24

 

$         64

$         30

 

Reminder:  Summary Plan Descriptions

An
updated summary plan description (SPD) must be furnished every five years if
changes have been made to information in the SPD, or if the related plan has
been updated during that time period.
(Otherwise, a new SPD must be furnished every 10 years.)  In the interval between updated SPDs, plan
participants must receive a summary of any “material modifications” to their
plan no later than 210 days after the end of the plan year in which the
modifications were adopted.

 

Immigration News

H-1B Visa Lottery Certain for April 1, 2016

Each year,
U.S. employers scramble to obtain H-1B visas for the foreign national
professionals they employ.  In the past three
years, the demand for new H-1B visas has exceeded availability on the first day
of filing, April 1.  Only 85,000 H-1B visas
become available each year, and in 2015 the number of new H-1B petitions filed
exceeded 230,000.

As the 2016
filing season approaches, employers should assume, once again, that there will
be more demand for H-1B visas than there are numbers available.

The earliest
filing date for the next allotment of H-1B visas is April 1, 2016.  If — as is certain — more H-1B petitions are
filed than there are numbers available, the U.S. Citizenship and Immigration
Services will subject all petitions submitted on the first day to a random
selection to determine which will be processed.
The H-1B petitions not selected in this lottery will be returned
to the employers who filed them, and the affected workers will be unable to
seek H-1B status for another year.

Given the
importance of getting new H-1B petitions filed on the first day of the 2016
filing season, we advise employers to work with counsel to have the petitions
prepared well before the end of March, 2016.
There is no guarantee that any particular petition will be selected in
the H-1B visa lottery, but unless the petition is filed on April 1, 2016, it will
stand no chance of acceptance.