Play or Pay Penalty Notices Are Coming

Affordable-Care-Act-Pay-or-Play-RequirementsThe Internal Revenue Service (IRS) has started the process of levying penalties on employers under the Affordable Care Act (ACA) employer shared responsibility provision. Often called the employer mandate or play or pay, the ACA provides for the IRS to assess penalties on employers that do not offer adequate health coverage to their full-time employees. Although the mandate took effect in 2015, the IRS is just now starting to send penalty notices. This article explains the IRS process and the steps you can take if you receive a penalty notice.

Looking Back to 2015
The first round of penalty notices pertains to calendar year 2015. Employers that receive a notice will only have 30 days to respond, so it is advisable for all employers to prepare in advance by reviewing what their situation was in 2015.

Applicable Large Employer (ALE):
For 2015, the play or pay rules applied only to employers that had an average of 50 or more full-time employees, including full-time equivalents, in 2014. Related employers in a controlled group, such as parent-subsidiary groups and entities under common ownership, were counted together to determine whether they were ALEs. Non-ALEs were exempt from the mandate.

Employer Mandate:
Penalties were triggered only if a full-time employee received a government subsidy to buy individual health insurance through a Marketplace. In that case, penalties for 2015 were based on a two-prong test:

  • Penalty A if the ALE failed to offer minimum essential coverage to at least 70% of its full-time employees; or
  • Penalty B if the ALE failed to offer affordable minimum value coverage to its full-time employees.

If triggered, Penalty A is $2,080 times the total number of full-time employees minus the first 80 employees. Penalty B is $3,120 times the number of full-time employees who actually received a Marketplace subsidy due to employer’s failure to offer that employee affordable minimum value coverage. Amounts are pro-rated by month. To calculate the monthly amount, divide $2,080 and $3,120 by 12. Also, if Penalty A applies, then Penalty B is disregarded.


ACA Reporting Forms (1094-C/1095-C):
ALEs were required to prepare and distribute Form 1095-C to persons who were full-time employees for any month in 2015 and to file copies with transmittal Form 1094-C to the IRS. The forms reported whether each full-time employee was offered health coverage and, if so, whether the coverage was affordable.

Transition Relief:

Several transition relief provisions were available for 2015.
For example:
  • ALEs that had an average of 50-99 full-time-equivalent employees in 2014, and did not materially reduce their workforce or health coverage through 2015, were exempt from penalties.
  • ALEs with non-calendar year health plans generally were exempt from penalties for the months preceding their 2015 plan year start date.

To take advantage of a transition relief provision, the ALE’s completed 2015 Form 1094-C must indicate the specific provision.

IRS Penalty Process
The IRS is using information from 2015 Forms 1095-C and 1094-C, and information about employees who received a Marketplace subsidy for any month in 2015, to determine which ALEs it believes are liable for penalties. It appears that a Form 1095-C on which line 16 is blank is one of the triggers the IRS is using to identify ALEs for penalty notices. The penalty process consists of the steps below.


1. The IRS sends Letter 226J (notice and instructions) along with Form 14765 (list of employees who received a Marketplace subsidy) and Form 14764 (employer response form). ALEs are instructed to review the information and respond within 30 days.

2. The ALE responds by completing and returning Form 14764. The ALE will check a box to indicate whether it agrees with the proposed penalty or disagrees with part or all of the proposed penalty. The form also requires the ALE’s contact information for additional follow-up.

3. If the ALE responds by agreeing with the proposed penalty, the ALE will complete the payment option section of the form.

4. If the ALE responds by disagreeing in whole or part with the proposed penalty, the IRS sends Letter 227 (not yet available). The follow-up letter will instruct the ALE on how to present supporting information for its case. The ALE also will have the option of requesting a pre-assessment conference with the IRS.

5. If the ALE fails to respond to Letter 226J or Letter 227 in a timely manner, the IRS will issue Notice CP 220J as a demand for payment.

Action Steps

Employers are advised to gather information now so they are prepared to respond quickly if they receive an IRS penalty notice. Again, the first notice will be Letter 226J and the employer will only have 30 days to respond. To prepare:

1. Alert all departments and staff to keep an eye out for any material from the U.S. Treasury or IRS. If part of a controlled group, confirm that subsidiaries or affiliated companies will notify each other if they receive any material.

2. Ensure that copies of all 2015 Forms 1095-C and 1094-C are readily available. Many ALEs used third-party vendors to prepare their forms, so it may be necessary to contact the vendor.

3. Identify staff and establish an audit process for comparing the IRS notice against employee data and benefits records.

4. Upon receipt of Letter 226J, refer to legal counsel for assistance in preparing a timely response. Lastly, note that the majority of employers will not receive an IRS notice, either because the employer was too small to meet the ALE definition or because the employer’s Forms 1095-C and 1094-C did not trigger any IRS action. In any case, an employer will not be on the IRS radar unless at least one of its employees received a Marketplace subsidy.

The IRS provides information about the penalty process in question-and-answer format on its Understanding your Letter 226-J webpage. Employers and their advisors should check the webpage periodically for updated information.

This article was reprinted from ThinkHR

What are CSR Payment Plans?

There is quite a bit of talk these days about how uncertainty around CSR Payments could cripple the individual health insurance market (see article). This brings up a good question – What are CSR Payment Plans?

Cost Sharing Reduction (CSR)

A discount that lowers the amount you have to pay for deductibles, copayments, and coinsurance. In the Health Insurance Marketplace, cost-sharing reductions are often called “extra savings.” If you qualify, you must enroll in a plan in the Silver category to get the extra savings.

  • When you fill out a Marketplace application, you’ll find out if you qualify for premium tax credits and extra savings. You can use a premium tax credit for a plan in any metal category. But if you qualify for extra savings too, you’ll get those savings only if you pick a Silver plan.
  • If you qualify for cost-sharing reductions, you also have a lower out-of-pocket maximum — the total amount you’d have to pay for covered medical services per year. When you reach your out-of-pocket maximum, your insurance plan covers 100% of all covered services.
  • If you’re a member of a federally recognized tribe or an Alaska Native Claims Settlement Act (ANCSA) Corporation shareholder, you may qualify for additional cost-sharing reductions.

Related content

The New Summary of Benefits and Coverage (SBC)

As open enrollment season approaches, employers and their advisors are getting ready to use the new Summary of Benefits and Coverage (SBC) format required under federal rules. The basic rules have been in place for several years, but 2017 is the first year that health plans must use newly updated templates and instructions to create their SBCs.
This article answers frequently-asked questions about the SBC and what you need to do as the employer sponsor.


1. What is the Summary of Benefits and Coverage (SBC)?

The Summary of Benefits and Coverage (SBC) describes the plan’s benefits and limits, provides contact information, and illustrates hypothetical coverage scenarios in a standardized format. Using templates and instructions provided by federal agencies, health insurers and employers insert case-specific information to create an SBC for their plan. See a sample SBC.

The SBC is sometimes called the uniform four-page summary, although it may be longer due to double-sided pages. The format requires presenting specific information in a specific order which is intended to help employees easily understand the plan’s key features and compare different plans.


2. Who is responsible for the SBC? The insurance company or the employer?

Group health plans are required to provide the SBC to plan participants before enrollment or re-enrollment. For plans provided through group insurance, the insurance carrier is responsible for producing the SBC and providing it to the plan administrator (employer). Both the insurer and employer are responsible for distributing the SBC to the plan participants. Either one may handle the distribution, but the employer needs to ensure it is done.

For self-funded health plans, the plan sponsor (employer) is responsible for producing and distributing the SBC. Most self-funded employers choose to contract with their third-party administrator or claims administrator for this service, but the employer retains ultimate responsibility for compliance.

3. Is an SBC required for every health plan? If the employer offers multiple plans, can the information be consolidated into a single SBC? 

An SBC generally is required for any health plan providing medical benefits, but not for plans that primarily provide excepted benefits. For example, SBCs are not required for the following:

  • Limited-scope stand-alone dental and/or vision plans;
  • Health Flexible Spending Accounts (HFSAs) with little or no employer contribution;
  • Fixed-indemnity or specific-disease policies;
  • Long-term care, disability or accident coverage; or
  • Retiree-only plans.

A separate SBC is required for each health plan that can be chosen for enrollment. For instance, if the employer offers one PPO plan and two HMO plans, there will be three separate SBCs. A consolidated summary describing multiple plans may be helpful to employees, and may be provided in addition to the SBCs, but cannot take the place of the required SBCs.

Different options within a plan can be shown on the same SBC provided the information is clear. For instance, different coverage levels (self/family) or different cost-sharing options (high deductible/low deductible) can be presented in the same SBC as long as the remainder of the coverage information is very similar.

4. Is an SBC required for a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA)?

A Health Savings Account (HSA) is a savings program—not health plan—so no SBC is required. However, a High Deductible Health Plan (HDHP), which sometimes is called an HSA-compatible plan, is a health plan requiring an SBC. Employers that contribute to their employees’ HSAs may want to show that information on the HDHP SBC.

A Health Reimbursement Arrangement (HRA) is a group health plan. In almost all cases, the HRA is integrated with another plan, such as a major medical plan or HDHP. Employers usually choose to include information about HRA amounts, and how they reduce deductibles or other cost-sharing, on the medical plan SBC.

5. What is the deadline for distributing the SBC? 

The insurer or employer must distribute the SBC at each of the following times:

  • At the beginning of each enrollment period (i.e., when a new employee first becomes eligible to enroll and at the start of each annual open enrollment period);
  • Within seven (7) business days of the participant’s request; and
  • Within 90 calendar days of a HIPAA special enrollment.

6. Do all eligible employees receive the SBC? What about dependents?

The SBC must be distributed to all plan participants including employees, retirees, and COBRA beneficiaries. Separate distribution for dependents is not required, unless the employer knows that they have a different address.

New hires (or employees newly eligible to enroll) must be given SBCs for all the plans for which they are eligible. At open enrollment, however, enrolled participants only need to receive the SBC for the plan in which they are currently enrolled, unless they request SBCs for other plans.

Also at open enrollment, it is not necessary to provide SBCs to employees who are eligible but not enrolled. Instead, they can be given a notice, such as a postcard, explaining that SBCs are available and how to request them. The Department of Labor (DOL) provides model language for this purpose that the employer may customize for its use:
Availability of Summary Health Information

“As an employee, the health benefits available to you represent a significant component of your compensation package. They also provide important protection for you and your family in the case of illness or injury. 

“Your plan offers a series of health coverage options. Choosing a health coverage option is an important decision. To help you make an informed choice, your plan makes available a Summary of Benefits and Coverage (SBC), which summarizes important information about any health coverage option in a standard format, to help you compare across options.

“The SBC is available on the web at: A paper copy is also available, free of charge, by calling 1-XXX-XXX-XXXX (a toll-free number).”

7. Can the SBC be distributed electronically or are paper copies required? 

SBCs can be distributed electronically provided the method complies with the DOL safe harbor for electronic delivery of benefit notices. The usual DOL guideline is a little less strict for SBCs. For instance, if enrollment is conducted exclusively online, SBCs can be provided electronically. Otherwise, for enrolled participants who use a computer as part of their regular job duties, the SBC can be sent to that computer, or it can be posted and a notice sent explaining how to access it, along with information about how to request a paper copy at no charge. For eligible participants who are not enrolled, it is sufficient to post the SBCs online as long as persons are notified of availability (see model notice above). In any case, a paper copy must be furnished upon the participant’s request.

More Information 

For copies of the new templates, instructions, and related materials, see the following:

In summary, employers offering group health coverage are encouraged to work with their carriers and benefit advisors to ensure that SBCs are prepared and distributed according to the federal rules.

from ThinkHR

SPD, Plan Document, Certificate of Insurance – Do You Have What You Need?


A summary plan description (SPD) is the primary vehicle for informing participants and beneficiaries about their plan and how it operates. It must:

  • Be written for the average participant and be sufficiently comprehensive to apprise covered persons of their benefits, rights, and obligations under the plan; and
  • Accurately reflect the plan’s contents as of the date not earlier than 120 days prior to the date the SPD is disclosed.

SPDs are to be distributed automatically to participants within 90 days of becoming covered by the plan and to pension plan beneficiaries within 90 days after first receiving benefits. However, a plan has 120 days after becoming subject to the Employee Retirement Income Security Act (ERISA) to distribute the SPD. An updated SPD must be furnished every five years if changes are made to SPD information or the plan is amended — otherwise the SPD must be furnished every 10 years.

Plan documents are all documents related to plan, including the SPD. The plan administrator must furnish copies of certain documents upon written request and must have copies available for examination. These documents include the latest updated SPD, latest Form 5500, trust agreement, and other instruments under which the plan is established or operated. Copies must be furnished no later than 30 days after a written request. The plan administrator must make copies available at its principal office and certain other locations.

Evidence of coverage (EOC) is further information regarding the plan that details coverage for the plan period. Each insurance carrier will have an EOC booklet, also called a schedule of benefits. These documents are often called certificates of insurance. This EOC/schedule of benefits does not meet the SPD requirements under ERISA. The EOC explains the health benefits participants and their dependents have under the plan. It details the services that will and will not be covered and the actions employees must to take to receive the health benefits — such as paying a co-pay, meeting a deductible, or using particular health care providers. The EOC can also refer to a certificate or contract provided to a health plan member that contains information about coverage and other rights.

ERISA requires the plan sponsor (employer) to provide an SPD to all plan participants. The SPD may incorporate the carrier’s EOC by reference, which generally provides sufficient description of the plan’s benefits. However, the SPD also must include specific content, such as ERISA plan number, Employer Identification Number (EIN), plan financing method, and other information that would not be found in a carrier EOC. Many employers choose to do an SPD wrap, which incorporates all benefits in one document instead of having a separate one for each line of coverage.

According to the Department of Labor’s Final Rules Relating to Use of Electronic Communication and Recordkeeping Technologies by Employee Pension and Welfare Benefit Plans; Final Rule, you can distribute insurance certificates and various ERISA required plan documents electronically via a company website. The department allows electronic notification and distribution of documents by email, attachment to an email, or by posting documents on a company website. However, just placing the documents on a company website does not, by itself, satisfy ERISA’s disclosure requirements.

Under ERISA, the rules allow for electronic delivery of all documents that must be furnished or made available to participant and beneficiaries. This includes SPDs, summary annual reports, individual benefit statements, and investment-related information for participant-directed accounts. These rules are limited to disclosures that plans are required to make to participants and beneficiaries under ERISA.

Prior to implementing, a plan administrator must notify all participants and beneficiaries of the availability of the particular disclosure document by sending written or electronic notice that directs them to the document on the website.

Top Questions on Form 5500 Preparation

Reprinted from ThinkHR

Man with Note Pad and FAQs ConceptsAt this time of year, many employers and benefit advisors begin preparing Form 5500, the annual report required for most employee benefit plans. Form 5500 must be filed with the federal government within seven months of the end of the plan year. For calendar-year plans, that means the plan’s 2016 Form 5500 is due July 31, 2017.

The following are frequently asked questions about Form 5500 for employer-sponsored health and welfare plans.

Frequently Asked Questions

Is Form 5500 required for our plan?

Under the Employee Retirement Income Security Act of 1974 (ERISA), Form 5500 must be filed annually for employer-sponsored welfare plans with 100 or more participants as of the beginning of the plan year. To count the number of participants, include covered employees, retirees, and primary COBRA beneficiaries, but do not include dependents.

Welfare plans include plans for medical, dental, vision, life, accident, and disability benefits, as well as health flexible spending accounts (HFSAs) and health reimbursement arrangements (HRAs). If the plan includes group insurance coverage, information about the insurance policy must be reported on Schedule A as part of the Form 5500 filing.

Most welfare plans are unfunded, which means all benefits are paid through group insurance contracts, or directly from the employer’s general assets, or a combination of both. In that case, the filing will be comprised of the three-page Form 5500 only, or the Form 5500 with one or more Schedules A if the plan includes group insurance coverages. No other schedules apply.

On the other hand, if the plan is funded (e.g., a benefits trust), or part of a multiple employer welfare arrangement (MEWA), Form 5500 may be required whether or not there are at least 100 participants. Additional schedules also may be required. Funded plans and MEWAs are uncommon and outside the scope of this article.

The following plans are exempt from ERISA; therefore, Form 5500 does not apply:

  • Plans sponsored by governmental employers and certain church plans;
  • Most voluntary plans (e.g., employee-pay-all after-tax insurance plans without any employer sponsorship or contribution);
  • Payroll practices (e.g., unfunded vacation and sick pay); and
  • Plans maintained solely to comply with state workers’ compensation, unemployment, and weekly disability insurance laws, without providing additional benefits.

When is Form 5500 due and how is it filed?

Form 5500 and any required schedules must be filed electronically using the Department of Labor (DOL) EFAST2 electronic filing system. Paper filings are no longer accepted. To prepare and file the form and any schedules, you may use approved third-party vendor software or the DOL’s web-based filing system IFILE.

Filing is due within seven months after the end of the plan year. For instance, for calendar-year plans, the due date is July 31 of the following year (or the next business day if July 31 falls on Saturday or Sunday).

The due date can be extended by two and one-half months if the employer mails a simple Form 5558 Application for Extension of Time, no later than the original due date. (Instructions for U.S. mail or overnight delivery are included with the form.) In very rare cases, the IRS denies the request. Normally, the IRS does not respond which means the extension is automatically granted. Later on, when filing Form 5500, be sure to check the appropriate box in Part I, D, to indicate that the due date was extended by filing Form 5558.

We have one plan covering employees at our parent company and two subsidiaries. In Part I, A, of Form 5500, do we check the box as a “single” or “multiple” employer?

A plan sponsored by multiple entities that belong to the same controlled group is deemed a single-employer plan. A controlled group means two or more related employers that are under some degree of common ownership or control, such as parent and subsidiary companies, or brother-sister companies. (The IRS definition of controlled group is used for a variety of business and tax purposes, so the group’s tax advisor or financial officer will be familiar with the definition and can confirm the group’s status.) Use the Employer Identification Number (EIN) as shown in the plan document and SPD; this usually is the parent company’s EIN.

For reference, here are quick definitions for the boxes in Part I, A, of Form 5500 (check one):

  • A “single employer plan” is an ERISA plan that is sponsored by a single employer, or by multiple entities that belong to the same controlled group and, therefore, are deemed a single employer.
  • A “multiemployer plan” is an ERISA plan that is sponsored by unrelated employers and a labor union (e.g., Taft-Hartley plan or union trust plan).
  • A “multiple-employer plan” is an ERISA plan that is sponsored by unrelated employers (that is, the entities do not belong to the same controlled group). If the plan is a welfare plan, it also is called a multiple employer welfare arrangement (MEWA). This is uncommon. In some states, state insurance laws prohibit MEWAs.
  • A “direct filing entity” or DFE is usually a bank or trust that files a Form 5500 listing all the plans that are invested in the master trust (e.g., pension plan investments).

Employers and benefit advisors that prepare Forms 5500 for welfare plans usually are reporting a “single employer plan.” Employers are unlikely to handle any of the other three types of plans shown above; those plans and forms generally are handled by trustees.

Part II of Form 5500 asks for basic plan information. Where do we find this information?

Although Form 5500 is prepared and filed many months after the end of the plan year, the plan’s name, plan number, and plan year were designated by the employer when the plan was first established.

ERISA requires that the plan sponsor (employer) set forth the plan in writing and provide a summary plan description (SPD) to plan participants. Those materials must specify the ERISA plan name, plan number, and plan year, along with the plan sponsor’s EIN and other required information. Therefore, the information needed to complete Part II of Form 5500 will be found in the plan document and SPD.

Part II asks for information about who prepared the form. Is this required?

No. Do not provide information about the preparer. Although the IRS added space for the preparer’s information, officials later announced that it should not be provided. Specifically, the IRS issued the following instruction: “The IRS has decided not to require plan sponsors to enter the “Preparer’s information” at the bottom of the first page of Form 5500 for the 2016 plan year and plan sponsors should skip these questions when completing the form.”

Part III, line 8, asks for codes. What are the correct codes?

For a welfare plan, do not enter any codes on line 8a. Refer to page 20 in Instructions for 2016 Form 5500 for the index of Plan Characteristic Codes, then enter the appropriate code(s) on line 8b. Codes for welfare benefits, including health plans and group life and disability insurance, begin with “4.”

For instance, if Form 5500 is for a welfare plan comprised solely of two medical plans (PPO and HMO), an HFSA, and an HRA, the appropriate code would be 4A (health, other than vision or dental). If the plan also included dental, life insurance, and AD&D, the appropriate codes would be 4A, 4B, 4D and 4L.

Part III, lines 9a and 9b, ask about funding arrangements and benefit arrangements. Please explain.

On both lines, check the box for “Insurance” if the plan includes coverages provided through one or more group insurance policies (e.g., group life, medical, STD, LTD). Check the box for “General assets of the sponsor” if the plan includes any self-funded or uninsured coverages (e.g., HFSA, HRA, or other self-funded health plan). Many employers offer insured plans along with an HFSA, in which case both boxes will be checked.
Do not check the boxes for 412(e)(3) contracts or trusts; these are uncommon arrangements requiring tax professionals or plan trustees to prepare the form.

When is Schedule A required?

Schedule A must be filed with Form 5500 if any plan coverages are provided through group insurance contracts. In that case, the insurance company will provide the employer with information about the policy, and information about any commissions or fees, for use in preparing the schedule. Carriers are required to provide this information within 120 days after the end of the plan year. If the plan includes multiple group policies, such as separate policies for group life, PPO medical, HMO medical, dental, and vision, there will be a separate Schedule A for each one.

The group policy year usually is the same as the ERISA plan year, although that is not required so different dates may apply. Include Schedule A with policy information for the policy year that ends within the plan year. For instance, if the ERISA plan year is January 1 and the group policy year and renewal date is July 1, the 2016 Form 5500 will be filed for period January 1, 2016 through December 31, 2016 and include Schedule(s) A for the policy year July 1, 2015 through June 30, 2016.

Is Schedule C required?

Schedule C does not apply to unfunded welfare plans, which are the vast majority of welfare plans. Unfunded means that all plan benefits are paid through group insurance contracts, or directly from the employer’s general assets, or a combination of both. Self-funded health plans are unfunded plans, despite the somewhat confusing terms, as long as benefits are paid from general assets, which usually is the case. Although fees may be paid to consultants, advisors, and other service providers, expenses paid from general assets or in connection with a § 125 plan are not reported on Schedule C.

Schedule C is required only for certain large welfare plans that are funded through benefit trusts (e.g., a voluntary employees’ beneficiary association (VEBA) or union trust), which is uncommon. In that case, Form 5500 and all required schedules should be prepared by tax professionals or plan trustees.

More Information
See the following links for a sample Form 5500 for plan year 2016, instructions for completing the form, and helpful tips from the DOL:

Remember, the actual filing must be completed electronically using the DOL’s EFAST system. Paper filings are not accepted. Lastly, if you are unable to file Form 5500 on time, complete, print, and mail Form 5558, Application for Extension of Time, for an automatic two and one-half month extension. Form 5558 must be mailed no later than the original due date for Form 5500.

Find and share New Orleans area health care prices with PriceCheck tool

Originally published by | The Times-Picayune
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on April 05, 2017 at 5:40 AM, updated April 06, 2017 at 12:06 PM
Going to a doctor or a hospital in metro New Orleans is like shopping blind: most consumers never know the price in advance. By collecting information from you and others, we can help change that. | The Times-Picayune and WVUE Fox 8 News have partnered with ClearHealthCosts, a New York journalism startup, to set up the PriceCheck tool, listing hundreds of prices from health care providers in our region. Check it out, and use your insurer’s Explanation of Benefits, or EOB, form to add your prices. (Information on how to read your EOB form can be found here.)

This is part of our project “Cracking the Code: The real cost of health insurance.” Read our coverage here.

Top Seven Questions About Health Coverage for Domestic Partners

DOMA-photoWe are regularly asked about Domestic Partner rules. Here are the most popular 7 questions from employers – as compiled by our partners at ThinkHR.

The U.S. Supreme Court settled the issue of same-sex marriages several years ago. The marriages are legal throughout the country and all spouses, regardless of gender, are treated the same under federal and state laws affecting benefit plans. Less clear, however, is the issue of domestic partners, civil unions, and other unmarried relationships. Employers often have questions about whether they are required to extend health coverage to unmarried partners and how to administer their plans if coverage is extended.

Following are the top seven questions we receive from employers about domestic partner health coverage.

1. What are domestic partnerships and civil unions?

A domestic partnership or civil union generally refers to two adults, unrelated by blood and neither of whom is married, who are in a committed relationship and assume responsibility for each other’s financial and emotional needs. Although not recognized under federal law, some states have established definitions for “registered domestic partnerships,” “domestic partnerships,” and “civil unions” to extend specific rights and responsibilities under various state laws. There also are several municipalities and local jurisdictions that extend rights to unmarried couples that meet the criteria developed by the jurisdiction. Further, many employers have voluntarily adopted broad definitions of domestic partners to extend eligibility under their group health plans.

2. Do employers that offer group health coverage to spouses also must cover domestic partners?

Employers may choose to extend eligibility to domestic partners, but it is not required unless mandated by a state’s insurance law. Most states have no requirements while others, such as New Jersey, merely require group health carriers to offer the employer the option of including domestic partners as dependents. California, on the other hand, has the strictest requirement: any group policy that covers spouses must extend eligibility to “registered domestic partners (RDPs).” The California Family Code defines RDPs and the California Secretary of State provides a registration system.

Employers that purchase group health insurance receive specific information from the carrier about any applicable state insurance laws. Self-funded (uninsured) plans are not affected since they are exempt from state insurance mandates.

Note: Public-sector employers, such as cities, counties, and public schools and universities, and private-sector employers that contract with public agencies, may be subject to additional requirements under local laws. Specific information typically is provided to the parties by the government agency.

3. Is special tax reporting required for domestic partner health coverage?

Yes, in most cases. Although group health coverage provided to the employee, spouse, and children under age 27 (and some older children) is tax-free, the value of any employer-paid coverage for a domestic partner is taxable. The employer must report the fair market value of the coverage, minus any after-tax contributions paid by the employee, as imputed income on the employee’s Form W-2 for federal and state/local tax purposes. There are two exceptions:

  • Federal: Coverage is tax-free if the domestic partner meets the following conditions under § 152 of the Internal Revenue Code:
    • Shares the same principal residence as the employee;
    • Receives more than half of his or her support from the employee;
    • Is a citizen, national, or legal resident of the United States, or resident of Canada or Mexico; and
    • Is not a qualifying child of a taxpayer.
  • State/Local: The majority of state and local tax laws conform to federal law, so taxes do not apply if the domestic partner is the employee’s tax dependent under § 152. (Non-conforming states, however, may impose state and/or local taxes.) Alternatively, several states specifically exempt certain categories of domestic partners from state or local taxes, even though federal taxes apply. For instance, California does not tax the value of employer-paid coverage for registered domestic partners (RDPs) as defined by state law.

Employers that offer health coverage to domestic partners should refer to their payroll vendor for specific information about the state and local tax withholding and reporting rules in the locations where their employees live and work.

4. Can employees pay for domestic partner health coverage on a pretax basis?

Cafeteria plans allow employees to make pretax contributions for group health coverage, but only for employees and their tax dependents (i.e., spouse, children, and § 152 dependents). Most domestic partners do not meet the financial dependency criteria to qualify under § 152, so contributions for their coverage would have to be made on an after-tax basis. IRS regulations permit an accommodation, however, for the employer’s convenience in administering payroll. That is, the cafeteria plan may allow pretax contributions for the domestic partner’s health coverage, provided that the full market value of the coverage is reported as the employee’s imputed income. For instance, assume the market value of the partner’s coverage is $200, the employee contributes $50 on a pretax basis, and the employer contributes the remaining $150. In that case, the employee’s taxable income is reduced by $50, but $200 of imputed income is reported on the employee’s W-2.

5. Can employees make midyear enrollment changes to add or drop their domestic partner?

Special enrollment rules under the Health Insurance Portability and Accountability Act (HIPAA) allow employees to add coverage midyear for a new spouse, but not for a domestic partner (since no marriage has occurred). On the other hand, the HIPAA rule for a midyear enrollment in the event a dependent losing his or her coverage under another plan does apply to domestic partners (if eligible for the employer’s plan).

Cafeteria plans may allow midyear changes in accordance with IRS regulations for permitted election changes. Although not required, employers that extend health plan eligibility to domestic partners also often provide for midyear enrollment changes under their cafeteria plans.

Beware of discrepancies between the group health insurance policy and the cafeteria plan document. Carriers are required to include the mandatory HIPAA special enrollment rules in group policies, but they often omit the optional cafeteria plan provisions. Always check all documents and policies before allowing an employee to make a midyear change. Self-funded employers should ensure that any stop-loss insurance protection applies with respect to all persons who are eligible under the group plan.

6. Are domestic partners eligible for other health-related benefits, such as FSAs, HRAs, or HSAs?

In most cases, no. Reimbursements from health flexible spending accounts (FSAs), health reimbursement arrangements (HRAs), and health savings accounts (HSAs) are limited to eligible health care expenses for the employee and his or her tax dependents. Domestic partners are not tax dependents, unless the domestic partner qualifies under § 152, which usually is not the case.

7. Are domestic partners eligible for COBRA?

Federal law defines COBRA-qualified beneficiaries as the employee (or former employee), spouse, and children if covered under the group health plan at the time of the qualifying event. A domestic partner, therefore, is not a COBRA-qualified beneficiary in his or her own right. The employee, however, may elect COBRA for his or her domestic partner, if the group health plan extends eligibility to domestic partners, since COBRA beneficiaries have the same enrollment options as active employees.

Separately, many states have enacted coverage continuation provisions under their state insurance laws. These often are referred to as “mini-COBRA” laws. Certain states that provide protections for domestic partnerships or civil unions may also extend their mini-COBRA provisions. California is one example; Cal-COBRA (the state’s mini-COBRA law) extends to registered domestic partners (RDPs) as defined by state law. Mini-COBRA provisions, if any, will be described in the carrier’s group policy.

In summary, employers that choose to extend group health plan eligibility to domestic partners, or who purchase group policies that include state-mandated domestic partner provisions, are encouraged to work with carriers, benefit advisors, and payroll vendors to develop and administer appropriate procedures. All plan materials should contain consistent definitions of eligibility, communications should encourage employees to consult their tax advisors regarding federal and state tax laws, and payroll vendors should ensure accurate W-2 reporting.

Hey Kids, Get to Work!

kids-workIf you have come to the conclusion that it is time for your children to start contributing to the revenue (rather than expense) side of your family’s income statement, there are a few things you need to know. Below is a good summary of things to consider before hiring your children to work for you:

Louisiana Employment of Minors

Child Labor

Louisiana’s child labor law is located at La. Rev. Stat. Ann. §§ 23:151 – 23:258. The law generally applies to any employer who employs minors. The law does not apply to minors employed in agriculture or domestic services in private homes.

Prohibited Employment

Minors Under 14

As a general rule, minors under 14 may not be employed at any time in Louisiana. However, minors under 14 may be employed if all of the following conditions are met:

  • The minor is at least 12 years old.
  • The minor’s parent or legal guardian is an owner or partner in the business in which the minor is to be employed.
  • The minor will work only under the direct supervision of the parent or legal guardian who owns or is a partner in the business.
  • All of the protections afforded to minors age 14 and 15 are afforded to minors age 12 and 13.
  • The minor obtains an employment certificate.

Minors Under 16

Minors under 16 may not be employed in the following occupations:

  • In connection with a poolroom or billiard room.
  • In connection with power-driven machinery.
  • In a manufacturing, processing, or mechanical establishment or occupation.
  • Close to any lounge or other location where alcoholic beverages are sold, except as otherwise provided by law.
  • In the distribution or delivery of goods or messages for any person engaged in the business of transmitting or delivering goods or messages.
  • Driving any motor vehicle on a public road.

Minors Under 18

Minors under 18 may not be employed in the following occupations:

  • In oiling, cleaning, or wiping machinery or shafting or applying belts to pulleys.
  • In or about any mine or quarry.
  • In or about places where stone cutting or polishing is done.
  • In or about plants that use, transport, or manufacture explosives or articles containing explosive components.
  • In or about iron or steel manufacturing plants, ore reduction works, smelters, foundries, forging shops, hot rolling mills, or in any other place in which the heat treatment of metals is done.
  • In the operation of machinery used in the cold rolling of heavy metals or in the operation of power-driven machinery for punching, shearing, stamping, bending, or planing metals.
  • In or about sawmills or cooperage stock mills.
  • In the operation of power-driven woodworking machines or off-bearing from circular saws.
  • In logging operations.
  • In the operation of a school bus transporting children to or from school.
  • In the operation of passenger or freight elevators or hoisting machines.
  • In spray painting or in occupations involving exposure to lead or its compounds or to dangerous or poisonous dyes and chemicals.
  • In any place in which the sale of alcoholic beverages constitutes its main business, unless the minor has a written contract to perform and is under the supervision of a parent or legal guardian. An establishment with a retail dealer’s alcoholic beverage permit or license where the sale of alcohol is not the main business may employ a person under 18 if the employment does not involve the sale, mixing, dispensing, or serving of alcoholic beverages for consumption on the premises.
  • In any establishment or occupation that the Executive Director of the Louisiana Workforce Commission determines hazardous or injurious to the life, health, safety, or welfare of the minor.

Theatrical Employment

A minor under 16 may not be employed, exhibited, used, or trained for exhibition in the following occupations:

  • As a rope or wirewalker, gymnast, wrestler, contortionist, stunt rider, or acrobat on a bicycle or other similar vehicle or contrivance.
  • In any illegal, indecent, or immoral exhibition or practice.
  • In an exhibition as insane or idiotic or when presenting the appearance of any deformity or unnatural physical formation or development.
  • In any practice, exhibition, or place considered to be dangerous or injurious to the minor.

Permitted Employment

Employment of minors 16 or older who are enrolled in or have completed an accredited nautical science-training program upon a vessel that is documented or registered under the laws of the United States is permitted.

Hours of Employment

Minors 14 and 15 may be employed after school hours and during nonschool days. Additionally, minors under 16 may not be employed under the following criteria:

  • More than eight hours in any one day.
  • More than six consecutive days or 40 hours in one week.
  • More than three hours on any school day.
  • More than 18 hours in any one school week.

The school calendar of the school in which the minor is enrolled or the public school calendar for the district in which the minor resides is used to determine a school day or week.

Minors who have not graduated from high school are bound by the following provisions:

  • Minors under age 16 may not be employed between the hours of 7 p.m. and 7 a.m.; except from June 1st through Labor Day at which time the permissible hours are extended to 9 p.m. Minors who are employed in the dairy industry are exempt from this restriction.
  • Minors 16 years of age may not be employed between the hours of 11 p.m. and 5 a.m. prior to the start of any school day.
  • Minors 17 years of age may not be employed between the hours of 12 a.m. and 5 a.m. prior to the start of any school day.

Additionally, a minor who has taken and passed a General Education Development test (GED) and who has been awarded a high school Equivalency Diploma from the Louisiana Department of Education will be considered to have graduated from high school.

Note: Employment of minors also is subject to the provisions of any local curfew ordinance.

Meal Periods

No minor may be employed for any five-hour period without one interval of at least 30 minutes for meals. If the period of work before the interval exceeds five hours by 10 minutes or less, that difference is considered de minimis and not a violation of the law. The interval may not be included as part of the working hours of the day and the interval must be 30 minutes.

If the length of the meal break is at least 20 minutes, the difference between the actual break time and the required 30-minute break time is considered de minimis, and is not considered a violation of the law. The break must be documented, using the employer’s normal timekeeping system. If a minor fails to clock in or out for a work period or meal break, and a time edit is necessary, the time edit must be documented and acknowledged in writing by the minor and the manager who performs the time edit.

Presumption of Employment

The presence of any minor under 16 in any place of employment prohibited to the minor and observed to be performing work duties on the employer’s behalf constitutes prima facie evidence of the minor’s employment therein.

Employment Certificates

An employer of minors must keep on file an employment certificate for each minor, except for those minors employed in approved federally funded youth training programs and those minors employed in theatrical, modeling, motion picture or television production, musical occupations, or in other performing arts. The certificate must be accessible on the jobsite at all times and available to any officer charged with the enforcement of Louisiana’s child labor law.

Employment certificates will be issued upon the application by the minor desiring employment along with a written permission from the minor’s parent or legal guardian. The issuing officer must approve the following papers before issuing a certificate:

  • A signed statement from the prospective employer stating the nature of the occupation, the number of hours per day and per week, and the wages the minor is to receive.
  • One of the following proofs of age:
    • Birth certificate.
    • Baptismal certificate.
    • Contemporaneous bible record of birth.
    • Passport or certificate of arrival in the United States showing the age, dated at least two years prior to the application date.
    • Life insurance policy covering the minor, dated at least two years prior to the application date.
    • School record or school identification showing the minor’s age.
    • Current valid Louisiana driver’s license or other state-issued identification, including a special identification card, with the minor’s date of birth.
    • An affidavit signed by the minor’s parent or legal guardian showing the minor’s name, date and place of birth, and a statement that no other proofs of age can be produced.

Employment certificates, including those for home study students, may be issued by any of the following:

  • The parish or city public school superintendent or designated agent.
  • The principal of a public or private school or designated representative.

If the student is a home study program participant, the employment certificate may be issued by any person authorized by the Louisiana Workforce Commission.

The superintendent of the parish, city, or other public school governing authority or a designee, or the private school principal or a designee, must completely fill out and electronically submit the Employment Certificate Interactive Form located on the Louisiana Workforce Commission’s website. The online employment certificate, which includes the information that was entered onto the Department of Labor’s employment certificate database, is to be printed, signed by the minor and the issuing authority, and presented to the minor for delivery to the employer. The employment certificate must be signed by the minor in the presence of the issuing authority and then it must be returned to the minor for delivery to the employer. An employment certificate is valid only for the employer for whom issued, and the employer is required to maintain it on file for a period of 14 days after the minor’s termination of the employment.

Under certain circumstances, such as athletic events, exhibitions, fairs, carnivals, or similar events, the Assistant Secretary of the Office of Regulatory Services may authorize the issuance of a blanket work permit. Blanket permits expire 60 days after issuance.

Recordkeeping Requirements

Every employer of a minor must keep on file an employment certificate or work permit for each minor, except for those employed in approved federally funded youth training programs and those minors employed in theatrical, modeling, motion picture or television production, musical occupations, or in other performing arts. The certificate or permit must be accessible on the jobsite or in the immediate area of the work location at all times and available to any officer charged with the enforcement of Louisiana’s child labor law.

The executive director or authorized representatives may have access to the employment certificates kept on file by the employer as well as all other records that may aid in the enforcement of the child labor law.

Notice Requirements

Every employer must keep conspicuously posted in the establishment a printed abstract of Louisiana’s child labor law and a list of the occupations prohibited to minors. The Executive Director of the Louisiana Workforce Commission may furnish these abstracts.


The executive director or an authorized representative will visit and inspect — at all reasonable times and as often as possible — all places where minors are employed. The secretary or authorized representative may have access to the employment certificates kept on file by the employer as well as all other records that may aid in the enforcement of the child labor law.


Any person who violates Louisiana’s child labor law by refusing to allow inspection of the workplace, obstructing enforcement of the law, hiding minors, or helping them escape from a law enforcement officer will be fined between $100 and $500, imprisoned between 30 days and six months, or both. In addition to criminal penalties, anyone who violates the state’s child labor law will be liable for a civil penalty of up to $500. Each day in which a violation continues and each minor employed illegally constitutes a separate offense.

Any talent agent or person who employs, exhibits, uses, or trains for the purpose of exhibition, or who consents or neglects to restrain a minor from engaging in theatrical employment illegally will be guilty of contributing to the delinquency of minors. Upon conviction, such a person will be fined up to $1,000, imprisoned for up to two years, or both and will be liable for a civil penalty of up to $500.

Employers who unlawfully hire minors under 18 to drive school buses will be fined between $25 and $500, imprisoned for up to six months, or both.

Child Performer Trust Act

The Child Performer Trust Act (located at La. Stat. Ann. §§ 51:2131 – 2135) applies to any contract in which a minor is employed or agrees to render artistic or creative services for compensation of $500 or more in Louisiana, which is not otherwise prohibited by law, directly or through a third-party individual or personal services corporation, a loan-out company, or through an agency or service that provides artistic or creative services including, but not limited to, a casting agency or other similar entity.

Artistic or creative services include, but are not limited to, the following services:

  • Actor or actress.
  • Dancer, musician, comedian, or singer.
  • Stunt person or voice-over artist.
  • Any other performer or entertainer in any motion picture, television, radio, theatrical, or sports production or commercial production.

Every contract executed by or on behalf of a minor rendering artistic or creative services for compensation must require that 15 percent of the gross earnings for the minor, under the contract, be placed in a trust fund created for the minor’s benefit. Prior to the execution of any such contract the trust must be established, unless an account was previously established, and the trustee must provide the employer with a written statement that includes the particulars of the trust. Employers may require more information from the trustee prior to executing the minor’s contract.

In the event that a trust account was not established on behalf of a minor performer within 30 days of the last day of employment, the employer must forward the 15 percent of the minor’s gross earnings, accompanied by the name of the minor, and, if known, the minor’s address and Social Security number, to the Louisiana Treasurer, who will hold the funds in trust to be transferred to a trust account that is subsequently established on behalf of the minor. However, if no such trust account is established, the minor will receive the trust monies upon reaching age 18. After completing the transfer to the treasurer, the employer has no further duty or obligation with respect to the transferred monies.

Education Requirement

Every contract or employment arrangement agreed to by parties subject to the Child Performer Trust Act must include provisions for the education of the minor being employed to render artistic or creative services. If a minor is absent from school for two or more days within a 30-day period, the employer must do the following:

  • Employ a certified teacher beginning on the second day of employment.
  • Ensure that the teacher provide a minimum of three education instruction hours per day to the minor, pursuant to the lesson plans for the particular minor, as provided by the principal and teachers at the minor’s school.
  • Ensure that there is a teacher-to-student ratio of one teacher for every 10 students.

Note: No minors’ employment regulated under the Child Performer Trust Act may occur without the issuance of a written permit from the Louisiana Workforce Commission.

Contact Information

Louisiana Workforce Commission