Alert / Employee Benefits
Some 2020 inflation adjustments roll out in time for benefits planning

In the last few weeks we have seen a flurry of government activity as federal agencies released some of the applicable inflation-adjusted benefits limits for 2020, including 2020 limits related to health savings accounts (HSAs).

IRS announces HSA limits for 2020

The IRS released the inflation-adjusted contribution limits and related amounts for HSAs and HSA-compatible high-deductible health plans (HDHPs) for 2020.

2020 HSA limits

HHS announces ACA out-of-pocket limit for 2020

The US Department of Health and Human Services (HHS) announced the inflation-adjusted out-of-pocket (OOP) limits that will apply to nongrandfathered plans for plan years beginning in 2020. The OOP limit includes the plan’s deductible and cost-sharing amounts for benefits that are considered essential health benefits (EHB) under the Affordable Care Act (ACA).

Self-insured plans and large-group insured plans are not required to cover all EHBs (although small-group insured plans are), but to the extent they cover an EHB, they may not impose annual or lifetime dollar limits on the benefit. Additionally, OOP expenses for in-network EHBs must accumulate against the maximum OOP limit.

2020 ACA out-of-pocket limits

Additionally, the ACA requires nongrandfathered plans apply an embedded OOP limit for everyone enrolled in coverage other than self-only coverage. This requires each enrollee to have his or her own individual OOP limit on essential health benefits that is no higher than the maximum self-only OOP limit.

In short, this means that if an individual enrolled under family coverage reaches the applicable ACA OOP limit for self-only coverage, $8,150 for 2020, that individual cannot incur additional OOP costs for EHBs, even if the family OOP limit has not been satisfied.

Lockton comment: Keep in mind, these ACA cost-sharing limits should not be confused with the maximum OOP limits applied to HSA-compatible HDHPs noted above. Those employers with an HSA-compatible HDHP will want to consider those differing limits.

IRS announces ACA employer mandate penalty amounts for 2020

IRS announced the inflation-adjusted 2020 employer mandate penalties.

Under the ACA, applicable large employers (i.e., those employers with 50 or more full-time and full-time equivalent employees in the prior calendar year) must satisfy certain requirements or risk penalties.

To avoid ACA penalties, applicable large employers must do the following:

  • Offer at least “minimum essential coverage” (MEC) to at least 95% of its ACA full-time employees and their dependents; and
  • Offer their ACA full-time employees coverage that is both “affordable” and provides “minimum value.”

If the employer fails to satisfy either of these requirements, they can be subject to certain penalties if an ACA full-time employee receives subsidized coverage through a public health insurance exchange.

2020 ACA penalty amounts

Not legal advice: Nothing in this Alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Services group are not privileged under the attorney-client privilege.

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