The April Monthly Minute addresses the newly extended HSA/telehealth rule and IRS proposed rules that reconsider family PTC eligibility and affordability.

Back for a Limited Time Only! Special HSA Rule for Telehealth Services

Last month, the Consolidated Appropriations Act of 2022 was passed and formally extended the CARES Act rule which permitted first-dollar coverage of telehealth services without impacting HSA eligibility. As a result, HDHPs may once again cover telehealth before the minimum deductible is satisfied. However, this extension only applies for a limited time -- from April 1, 2022 through December 31, 2022 – the exception does not apply to January, February, or March, 2022.

KMK Comment: The limited timeframe of the telehealth/HSA extension adds some administrative complexity and may create participant confusion. Before implementing this optional benefit, be sure to coordinate with your administrator and note that participant communications will need to be carefully drafted.

Reconsidering PTCs and Affordability

IRS proposed regulations issued earlier this month would link premium tax credit (PTC) determinations with affordability of employer-sponsored family coverage, rather than employee-only coverage. The proposed regulations also would add a minimum value rule for family members of employees based on the benefits provided to the family members. Under the current regulations, a PTC is not allowed for children and other family members who have been offered employer coverage if the cost of the employee’s self-only coverage is affordable, regardless of the employee’s cost to cover those family members. Hence, the goal of the proposed rules is to close this "family glitch" by allowing family members of an employee with an affordable offer of self-only coverage to qualify for PTCs if the employer's family coverage is not considered affordable.

KMK Comment: Given the impact of the proposed rules is on family members, and not employees, the affordability analysis under the ACA employer shared-responsibility penalty rules is not implicated. However, whether or not these changes might impact plan participation rates is yet to be seen, and we expect this issue to be raised during the comment period set for June, 2022. We will keep you updated as to the status of these rules.

COMPLIANCE ALERT — Cycle 3 Restatement Deadline

The Cycle 3 restatement window for pre-approved defined contribution plans began August 1, 2020 and ends July 31, 2022. Adopting employers should be working with plan providers and legal counsel now to ensure timely restatement.