IRS Revises October 2022 Additional Election Change Guidance
We recently reported on final IRS regulations that change the Ability standards for an Affordable Care Act (ACA) premium tax credit (PTC) to fix the “family glitch” by providing that, for taxable years beginning after 2022, cost-effective employer-sponsored coverage for an employee’s family members are based on the employee’s cost to cover the employee and those family members, instead the cost of employee-only coverage (see our Checkpoint article). We also reported on related IRS guidance allowing participants in non-calendar-year plans to revoke their elections for family health coverage midyear to allow one or more family members to enroll in a good health plan through an Exchange (QHP). The IRS has now posted a correct version of the guidance that does not include the non-calendar-year plan requirement.
Under the correct guidance, cafeteria plans—regardless of the plan year—can be improved to allow prospective midyear election changes from family coverage to employee-only coverage (or family coverage including one or more already-covered similar individuals) under a health plan that is not a health FSA and provides minimum important coverage if the following conditions are satisfied: (1) one or more related individuals are ready for a special enrollment period to enroll in a QHP, or one or more individuals are already to covered related individuals seek to enroll in a QHP during the Exchange’s annual open enrollment period; and (2) the election change match to the intended QHP enrollment for new coverage effective beginning no later than the day rapidly following the last day of the coverage. Plans may rely on the employee’s reasonable representation regarding enrollment or meant enrollment in a QHP. The instruction is effective for elections that are more effective on or after January 1, 2023. improvements must be accepted on or before the last day of the plan year in which the changes are allowed and may be more effective on the first day of that plan year if the plan operates in accordance with the information and participants are informed of the improvement. However, improvements for a plan year beginning in 2023 can be adopted on or before the last day of the plan year beginning in 2024.
The IRS has released Form 5498-SA for the 2023 tax year, along with its guidance, which is combined with the guidance for Form 1099-SA. (The 2023 common Guidance for Information Returns, which connect to these and other information Returns, have not yet been released.) Form 5498-SA is used by agents to Report contributions to (and the fair market of) HSAs, Archer MSAs, and Medicare Benefits MSAs, while Form 1099-SA is used to Report distributions from these Accounts. Form 1099-SA is a “continuous use” form, meaning that it is not Revised Annually but will only be updated as needed (see our Checkpoint article). The 2023 Form 5498-SA and guidance are substantially the same as the 2022 counterparts, but the guidance has been modified to update filing and Delivery deadlines.
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