On December 1, 2020, the IRS released final regulations clarifying that when Congress zeroed out the personal exemption deduction (provided for meeting the individual mandate) for taxable years beginning after December 31, 2017, and before January 1, 2026, it did not prevent individuals from claiming the premium tax credit when enrolling in a health plan on the Marketplace.
The premium tax credit is a refundable credit that helps eligible individuals and families cover the premiums for their health insurance bought through the Health Insurance Marketplace. Among other requirements, a person can obtain the credit by establishing a household income for the taxable year that is at least 100% but not more than 400% of the federal poverty line for the taxpayer’s family size for the taxable year. The individual’s family size is determined by the number of personal deductions that the person makes on their individual tax returns.
Although the Tax Cuts and Jobs Act of 2017 (TCJA) ended the personal exemption for the years 2018 – 2025 by effectively making it zero, the TCJA also made clear that this should not be considered when determining whether an individual qualified for the deduction in other parts of the IRS Code. The new regulations make clear that an individual’s family, for purposes of obtaining the credit, include the person’s spouse and any other individual from whom the applicant can claim a personal exemption deduction, regardless of whether the applicant could claim that deduction under the TCJA. Similarly, a person who would be the subject of another person’s claim for a personal exemption cannot obtain the premium tax credit.
The new regulations also govern how to distribute advance payments of the premium tax credit in light of this clarification, as well as income tax return filing requirements related to the premium tax credit.
Employers should be aware of this development and how it may affect employees’ ability to obtain and use the premium tax credit.
On December 11, 2020, the DOL, HHS and IRS issued final rules that amend certain requirements for grandfathered group health plans to maintain their grandfather status. The rules provide such plans with greater flexibility to make changes in response to increases in health coverage costs.
As background, the ACA allows certain group health plans that existed as of the law’s enactment on March 23, 2010, to be treated as grandfathered health plans. This treatment exempts the plans from some ACA mandates. To preserve grandfather status, these plans are restricted in their ability to make plan design changes or increase cost sharing. The 2015 grandfathered plan rules outline these limitations.
The final rules follow July 15, 2020, proposed rules, which have been adopted without substantial change. The 2015 existing regulations are modified in two respects.
First, the rules provide an alternative method of measuring permitted increases in fixed amount cost sharing. Under the existing regulations, increases for fixed amount cost sharing other than copayments (e.g., deductibles and out-of-pocket maximums) cannot exceed thresholds based upon the Consumer Price Index measure of medical inflation. Specifically, the 2015 rules define the maximum increase as medical inflation (from March 23, 2010) plus 15 percentage points. However, this component of the CPI index includes price changes for Medicare and self-pay patients, which are not reflected in grandfathered group health plan costs.
The alternative standard relies upon the premium adjustment percentage, rather than medical inflation. The premium adjustment percentage is published by HHS in the annual notice of benefit and payment parameters and reflects the cumulative historic growth in private health insurance premiums from 2013 through the preceding calendar year. As a result, this measure may better reflect increases in underlying costs for grandfathered group health plans.
This new measurement method does not replace the current standard. Rather, an employer can use the method that yields the greater result. Therefore, grandfathered plans are allowed to increase these out-of-pocket costs at a rate that is the greater of the medical inflation adjustment percentage or premium adjustment percentage, plus 15 percentage points.
Second, the final rules permit a grandfathered group HDHP to increase fixed-amount cost-sharing requirements, such as deductibles, to the extent necessary to maintain HDHP status without losing grandfather status. This change was designed to ensure that participants enrolled in such coverage remain eligible to contribute to an HSA.
Employers who sponsor grandfathered plans should be aware of these final rules, which will be applicable beginning on June 15, 2021.
On November 24, 2020, the IRS released Notice 2020-84, which announces that the adjusted applicable dollar amount for PCOR fees for plan and policy years ending on or after October 1, 2020, and before October 1, 2021, is $2.66. This is a $0.12 increase from the $2.54 amount in effect for plan and policy years ending on or after October 1, 2019, but before October 1, 2020.
As a reminder, PCOR fees are payable by insurers and sponsors of self-insured plans (including sponsors of HRAs). The fee does not apply to excepted benefits such as stand-alone dental and vision plans or most health FSAs. The fee, however, is required of retiree-only plans. The fee is calculated by multiplying the applicable dollar amount for the year by the average number of lives and is reported and paid on IRS Form 720 (which has not yet been updated to reflect the increased fee).
It is expected that the form and instructions will be updated prior to July 31, 2021, since that is the first deadline to pay the increased fee amount for plan years ending between October and December 2020. The PCOR fee is generally due by July 31 of the calendar year following the close of the plan year.
The PCOR fee requirement has been extended and is in place through the plan years ending after September 30, 2029.
The IRS recently released a revised version of Publication 5165, Guide for Electronically Filing Affordable Care Act (ACA) Information Returns for Software Developers and Transmitters, for tax year 2020 (processing year 2021). This publication outlines the communication procedures, transmission formats, business rules, and validation procedures for returns transmitted electronically through the ACA Information Return System (AIR). The updated version of this publication contains no major changes. The AIR system itself is quite technical; for example, the forms must be filed using the Extensible Markup Language (XML) schemas outlined in the publication.
Employers who plan to electronically file Forms 1094-B, 1095-B, 1094-C or 1095-C should review the latest guidance and make any necessary adjustments to their filing process. Because of the complexity, most employers partner with a payroll or software vendor to assist them with the electronic filing. Those employers still have a responsibility to review the forms for accuracy before submission to the IRS and distribute the forms to employees. Employers filing fewer than 250 forms may file with the IRS by paper.
As a reminder, the IRS previously announced a slight adjustment to the 2020 filing due dates (due in early 2021). Based on that announcement, Forms 1095-B and 1095-C would need to be distributed to employees by March 2, 2021 (instead of January 31, 2021), and those forms along with the Forms 1094-B and 1094-C would need to be filed with the IRS by March 31, 2021, if filing electronically and by March 1, 2021 (since the February 28, 2021, due date falls on a Sunday), if filing by paper.
The IRS recently published the final versions of the 2020 reporting Forms 1094-B and 1095-B, 2020 reporting Forms 1094-C and 1095-C, and instructions for those forms. Forms 1094-B and 1095-B are used by insurers and small self-insured employers to report that they offered MEC. Forms 1094-C and 1095-Cs are used by ALEs to report that they offered minimum value, affordable coverage to their full-time employees. These forms are filed with the IRS, and copies of Forms 1095-B and 1095-C are also distributed to individuals.
This year’s forms feature a few new changes. The Plan Start Month section of Form 1095-C must now be completed. In addition, the penalty for the failure to file a correct information return increased to $280 per return (up from $270 for each incorrect return), and the penalty cap is raised to a total of $3.392 million for a calendar year, up from a cap of $3.339 million in 2019. Finally, the updated draft 1095-C form shows that the affordability safe harbor percentage threshold is 9.78% in 2020, down from the 9.86% threshold in 2019.
The 2020 forms and instructions also require employers to include information concerning Individual Coverage Health Reimbursement Arrangements (ICHRAs), if applicable. The instructions for Form 1094-C state that offers of ICHRA coverage count as offers of minimum essential coverage and both Forms 1095-B and 1095-C have new codes for information concerning ICHRAs offered to employees. Line 8 of Form 1095-B has a new Code G, which identifies ICHRAs as the type of employer-sponsored coverage. Form 1095-C’s Line 14 now has codes to identify the full-time or part-time status of the employee offered an ICHRA, whether the ICHRA was offered to a full-time employee’s spouse or dependents, whether the ICHRA is affordable, and whether the affordability was based upon where the full-time employee lives or works (the ZIP code of the full-time employee’s residence or place of work can be entered on Line 17, if the employee was offered an ICHRA). The employee’s contribution is recorded on Line 15.
As a reminder, the date by which employers must distribute Forms 1095-B or 1095-C to individuals has been extended. 2020 forms must now be distributed to individuals by March 2, 2021 (instead of January 31, 2021). Even though this extension is provided, employers are encouraged to furnish the 2020 statements as soon as they are able. Further, as in prior years, this notice does not extend the date by which employers must file Forms 1094-B/C and 1095-B/C with the IRS. That said, reporting entities must still file Forms 1094-B/C and 1095-B/C with the IRS by March 1, 2021 (as February 28, 2021, falls on a Sunday) if filing by paper, and March 31, 2021, if filing electronically. As noted above, the penalty for failure to comply is $280 per failure. This means that an employer who fails to file a completed form with the IRS and distribute a form to an employee/individual would be at risk for a $560 penalty.
On October 2, 2020, the IRS released Notice 2020-76, extending the deadlines for distributing ACA reporting forms to individuals.
As background, the ACA imposes two reporting requirements under Sections 6055 and 6056. Section 6055 requires entities that provide minimum essential coverage to report to the IRS and to covered individuals the months in which the individuals were covered. Section 6056 requires applicable large employers (under the employer mandate) to report to the IRS and full-time employees whether they offered minimum essential coverage that was affordable and minimum value.
This relief is consistent with that offered in previous years. As the IRS has done for the previous reporting years, the date by which employers must distribute Forms 1095-B or 1095-C to individuals has been extended. 2020 forms must now be distributed to individuals by March 2, 2021 (instead of January 31, 2021). Even though this extension is provided, employers are encouraged to furnish the 2020 statements as soon as they are able. Further, as in prior years, this notice does not extend the date by which employers must file Forms 1094-B/C and 1095-B/C with the IRS. That said, reporting entities must still file Forms 1094-B/C and 1095-B/C with the IRS by March 1, 2021 (as February 28, 2021, falls on a Sunday) if filing by paper, and March 31, 2021, if filing electronically.
Despite this relief, the IRS may still seek penalties on employers who fail to comply with the deadlines. The IRS also indicates that employers can no longer request an automatic extension of the due date by which they must distribute the forms to individuals, as the extension they have provided is just as generous. In fact, the IRS will not respond to any such request for an extension. Employers may still request an automatic extension to file the Forms 1094-B/C and 1095-B/C with the IRS, as long as they submit a Form 8809 on or before the due date of those filings.
The IRS also continues to recognize good faith efforts made by employers that file the 2020 forms. Specifically, employers that timely file and distribute their required Forms 1094-B/C and 1095-B/C will not be subject to penalties if the information is incorrect or incomplete. In determining what constitutes a good faith effort, the IRS will take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting, such as gathering and transmitting the necessary data to a reporting service provider or testing its ability to use the ACA Information Return Program electronic submission process.
Since the intention of this good faith relief was to be transitional relief, the IRS states that this is the last year they intend to provide such relief. Note that this relief does not apply to a failure to timely furnish or file a statement or return, and it does not extend to employer mandate penalties (for large employers that did not offer affordable, minimum value coverage to full-time employees pursuant to the ACA’s employer mandate).
Notably, similar to last year, this notice also provides penalty relief for employers which will allow them to forego distributing the Form 1095-B to individuals. As a reminder, this resulted from the IRS accepting comments on the necessity of the Form 1095-B now that the individual mandate penalty has been zeroed out. So, as long as employers post a notice on their website that the document is available upon request, and then fulfill any such request within 30 days, they can choose not to distribute the Forms 1095-B to covered individuals.
However, employers should note that the penalty relief pertaining to the Form 1095-B is not available for Form 1095-C, but can be applied to employees who are not full-time and only receive a Form 1095-C to meet the Form 1095-B reporting requirement. In other words, those employees who are only receiving a Form 1095-C because the employer uses Part III to comply with Section 6055 no longer have to be provided a Form 1095-C. (Self-insured applicable large employers must still provide and file Form 1095-C to full-time employees and complete Part III of the Form, indicating the covered spouses and dependents of the full-time employees.)
Although the IRS provided similar relief in the past, the agency explains that unless they receive comments to explain why relief related to furnishing statements under Sections 6055 and 6056 continues to be necessary, no relief will be granted in future years. Comments must be submitted by February 1, 2021 (Notice 2020-76 provides instructions on how to do so).
Employers should keep this guidance in mind as they are preparing their ACA filings and distributions for 2020.
The IRS recently released an updated version of Publication 5164, entitled “Test Package for Electronic Filers of Affordable Care Act (ACA) Information Returns (AIR),” for tax year 2020 (processing year 2021). The publication describes the testing procedures that must be completed by those filing electronic ACA returns with the IRS, specifically Forms 1094-B, 1095-B, 1094-C and 1095-C. As a reminder, those who are filing 250 or more forms are required to file electronically with the IRS.
Importantly, the testing procedures apply to the entity that will be transmitting the electronic files to the IRS. Thus, only employers who are filing electronically with the IRS on their own would need to complete the testing. If an employer has contracted with a software vendor who’s filing on behalf of the employer, then the testing and this publication would not be utilized by the employer, but the software vendor instead.
The IRS provides scenarios for each form type (see pages 12-13) for reporting year 2020. Each scenario contains all the information needed to prepare the XML. The scenarios test the functionality of the business rules and each test submission must match the scenarios exactly to pass tests. Correction scenarios are also provided (see pages 15-16), but those are not required in order to pass testing.
As a reminder, electronic filing of 2020 returns will be due March 31, 2021. Employers that are filing on their own will need to review the updated testing requirements in Publication 5164. Large employers that are required to file electronically, and would like information on third-party vendors who can assist, can contact their advisor for more information.
On September 2, 2020, the US District Court for the District of Columbia issued an injunction against HHS, stopping the agency from enforcing its amendments to its rule implementing Section 1557 of the ACA. The specific amendments subject to the injunction are those that scale back the rule’s prohibition against discriminating on the basis of gender identity or sexual orientation, as well as the insertion of a religious exemption allowing religious organizations to opt out of following the rule when doing so would be inconsistent with their religious beliefs. This is the second federal district court to block these new amendments.
The amendments to the rule implementing Section 1557 were discussed in the June 23, 2020, edition of Compliance Corner.
In this case, Whitman-Walker Clinic v. HHS, a group of organizations that provide healthcare and other services to the LGBTQ community filed suit against HHS within days of the publication of its final rule. The plaintiffs alleged that the agency acted in an arbitrary and capricious way when implementing the amendments to the rule, and that these amendments conflict with Section 1554 of the ACA by creating unreasonable barriers and impeding access to healthcare services to members of the LGBTQ. The plaintiffs also alleged that the final rule violates the First Amendment’s right to free speech, the Fifth Amendment’s guarantees of equal protection and substantive due process, and the Establishment Clause. As a preliminary matter, the plaintiffs asked the court to enjoin the agency from enforcing its final rule while litigation proceeded.
The court considered whether the plaintiffs would likely succeed on the merits of their case. The court concluded that they were likely to both succeed on the merits and suffer irreparable harm on the allegations that HHS acted arbitrarily and capriciously when it stripped out language regarding sexual orientation and gender identity from the definition of “discrimination of the basis of sex.” Although the court did not agree that “gender identity” was included in the original regulation, it did agree that discrimination based upon “sex stereotyping” was prohibited. The court additionally found that the agency improperly incorporated the religious exemption established in Title IX of the Civil Rights Act of 1964 into the final rule. Accordingly, the court issued its injunction. The injunction is effective nationwide.
This ruling is part of ongoing litigation and could be appealed, so the ultimate disposition of the final rule is unknown. It should be noted that this is the second federal district court to enjoin this rule. The first case, Walker v. Azar, was discussed in the August 18, 2020, edition of Compliance Corner. Employers that would operate their plans in a manner consistent with the final rules should consult with legal counsel about the implications of this decision. We will keep an eye on developments in this area to see how they may affect the benefits employers provide to their employees.
On September 24, 2020, President Trump issued the Executive Order on An America-First Healthcare Plan, providing a summary of efforts made regarding the efficiency and quality of healthcare in the US, and directives aimed at lowering healthcare costs for Americans.
In an effort to lower healthcare costs, the order directs HHS to:
In addition, HHS is directed to continue to maintain and improve upon existing processes to reduce waste, fraud and abuse in the healthcare system and to advance the quality of delivery of care for veterans, while continuing to promote medical innovations of conditions impacting Americans (such as COVID-19 and Alzheimer’s disease, among others).
Further, in response to the order, HHS issued a final rule from the Food and Drug Administration and related guidance, among other items, as noted in its September 24, 2020, press release. The final rule permits importation of certain drugs from Canada in an effort to lower patient drug costs and explains the process for states who wish to do so.
While the order does not directly impact group health plans, employers should be aware of these developments.
On August 19, 2020, the IRS updated its guidance on the employer mandate (also known as employer shared responsibility).
The Q&A updates reflect index adjustments to penalties and the affordability percentage for calendar year 2021. The employer shared responsibility payment, which is the penalty an applicable large employer must pay if it does not offer minimum essential coverage to at least 95% of its full-time employees, is now the product of $2,700 (which is up from $2,570 in 2020) multiplied by the number of full-time employees employed for the calendar year. The penalty for failing to offer affordable coverage or coverage that does not provide minimum value, which is computed separately for each month, is the product of $4,060 (up from $3,860 in 2020) multiplied by the number of full-time employees who received premium tax credits in that month. The update also confirms that the percentage used to determine whether coverage is affordable (the affordability threshold) for plan years beginning in 2021 is now 9.83% (up from 9.78% for plan years beginning in 2020).
As a reminder, the draft 2020 versions of the ACA employer shared responsibility reporting forms were discussed in the July 21, 2020, edition of Compliance Corner.
Employers should be aware of these updates when determining premiums for 2021 and preparing their employer shared responsibility reporting forms for the calendar year 2021.
On August 17, 2020, in Walker v. Azar, the US District Court for the Eastern District of New York blocked the Trump administration’s final rule concerning Section 1557 of the ACA. As reported in the June 23, 2020, edition of Compliance Corner, HHS issued a final rule that amended the agency’s prior regulation concerning Section 1557 of the ACA. This rule scaled back explicit protections based upon gender identity introduced by the previous administration, relying instead on broader protections against discrimination on the basis of sex provided for in the ACA. The final rule was to take effect on August 18, 2020.
This federal district case was initiated by two transgender women seeking medical care for ongoing health conditions. Both claim that they experience discrimination in their efforts to obtain that care and they asked the district court to vacate the final rule because it is contrary to a recent Supreme Court ruling that held that discrimination based upon gender identity is prohibited by Title VII of the Civil Rights Act of 1964. As a preliminary matter, the plaintiffs asked that the Trump administration be enjoined from enforcing the final rule, pending the resolution of the litigation.
In this case, the district judge agreed that the final rule was contrary to the Supreme Court ruling in Bostock v. Clayton Cty., Ga. As was also previously reported in the June 23 edition of Compliance Corner, the Supreme Court ruled that discrimination based upon sexual orientation or sexual identity is prohibited under Title VII of the Civil Rights Act of 1964. That opinion resolved three cases involving homosexual and transgender plaintiffs alleging that they were fired from their jobs based upon their sexual orientation or sexual identity. The court reasoned that Title VII’s prohibition against discrimination based on sex was broad enough to include sexual orientation and sexual identity because those things are inextricably linked to sex. Accordingly, employers cannot rely upon traditional notions of gender when considering terminating someone’s employment.
The federal district court noted that HHS adopted a position in its final rule regarding what constituted discrimination based upon sex that was soon to be rejected by the Supreme Court. HHS was aware that the Supreme Court case was coming when it issued its final rule, and did not attempt to change or pull down its final rule after the Supreme Court issued its ruling. So it appeared to the district court that the agency was taking a position that was rejected by the Supreme Court and was, therefore, contrary to law. In addition, by failing to take action that harmonized with the Supreme Court’s ruling, the agency was deemed to be acting in an arbitrary and capricious manner. As a result of these determinations, the federal district court stayed the implementation of the final rule until further order from the court.
This ruling is part of ongoing litigation and could be appealed, so the ultimate disposition of the final rule is unknown. Employers that would operate their plans in a manner consistent with the final rules should consult with legal counsel about the implications of this decision. We will keep an eye on developments in this area to see how they may affect the benefits employers provide to their employees.
On July 21, 2020, the IRS published Rev. Proc. 2020-36, which provides the 2021 premium tax credit (PTC) table and the employer contribution percentage requirements applicable for plan years beginning after December 31, 2020.
As background, the ACA's employer-shared responsibility rules (also known as the "employer mandate") require an employer to provide affordable, minimum value coverage to its full-time employees. The IRS' required contribution percentage is used to determine whether an employer-sponsored health plan offers an individual "affordable" coverage, and the affordability percentage is adjusted for inflation each year. In addition, the ACA also provides a refundable PTC, based on household income, to help individuals and families afford health insurance through affordable insurance exchanges. The IRS provides the PTC percentage table for individuals to calculate their PTC.
For 2021, the ACA's affordability percentage will increase to 9.83% (up from 9.78% in 2020). For the employer mandate and affordability, this means that an employee's required premium contribution toward single-only coverage under an employer-sponsored group health plan can be no more than 9.83% of the federal poverty line or of an employee's W2 income or rate of pay (depending on which of the three affordability safe harbors the employer is relying upon).
The 2021 PTC table used to determine an individual's eligibility for PTCs is provided below:
Household Income Percentage of Federal Poverty Line
Less than 133%
At least 133%, but less than 150%
At least 150%, but less than 200%
At least 200%, but less than 250%
At least 250%, but less than 300%
At least 300%, but not more than 400%
The revenue procedure is effective for plan years beginning on and after December 31, 2020.
Employers should be mindful of the upcoming 2021 affordability percentages and make sure that the premium offerings for 2021 continue to be affordable for full-time employees, so as to avoid any employer-shared responsibility penalties. The penalties related to employer shared responsibility remain the law (despite the fact that the ACA's individual mandate was repealed in 2019).
The IRS recently released draft versions of the 2020 informational reporting forms that insurers and self-insured employers will use to satisfy their obligations under IRC Section 6055 and that large employer plan sponsors and health plans will use to satisfy their obligations under IRC Section 6056. These forms, once finalized, will be filed in early 2021 relating to 2020 information. (Note that 2020 draft instructions for these forms have not yet been released.)
As background, the ACA imposes two reporting requirements under Sections 6055 and 6056. Section 6055 requires insurers and small self-insured employers to report on Forms 1094-B and 1095-B that they provided minimum essential coverage to covered individuals during the year. Section 6056 requires applicable large employers (under the employer mandate) to report on Forms 1094-C and 1095-C that they provided affordable and minimum value coverage to full-time employees.
On July 13, 2020, the IRS released the 2020 draft of Forms 1094-C and 1095-C. Earlier in the month, the IRS released the 2020 draft of Forms 1094-B and 1095-B. While the Forms 1094-B and 1094-C are basically unchanged from their 2019 versions, there are notable changes to Forms 1095-B and 1095-C. Highlights of the changes are as follows:
As a reminder, the forms must be filed with the IRS by March 1, 2021 (as February 28, 2020, falls on a Sunday), if filing by paper and March 31, 2021, if filing electronically. The Forms 1095-B and 1095-C must be distributed to applicable employees by February 1, 2021 (as January 31, 2021, falls on a Sunday). The penalties for failure to file and report are $270 per failure. This means that an employer who fails both to file a completed form with the IRS and to distribute a form to an employee/individual would be at risk for a $540 penalty. Keep in mind, though, that the IRS has provided relief that would allow reporting entities not to distribute the Form 1095-B if certain conditions are met.
Employers should become familiar with these forms in preparation for filing information returns for the 2020 calendar year. However, these forms are only draft versions, and they should not be filed with the IRS or relied upon for filing. We will keep you updated of any developments, including release of the finalized forms and instructions.
On July 10, 2020, the DOL, HHS and IRS released a proposed rule to amend certain requirements for grandfathered group health plans seeking to maintain their grandfathered status. The proposal is designed to provide such plans greater flexibility to make changes with respect to fixed-amount cost-sharing increases, including those necessary to maintain HDHP status.
As background, the ACA permits certain group health plans that existed as of the law’s enactment on March 23, 2010, to be treated as grandfathered health plans. By such treatment, the plans are exempt from some of the ACA’s mandates. However, to preserve such status, these plans are limited in their ability to alter the plan design or increase cost sharing.
The proposal follows a public request for information by the agencies on February 25, 2019. This request was designed to gather feedback as to whether the existing 2015 grandfathered plan rules could be modified to better assist plan sponsors responding to rising healthcare costs, while maintaining affordability for employees.
Under the current regulations, increases for fixed-amount cost sharing other than copayments (e.g., deductibles and out-of-pocket maximums) cannot exceed thresholds determined by the Consumer Price Index (CPI) measure of medical inflation. However, this component of the CPI index includes not only prices for private insurance, but also self-pay patients and Medicare, which would not be reflected in group health plan costs.
Accordingly, the proposed rule provides the alternative method of measuring permitted increases in such fixed-amount cost sharing by using the premium adjustment percentage published each year by HHS in the annual notice of benefit and payment parameters. The premium adjustment percentage reflects the cumulative historic growth from 2013 through the preceding calendar year in premiums for private health insurance. Therefore, this measure is viewed as more accurately reflecting the cost increases for grandfathered group health plans than the CPI measure.
The proposal does not eliminate use of the CPI index, but rather allows an employer to use the method that yields the greater result. Therefore, the increases to non-copay fixed-amount cost-sharing for grandfathered group health plans could not exceed the greater of the CPI measure of medical inflation percentage or the applicable premium adjustment percentage, plus 15 percentage points.
In addition, the proposal clarifies that a grandfathered group HDHP may increase fixed-amount cost-sharing requirements, such as deductibles, to the extent necessary to maintain their HDHP status without losing grandfathered status. This change was initiated to ensure that participants enrolled in that coverage remain eligible to contribute to an HSA.
Employers who sponsor grandfathered plans should be aware of these developments. The agencies are accepting public comments on the proposal through August 14, 2020. The proposed changes would become effective 30 days following the publication of a final rule and would not have retroactive effect.
On July 8, 2020, the U.S. Supreme Court issued a 7-2 decision in Little Sisters of the Poor Saints Peter and Paul Home v. Pennsylvania that upheld the current administration’s religious and moral exemptions from the employer mandate to provide birth control to employees.
This decision is the result of long-running litigation that began when the previous administration promulgated rules that clarified the ACA’s requirement that employers provide group health plans to their employees that includes preventive care and screening services to women without cost sharing. The previous administration defined “preventive care” to include birth control. In doing so, the previous administration created an exemption for religious institutions and gave nonprofits affiliated with those institutions an exemption if those nonprofits self-certified that offering birth control coverage in their health plans would violate sincerely held religious beliefs.
Employers with religious objections to birth control took the previous administration to court, asserting that the requirement would keep them from exercising their religious beliefs in violation of the Religious Freedom Restoration Act. The current administration later issued interim rules that expanded the exemption to any employer, including publicly traded employers, which objected on religious grounds. Employers that are not publicly traded can also object for broader moral reasons.
Two states, Pennsylvania and New Jersey, filed suit against the federal government, alleging that the federal government did not follow administrative procedure in promulgating the interim rules that expanded the exemptions and lacked the statutory authority to do so. The federal district court agreed with the states and issued a national preliminary injunction preventing the exemptions from going into effect pending the resolution of the litigation. The U.S. Court of Appeals for the Third Circuit affirmed that judgment and the injunction.
However, the Supreme Court disagreed and ruled that the ACA gave the federal government wide latitude to grant the exemptions, in that the law does not expressly require that contraceptives be covered by an employer’s group health plan. The Court also concluded that the current administration substantially followed administrative procedure when promulgating the interim rules and that any errors made during that process did not substantially harm the states. Accordingly, the Court reversed the Third Circuit’s judgment and remanded the case back to the district court for further proceedings.
Note that the exemptions at issue in this case were created in interim rules promulgated by the federal government. These exemptions can also be found in the final rule promulgated by the federal Health and Human Services Department, which we covered in the June 23, 2020, edition of Compliance Corner.
Employers intending to avail themselves of a religious or moral exemption from offering contraceptives should consult with their legal counsel about the implications of this Supreme Court decision.
Over the course of a few days in June, the executive branch and the judicial branch asserted two potentially conflicting positions regarding discrimination against persons on the basis of sexual orientation or gender identity.
On June 12, 2020, the HHS Office for Civil Rights (OCR), issued a final rule that amended the agency’s prior regulation concerning Section 1557 of the ACA. This rule scaled back explicit protections based upon gender identity introduced by the previous administration, relying instead on broader protections against discrimination on the basis of sex provided for in the ACA.
Section 1557 prohibits healthcare providers, health plans and insurers from discriminating on the basis of race, color, national origin, sex, age and disability. OCR’s prior regulation, referred to as the “2016 Rule,” expanded the scope of these prohibitions by including discrimination based upon gender identity, as well as requiring health plans and insurers to cover gender reassignment surgery. The 2016 Rule also required entities covered by the rule to distribute nondiscrimination notices with foreign language taglines, and required them to have compliance coordinators and written grievance procedures to handle complaints concerning possible violations of Section 1557.
Stating that the 2016 Rule exceeded the scope of the authority granted under Section 1557, the OCR’s new final rule eliminates those requirements. The new final rule also removed the definition section, which included broad definitions of gender identity, and narrows the application of the regulations to just HHS programs administered under Title I of the ACA (which does not include Marketplace plans). Specific protections from discrimination based upon sexual orientation and pregnancy termination were also removed.
Although several commenters wanted the agency to wait until the U.S. Supreme Court issued an anticipated ruling regarding gender identity and sexual orientation protections under Title VII of the Civil Rights Act of 1964 before committing to these changes, the agency opted not to wait. The agency’s position was that, even assuming that the Court ruled that Title VII protections extended that far, gender identity and sexual orientation create special issues in the healthcare context that the Court would not address. Accordingly, the agency asserted that the changes to the final rule addressed those issues directly and the agency did not need to wait for the Court.
However, on June 15, 2020, the U.S. Supreme Court ruled in Bostock v. Clayton Cty., Ga that discrimination based upon sexual orientation or sexual identity is prohibited under Title VII of the Civil Rights Act of 1964. The majority opinion resolved three cases involving homosexual and transgender plaintiffs alleging that they were fired from their jobs based upon their sexual orientation or sexual identity. The Court reasoned that Title VII’s prohibition against discrimination based on sex was broad enough to include sexual orientation and sexual identity because those things are inextricably linked to sex. Accordingly, employers cannot rely upon traditional notions of gender when considering terminating someone’s employment.
Although this ruling is primarily focused on employment law issues, it signals a potential conflict between the judicial branch and the executive branch of the federal government over how best to deal with this type of discrimination in other areas, such as benefits. While the administration’s new final rule concerning Section 1557 purports to rely upon the broad protections provided under the ACA, the fact that specific protections for gender identity were removed indicates a narrower approach to these issues than that espoused by the Court. Accordingly, challenges to this new rule may create additional uncertainty in this area of benefits law.
We will keep an eye on developments in this area to see how they may affect the benefits employers provide to their employees.
On June 8, 2020, the IRS released Notice 2020-44, which announces that the adjusted applicable dollar amount for PCOR fees for plan and policy years ending on or after October 1, 2019, and before October 1, 2020, is $2.54. This is a $.09 increase from the $2.45 amount in effect for plan and policy years ending on or after October 1, 2018, but before October 1, 2019.
As a reminder, PCOR fees are payable by insurers and sponsors of self-insured plans (including sponsors of HRAs). The fee doesn’t apply to excepted benefits such as stand-alone dental and vision plans or most health FSAs. The fee, however, is required of retiree-only plans. The fee is calculated by multiplying the applicable dollar amount for the year by the average number of lives and is reported and paid on IRS Form 720 (which hasn’t yet been updated to reflect the increased fee). It’s expected that the form and instructions will be updated prior to July 31, 2020, since that’s the first deadline to pay the increased fee amount for plan years ending between October and December 2019. The PCOR fee is generally due by July 31 of the calendar year following the close of the plan year.
The PCOR fee requirement is in place until the plan years ending after September 30, 2029.
On May 14, 2020, CMS released the Final Benefit and Payment Parameters for 2021, along with an accompanying fact sheet. The regulations are primarily directed at health insurers and the marketplace, but include important information that also affects large employers and self-insured group health plans. The effective date is July 13, 2020.
As background, these annual parameters specify the uniform standards for health plans subject to the ACA. Related regulatory and reporting issues are also prescribed. Accordingly, the guidance can serve as a useful planning tool for insurers and employers.
Overall, the 2021 regulations minimize regulatory changes in an effort to promote a more stable and predictable regulatory market. The guidance provides the updated plan cost-sharing limits and addresses the application of prescription drug coupons towards such limits. There are new annual reporting requirements with respect to state mandates for benchmark plans. Other highlights include amendments to the medical loss ratio (MLR) calculation and new notice obligations for non-federal government sponsors of excepted benefit health reimbursement arrangements (EBHRAs).
For 2021, the out-of-pocket maximum applicable to insured and self-funded plans is $8,550 for self-only coverage and $17,100 for family coverage. This limit is distinct from the 2021 IRS out-of-pocket maximum applicable to HSA-compatible high deductible health plans (HDHPs), which is $7,000 for self-only coverage and $14,000 for family coverage.
The guidance also clarifies that, to the extent consistent with state law, plans will be permitted, but not required, to count drug manufacturer coupons or discounts towards enrollees’ annual out-of-pocket limits. (The prior 2020 rule permitted the exclusion of coupons towards the cost-sharing limits only if the drug has a generic equivalent available.) However, the 2021 parameters do not address concerns regarding the applicability of drug coupons to an HSA-compatible HDHP. Accordingly, absent new guidance, these plans should continue to disregard the discounts in determining whether the HDHP statutory deductible has been satisfied.
The ACA requires non-grandfathered health plans in the individual and small group health plans to cover 10 essential health benefits (EHBs). States may require benefits in addition to the EHBs that are incorporated in the state benchmark plans. Beginning in 2021, states will be required to annually notify HHS of any such additional state-required benefits in a form and manner specified by HHS. The change is intended to ensure states are defraying the costs of additional required benefits for those advanced premium tax credits.
In an effort to lower premium amounts, the guidance amends the MLR regulations to require issuers to deduct prescription drug rebates and any other price discounts received by the issuer (or any entity providing pharmacy benefit management services to the issuer) from the incurred claim amount. This change is effective for the 2022 MLR reporting year. Additionally, issuers must report expenses for outsourced services in the same manner as expenses for non-outsourced services, to ensure that the full benefit of prescription drug rebates is reflected in premiums and not offset by outsourcing expenses.
For the benefit of employees, non-federal governmental plan sponsors that offer EBHRAs will now be required to provide a notice that includes the eligibility requirements, annual or lifetime benefit limits, and a summary of benefits generally consistent with ERISA requirements. The notice requirement was designed to ensure that employees received clear information about their excepted benefit offer regardless of whether the arrangement was subject to ERISA.
Employers may find this annual guidance helpful in designing their plan benefit offerings.
On March 12, 2020, CMS provided a set of FAQs that discusses the designation of COVID-19 treatment as an essential health benefit (EHB). As background, under the ACA, plans may not impose annual or lifetime limits on essential health benefits.
The FAQs address three questions:
Employers should consider this guidance as they provide coverage to participants who may be diagnosed with and treated for COVID-19.
On March 2, 2020, the Supreme Court announced that it will review a ruling by the U.S. Court of Appeals for the Fifth Circuit that found the individual mandate of the ACA – and possibly other provisions of the ACA – are unconstitutional. The Court will take up TX v. US during its October 2020 term. As such, the Court will not likely issue its own decision until after the November 2020 elections.
The ACA is still in force and plan sponsors should continue to comply with the various mandates imposed by the law. We will continue to follow any developments as this case makes its way through the appeals process.
On February 21, 2020, the IRS Office of Chief Counsel released a memorandum confirming that there is no applicable statute of limitations on an Employer Shared Responsibility Payment (ESRP) imposed by IRC §4980H. As background, applicable large employers (ALE) may be liable for two separate payments:
The IRS concludes in the memorandum that because no tax return is filed to report an ALE’s liability for the ESRP, there is no statute of limitations for the ESRP.
Explained further in the memorandum, the IRS generally imposes a three year statute of limitations that begins upon the filing of a “return.” However, the Supreme Court has established a four-part test to determine when a document filed with the IRS constitutes a “return” for this purpose. Specifically, one requirement is that the document provided includes sufficient data to calculate tax liability. While ALEs are required to report information about offers of coverage on Forms 1094-C and 1095-C, this reporting does not include sufficient data to calculate tax liability. This is because the reporting does not provide information specific to an employee’s eligibility for a premium tax credit, which is necessary to calculate the ESRP. Rather, the penalty is only calculated after cross-referencing information provided via the forms with the full-time employees’ individual tax returns.
That said, because there is no return that contains the necessary data to calculate the amount of an ESRP that could be owed by an ALE, the IRS’s three year statute of limitations does not apply and, as such, there is no statute of limitations for the ESRP. Importantly, ALEs should be aware that they can be liable for an ESRP assessment indefinitely and should continue to maintain compliance with the ACA’s employer mandate. Additionally, while the instructions for forms 1094-C and 1095-C advise filers to maintain copies of returns (and supporting documents) for a minimum of three years, implementing a longer retention period may be prudent in light of this memorandum.
On January 31, 2020, CMS announced an additional one-year extension with respect to specific ACA compliance requirements for certain non-grandfathered individual and small group coverage known as “grandmothered” policies. Under the latest extension, states may permit insurers that have continually renewed eligible grandmothered policies since January 1, 2014, to again renew that coverage for a policy year beginning on or before October 1, 2021, provided that the policies end by January 1, 2022.
As background, on November 14, 2013, CMS issued a letter outlining a transitional policy with respect to the health care reform mandates for coverage in the individual and small group markets. Under the policy, state authorities could allow health insurance issuers to continue certain coverage that would otherwise have been cancelled for failure to comply with the ACA requirements. This initiative allowed individuals and small businesses to elect to re-enroll in such coverage. Specifically, the non-enforcement policy provided relief from the following market reforms:
The transitional policy has been continually extended since the initial announcement, thus permitting grandmothered policies to maintain an exemption from the above-mentioned requirements. However, although the CMS bulletin allows for the temporary continuation of these non-compliant plans at the federal level, the practice must still be approved by state regulators in order for policies to be available in a particular state. Insurers then also have a choice as to whether to keep offering the policies. The bulletin includes a notice to be used in the event a coverage cancellation notice was already sent and the insurer will now be providing an option to the policyholder to continue the coverage.
Accordingly, small employers who are currently covered by such grandmothered policies should be aware of the most recent non-enforcement extension. These employers should work with their advisors and insurers regarding possible renewal of the coverage.
On February 3, 2020, the DOL, HHS, and the Department of the Treasury issued two FAQs concerning the application of recent updates to SBC materials.
These agencies are charged with developing standards that group health plans and health insurance issuers can apply when compiling and providing SBCs to plan participants in accordance with the ACA. On November 7, 2019, updates to the SBC template, coverage examples calculator, guide, and narratives for coverage examples were released.
The first FAQ states that group health plans and health insurance issuers must use these updated materials beginning on the first day of the first open enrollment period for plan years beginning on or after January 1, 2021.
The second FAQ clarifies that using the calculator is not mandatory. It is a tool to help group health plans and health insurance issuers to generate the estimated out-of-pocket costs that a consumer can expect to pay under the plan for the coverage examples on the SBC. The calculator makes several assumptions that may not apply to particular plans or policy designs, so the agencies allow the plans and issuers to create their own calculators or to modify the calculator as necessary. However, plans and issuers can use the calculator even when they could develop more accurate methods for generating coverage examples, because it retains its status as a safe harbor.
Employers should be aware of the 2021 updates to SBC materials, their application, and when they must be applied.
In January, HHS announced the 2020 federal poverty levels (FPL). The guidelines for the 48 contiguous states is $12,760 for a single person household and $26,200 for a four person household. The guidelines are different for Alaska ($15,950 and $32,750, respectively) and Hawaii ($14,680 and $30,130, respectively).
The FPL plays an important role under the ACA. Individuals who purchase coverage through the exchange may qualify for a premium tax credit if their household earnings are within 100% to 400% of the FPL. Employers wishing to avoid a penalty under the employer mandate may use the FPL affordability safe harbor, which means the cost of an employee's required contribution for employer sponsored coverage does not exceed 9.78% (for 2020), down from 9.86% (for 2019), of the single person FPL. This means that the FPL affordability safe harbor threshold in the 48 contiguous states for 2019 would be $103.99 per month, which is $12,760 divided by twelve and multiplied by 9.78%. As a reminder, the FPL safe harbor is only one of the affordability safe harbors; the other two are the rate of pay and Form W-2 safe harbors.
Employers should consider this adjustment to the FPL when determining whether their coverage is affordable, especially if they're using the FPL affordability safe harbor. The 2020 FPL is applicable beginning January 15, 2020.
On January 29, 2020, the United States Court of Appeals for the Fifth Circuit announced that it would not revisit its earlier decision in the TX v. US case. That decision was made by a panel of three judges, and could have been reviewed by the entire Court under certain circumstances. In this case one of the appellate court judges made the request to have the entire Court hear the case. However, as a result of this decision, the case will proceed as originally ordered by the appellate court.
As background, on December 18, 2019, the Fifth Circuit ruled that the individual mandate was unconstitutional because Congress declined to exercise its constitutional taxing authority to penalize citizens who did not obtain health insurance. Although the District Court that first heard this case also ruled that the loss of the individual mandate meant that the entire ACA was also unconstitutional, the Fifth Circuit was not convinced. Instead, the appellate court remanded the case back to the District Court to examine that question more closely and provide more detail about what provisions in the ACA would fail and rule on whether other provisions could stand.
On an 8-6 vote, the entire Fifth Circuit decided not to review the case, which means that the case will proceed in a remand to the District Court. Although the defendants in the case asked the Supreme Court to expedite its consideration of this case, the Supreme Court declined to do so.
The ACA is still in force and plan sponsors should continue to comply with the various mandates imposed by the law. We will continue to follow any developments that come from TX v. US.
Despite defendants’ efforts to persuade the US Supreme Court to expedite its consideration of the lawsuit challenging the constitutionality of the ACA, the Court denied their request.
On December 18, 2019, the Fifth Circuit Court of Appeals ruled that the individual mandate was unconstitutional because Congress declined to exercise its Constitutional taxing authority to penalize citizens who did not obtain health insurance. Although the District Court that first heard this case also ruled that the loss of the individual mandate meant that the entire ACA was also unconstitutional, the Fifth Circuit was not convinced. Instead, the appellate court remanded the case back to the District Court to examine that question more closely, provide more detail about what provisions in the ACA would fail, and rule on whether other provisions could stand.
On January 3, 2020, two defendants in the case asked the Supreme Court to hear their appeal of the Fifth Circuit ruling on an expedited basis. The defendants, California and the US House of Representatives, asked that the Court consider their appeal during the current term, which ends in June 2020, without waiting for the lower courts to reconsider these issues first. They argued that these issues, and the ultimate fate of the ACA, are too important to wait and that uncertainty about the outcome needed to be resolved sooner rather than later.
On January 10, 2020, the plaintiffs in the federal lawsuit challenging the ACA’s individual mandate and, potentially, the entire ACA, filed a brief with the US Supreme Court urging the Court not to expedite its review of the case. The plaintiffs in the case include the federal Department of Justice, 18 Republican attorneys general and governors, and two individual plaintiffs. They argued that the defendants failed to articulate the harm in waiting, as the lower court rulings are stayed pending the resolution of the appeals. They also argued that there is no need to rush the process, and to give the lower courts more time to consider the issues more carefully. In the alternative, the plaintiffs asked that the Court wait and take up the matter in their next session, which begins in October 2020.
On January 21, 2020, the Court issued an order denying the defendants’ request to expedite consideration of the case. The order did not weigh in on the merits of the parties’ arguments. As a result, the Court will likely not take up this matter until 2021 at the earliest.
This news does not change anything about the ACA or its application to employer plan sponsors. As such, plan sponsors should continue to comply with the ACA’s provisions as they are now.
On December 20, 2019, President Trump signed the Further Consolidated Appropriations Act of 2020 (HR 1865) into law. The main purpose of this legislation is to continue funding certain government operations. However, the bill also includes a number of employee benefits-related provisions. Specifically, the bill repeals the tax on high cost health coverage (aka the Cadillac tax), the health insurance tax (HIT, aka the Health Insurance Providers Fee), and the medical device tax. The bill also extends the ACA’s PCOR fee for 10 years (until 2029) and the paid family and medical leave tax credit for one year, and retroactively eliminates a commuter benefit tax for tax-exempt organizations.
ACA Tax Repeals
PCOR Fee Extension
HR 1865 extends the PCOR fee for 10 more years. As background, the ACA imposes a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute. The fee, required to be reported only once a year on the second quarter Form 720 and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan.
The PCOR fee previously applied to policy or plan years ending on or after October 1, 2012, and before October 1, 2019. However, HR 1865 extends the fee through 2029.
Employers with self-insured plans (including HRAs) will need to continue their compliance with the PCOR fee requirement by filing Form 720 by July 31 each year. We anticipate the IRS will issue additional guidance on the extension, including applicable fee amounts, prior to the July 31, 2020, deadline.
Employer-Paid Family and Medical Leave Tax Credit
HR 1865 extends the employer-paid family and medical leave tax credit for one year. As background, the 2017 Tax Cuts and Jobs Act established a business tax credit for certain employer-paid family and medical leave, which ranges from 12.5% to 25% of the wages paid to qualifying employees, where such wage payments are at least 50% of the wages normally paid to the employee. The credit was originally available to employers only for wages paid in 2018 and 2019, HR 1865 extends the credit through 2020.
Retroactive Elimination of Commuter Benefit Tax for Tax-Exempt Organizations
HR 1865 also eliminates a tax on commuter benefits for tax-exempt organizations. As background, Congress (as part of the 2017 Tax Cuts and Jobs Act), enacted Section 512(a)(7), which required tax-exempt organizations to include in unrelated business taxable income their costs for providing “qualified transportation fringe benefits” to their employees. HR 1865 repeals section 512(a)(7) retroactive to the date of its enactment. We anticipate that the IRS will issue guidance relating to the repeal, including how to amend Forms 990-T (used to report and pay the tax), and how to claim related refunds.
On December 18, 2019, a three-judge panel of the United States Court of Appeals for the Fifth Circuit ruled that the MEC provision (otherwise known as the “individual mandate”) of the ACA is unconstitutional. However, the appeals court declined to rule on whether the individual mandate rendered the entire ACA unconstitutional or if it can be severed from the ACA. The appeals court remanded that matter back to the district court to make the determination. As a reminder, the matter came before the appeals court after US District Judge Reed O’Connor of the Northern District of Texas ruled that the individual mandate was unconstitutional and so integral to the ACA that the entire law must be overturned.
The question of whether the individual mandate is unconstitutional hinges upon the tax penalty imposed upon taxpayers who fail to obtain health insurance that provides MEC. A previous ruling by the US Supreme Court, back in 2012, determined that Congress had the authority to create an individual mandate in the ACA through its power to tax. Thus, as long as the law imposed a tax, the mandate was constitutional. In late 2017, Congress reduced the tax to $0, and in response 20 states and two individuals challenged the ACA on the basis that Congress waived its authority to impose the individual mandate when it declined to impose a tax. Both the district court and the appeals court accepted this argument.
The appeals court remanded back to the district court the issue regarding whether the individual mandate being invalidated causes the whole ACA to fail. The appellate court asks the district court to do two things: 1) Explain which provisions in the ACA are so intertwined with the individual mandate that they must also be severed from the ACA; and 2) Decide whether the court can enjoin only those provisions of the ACA that injure the states and individuals that brought the suit or declare the ACA unconstitutional only as to those states and individuals.
The lawsuit will continue to move through the courts for some time. The states defending the ACA in this lawsuit have already appealed this decision to the Supreme Court. Even if the Supreme Court declines to take up the matter at this time, the district court must now reconsider key issues, as noted above, and issue new rulings that will very likely be appealed as well. Although it is very difficult to predict the course of any lawsuit, it is not unreasonable to expect this one to take many more months to resolve.
For employers and group health plans, the Fifth Circuit decision does not change any requirements or obligations currently imposed under the ACA. Specifically, employers should continue their efforts toward timely ACA employer reporting and compliance with other coverage mandates, as the regulatory agencies will continue enforcing the ACA. We will report future developments in Compliance Corner.
On December 10, 2019, the IRS released a draft of the 2019 Instructions for Form 8941, Credit for Small Employer Health Insurance Premiums. This publication provides a general overview of the purpose and eligibility requirements for the small business health care tax credit, as well as specific instructions for completing the form.
As background, the small business health care tax credit allows eligible small employers that offer health insurance coverage to their employees to take a tax credit of up to 50% of the nonelective contributions they pay toward the premium cost. Tax-exempt eligible small employers are permitted a tax credit of up to 35% of such contributions. To qualify, a small employer generally must purchase the health coverage for its employees through SHOP. For tax years beginning after 2013, this credit is only available for a period of two consecutive tax years.
The instructions for Form 8941 provide the necessary information to compute the tax credit, and include worksheets to determine the applicable number of employees, average wages, and average premiums for each state’s small group health insurance market. The IRS modifies the form instructions periodically to reflect changes in regulations and/or numeric values, such as the average premium amounts. As standard procedure, the IRS releases a preliminary draft of the updated guide prior to final publication.
Employers that could potentially claim this credit should be aware of the release of the draft instructions. The IRS is accepting comments regarding the proposed publication. Accordingly, employers should also recognize that changes to the released version may occur prior to finalization.