The Washington Report
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October 19, 2022
Note to Subscribers
The Washington Report will not be published on October 26, 2022. Look for your next Aon Washington Report on Wednesday, November 2, 2022.
Executive
President Signs EO Instructing HHS to Pursue Actions to Lower Prescription Drug Costs
On October 14, 2022, President Biden signed an Executive Order (EO) directing the Department of Health and Human Services (HHS) to explore additional actions to lower prescription drug costs. According to the EO, this includes “leveraging the ‘Innovation Center’ at HHS, created by the Affordable Care Act, which has authority to test new ways of paying for Medicare services that improve the quality of care while lowering costs.” Under the EO, HHS will have 90 days to submit a formal report outlining any plans to use the Innovation Center’s authorities to lower drug costs and promote access to innovative drug therapies for Medicare beneficiaries.
The latest action follows EO 14036 (Promoting Competition in the American Economy), signed July 9, 2021, and the enactment of the Inflation Reduction Act of 2022 (P.L. 117-169), signed into law on August 16, 2022. Both measures include provisions to improve competition and reduce prices for prescription drugs.
The EO is available here.
A Fact Sheet is available here.
Health
IRS Publishes Forms 1094-B/C and 1095-B/C
On October 14, 2022, the Internal Revenue Service (IRS) posted the following health coverage forms on its website:
- Form 1094-B Transmittal of Health Coverage Information Returns;
- Form 1095-B Health Coverage;
- Form 1094-C Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns; and
- Form 1095-C Employer-Provided Health Insurance Offer and Coverage.
Form 1094-B Transmittal of Health Coverage Information Returns is available here.
Form 1095-B Health Coverage is available here.
Form 1094-C Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns is available here.
Form 1095-C Employer-Provided Health Insurance Offer and Coverage is available here.
Retirement
PBGC Announces 2023 Premium Rates for Single-Employer and Multiemployer Plans
On October 14, 2022, the Pension Benefit Guaranty Corporation (PBGC) announced the 2023 flat-rate premiums for single-employer and multiemployer plans. For the 2023 plan year, the per-participant flat-rate premium for single-employer plans is $96.00 (up from $88.00 in 2022) and $35.00 for multiemployer plans (up from $32.00 in 2022). For plan years beginning in 2023, the variable-rate premium (VRP) for single-employer plans is $52.00 per $1,000 of unfunded vested benefits, up from a 2022 rate of $48.00. For 2023, the VRP is capped at $652 times the number of participants (up from a 2022 cap of $598). Plans sponsored by small employers (generally fewer than 25 employees) may be subject to a lower cap.
For additional information on VRPs, as well as other current and historical data, please refer to the Premium Rate website.
The 2023 PBGC premium rates are available here.
PBGC Releases Proposed Rule for Multiemployer Plans to Clarify Assumptions for Determining an Employer’s Withdrawal Liability
On October 13, 2022, the PBGC released a proposed rule that would provide interest rate assumptions in determining a withdrawing employer’s liability to a multiemployer pension plan. Under ERISA, an employer that withdraws from an underfunded multiemployer plan may owe withdrawal liability to the plan. The amount owed represents the withdrawn employer’s share of the amount by which the present value of the plan’s nonforfeitable benefits exceed the value of the plan’s assets. The plan actuary determines the present value of the plan’s nonforfeitable benefits using actuarial assumptions and methods. The proposed rule clarifies that it is reasonable to base the interest assumption used to calculate an employer’s withdrawal liability on the market price of purchasing annuities from private insurers, such as by use of settlement interest rates prescribed by PBGC under Section 4044 of ERISA (4044 rates). The proposed rule would specifically permit the use of 4044 rates, the funding interest rate, or a rate in between those two rates (such as a resulting rate when 4044 rates are combined with funding interest rate assumptions) to determine withdrawal liability.
Existing PBGC regulations prescribe actuarial assumptions for determining withdrawal liability in a multiemployer plan that terminates by mass withdrawal, but until now, PBGC has not used its explicit statutory authority under Section 4213(a)(2) of ERISA to issue regulations setting forth the assumptions that an ongoing plan may use in calculating an employer’s withdrawal liability. Comments on the proposed rule must be received by November 14, 2022.
The news release is available here.
The proposed rule is available here.
Other HR/Employment
IRS Provides Tax Inflation Adjustments for 2023
On October 18, 2022, the Internal Revenue Service (IRS) announced in Revenue Procedure 2022-38 the tax year 2023 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2022-38 provides details about all these annual adjustments. Items that may be of interest to employers are provided below. Please refer to the actual Revenue Procedure for all tax information.
Qualified Transportation Fringe Benefit: For tax year 2023, the monthly limitation for the qualified transportation fringe benefit is $300, as is the monthly limitation for qualified parking. This amount increased $20 from the tax year 2022 benefit of $280.
Health Flexible Spending Arrangements: For the taxable years beginning in 2023, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $3,050, an increase of $200 from the 2022 tax benefit of $2,850. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $610, an increase of $40 from taxable years beginning in 2022.
Medical Savings Accounts: For tax year 2023, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,650, up $200 from tax year 2022; but not more than $3,950, an increase of $250 from tax year 2022. For self-only coverage, the maximum out-of-pocket expense amount is $5,300 up $350 from 2022. For tax year 2023, participants with family coverage, the floor for the annual deductible is $5,300, up from $4,950 in 2022; however, the deductible cannot be more than $7,900, up $500 from the limit for tax year 2022. For family coverage, the out-of-pocket expense limit is $9,650 for tax year 2023, an increase of $600 from tax year 2022.
Qualified Adoption Expenses: The maximum credit allowed for adoptions is the amount of qualified adoption expenses up to $15,950 for taxable years beginning in 2023, up from $14,890 for 2022.
IRS Information Release IR-2022-182 is available here.
IRS Revenue Procedure 2022-38 is available here.
SSA Releases 2023 Indexed Figures; Announces 8.7% Benefit Increase
The Social Security Administration (SSA) released the Social Security 2023 indexed figures on October 13, 2022. The SSA announced that there will be a 8.7% Cost-of-Living Adjustment (COLA) for 2023. Some other changes that take effect in January of each year are based on the increase in average wages. Relevant figures are shown below.
COLA: Based on the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, Social Security and Supplemental Security Income beneficiaries will receive a 8.7% COLA for 2023. (The 2022 COLA was 5.9%.)
Wage Base: The 2023 Social Security wage base is $160,200. (The 2022 amount was $147,000.)
FICA/Medicare Tax Rate: The FICA tax rate remains at 7.65%: 6.20% for Social Security and 1.45% for Medicare combined.
Beginning in 2013, the Affordable Care Act increased the Medicare tax rate on wages by 0.9% (from 1.45% to 2.35%) for higher-income individuals. The payroll tax increase applies to wages over $200,000 for single tax filers and $250,000 for couples filing jointly ($125,000 for a married individual filing separately). The tax rates above do not include the 0.9%. The Internal Revenue Service has provided frequently asked questions on the Medicare tax increase, available here.
Maximum Monthly Benefit: For someone retiring at full retirement age in 2023, the maximum monthly benefit is $3,627. (The 2022 amount was $3,345.)
Annual Earnings Test Limit: For individuals under full retirement age, the 2023 annual earnings test limit is $21,240. (The 2022 amount was $19,560.) For individuals attaining full retirement age in 2023, the annual earnings test limit for the months prior to attaining full retirement age is $56,520. (The 2022 amount was $51,960.) There is no annual earnings test for individuals who have attained full retirement age.
A more detailed Aon bulletin, SSA Releases 2023 Indexed Figures; Announces 8.7% Benefit Increase, is available in the Publications section of the newsletter.
More information on the SSA COLA is available here.
A Fact Sheet on the SSA's 2023 Social Security changes is available here.
The October 13, 2022, news release is available here.
Aon Publications
SSA Releases 2023 Indexed Figures; Announces 8.7% Benefit Increase
The Social Security Administration (SSA) released the Social Security 2023 indexed figures on October 13, 2022. The SSA announced that there will be an 8.7% Cost-of-Living Adjustment (COLA) for 2023. Some other changes that take effect in January of each year are based on the increase in average wages.
The Aon bulletin is available here.
Once More with Feeling?—HHS Renews Public Health Emergency Declaration
Health and Human Services (HHS) Secretary Xavier Becerra once again renewed the public health emergency (PHE) declaration, effective October 13, 2022. The declaration extends the PHE for another 90 days, although the Secretary has the right to terminate the declaration prior to its expiration date, with 60 days’ advance notice.
The Aon bulletin is available here.
IRS Issues Final Regulations Fixing “Family Glitch” in ACA Subsidies, Adds New Cafeteria Plan Change in Status Rule for Exchange Eligibility
On October 11, 2022, the Internal Revenue Service (IRS) issued final regulations that expand the eligibility rules for family members to obtain subsidies on the public health insurance Exchange when they have not been offered affordable employer-sponsored health plan coverage. Separately, the IRS also expanded the cafeteria plan change-in-status rules to permit employees to change elections mid-year to allow family members to enroll in health care coverage on the public Exchange.
The final regulations fixing the “family glitch” and the guidance on the new change-in-status rules are effective starting after 2022.
This Aon bulletin addresses the following:
- Background on ACA Subsidies and “Family Glitch”
- Final Regulations Fix “Family Glitch”
- IRS Expands Cafeteria Plan Rules to Permit Enrollment in Public Exchange
- Employer Impact
- Next Steps
The Aon bulletin is available here.
Now Available: Retirement Legal Consulting & Compliance Year-End Update
Aon’s Retirement Legal Consulting & Compliance practice is pleased to present its Year-End Update of recent developments and risk mitigation strategies for retirement plan sponsors and fiduciaries to consider as we head toward year end. The summary highlights several key considerations including:
- Risk mitigation strategies for plan sponsors and fiduciaries to consider in 2022
- Discretionary amendments for defined benefit and defined contribution plans that may prove helpful to avoid or limit litigation exposure
- Description of the now-delayed SECURE Act, CARES Act, and Miners Act changes and a reminder that while plan amendments are delayed, operational compliance is presently required
- Opportunities to streamline DB plans in anticipation of a future plan termination
The Year-End Update: Recent Developments and Risk Mitigation Strategies for Plan Sponsors and Fiduciaries is available here.