Ask the Experts - August 2025
In this session, our team will discuss the latest trends and topics in the world of employee benefits and compliance.
If you have any immediate questions, please contact your Account Executive.
In this episode, we will discuss:
Where to Send PCORI Fees and How to Handle Late Payments
COBRA Extension After Divorce
Spousal Carve-Outs
ACA Full-Time Definition for ALE Determination
Special Enrollment After Dependent Loss of Coverage
Notice Requirements When Terminating a Group Health Plan
Summary Annual Report Requirements
COBRA and Controlled Group Rules
Podcast: Ask the Experts August 2025
Welcome to Ask the Experts, a monthly podcast taking on the latest questions around healthcare legislation and compliance.
Welcome to another edition of Ask the Experts. Today's guest is Crystal Bertner, Senior Compliance Specialist.
Welcome to the podcast, Crystal.
Thanks so much, Shelley. It's great to be here today.
My first question for you today, Crystal. Can you confirm where employees should mail their PCORI fees? I know we are past the July 31st deadline, but no information received has the actual address.
Yeah, so the PCORI fee is not a fee that employees pay. Rather, it's an employer-paid fee that applies to self-funded plans, including level-funded and HRA plans, and employers report and pay it using IRS Form 720. Now, while the filing deadline for the 2024 plan year has passed, employers that missed the deadline should still file and submit payment as soon as possible. The IRS Form 720 instructions include the address for where employers should send the payment.
And also, since we've passed the July 31st deadline, will the employer incur any penalties as a result of paying late?
So, at this point, they would just simply go ahead and file and pay, even though we have passed the July 31st deadline. If they do later receive a penalty notice, they will then need to reply with an explanation for the late filing, and the IRS would then determine if any penalties will apply. But for now, they would just go ahead and file and pay as soon as possible.
If someone is on COBRA with employee and spouse coverage, and the couple gets a divorce during the 18 months, would the ex-spouse be able to remain on the group health plan, and then would they only be entitled to finish out that 18 months, or would they qualify for 36 months?
So, divorce can qualify as a second qualifying event if it would have caused the spouse to lose coverage under the plan had the employee still been active. If so, and the plan is notified timely of the divorce, typically within 60 days, then the ex-spouse may then be eligible to extend COBRA for up to 36 months from the original qualifying event date.
Are you aware of any compliance issues with spousal carve-outs? This is for a group located in Texas.
If the plan is fully insured, the Texas Insurance Code generally prohibits excluding an otherwise eligible spouse from coverage. Therefore, a spousal carve-out policy would likely not be allowed. However, a spousal surcharge would generally be permitted, provided that it is applied consistently. Now, if the plan is self-funded, including level-funded plans, ERISA preemption applies, and state mandates in Texas would not apply. If this is the case, a spousal carve-out would be allowed under federal law as long as ACA, HIPAA, and nondiscrimination rules are met. Also, depending on whether this change is being implemented at renewal or mid-year, there may be additional considerations, such as carrier approval. And then just one last point here, since you mentioned that this is for a Texas group, I did provide details based on Texas, but just keep in mind that state laws vary in terms of whether carve-outs are allowed, so it's always important to look at the specific laws in each state when questions like this do come up.
Our employer group is counting their employees to determine if they are an ALE, applicable large employer, or not. They are asking if they can say that their policy is a full-time person works 40 hours a week and not 30. Can you please confirm if that's allowed?
The employer cannot redefine the ACA standards for full-time or full-time equivalent employees. For ALE determination under the ACA, a full-time employee is defined as someone who averages 30 or more hours of service per week or 130 hours per month. And then for full-time equivalents, you would take the hours of all employees with less than 120 hours per month and divide that by 120. The ACA calculation methods are set by the ACA law and are what employers must follow. However, employers can define full-time differently for other internal policies, such as PTO, for example, but those definitions do not apply for ACA compliance or ALE determination.
We have an employee who previously waived medical coverage and whose children were covered under her spouse's plan. That coverage has now ended and she is asking to enroll herself and her children. Since she wasn't previously covered under the spouse's plan, do the children's loss of coverage allow her and her children to now enroll?
Under HIPAA regulations, if a dependent loses other group health coverage, both the dependent and the employee are eligible for special enrollment as long as they are otherwise eligible and the dependent had coverage under the spouse's plan when coverage was originally waived. Assuming this is the case, the employer should allow the employee and any dependents who lost coverage to enroll as long as that request is made within 30 days of the loss of coverage date.
What is the minimum amount of time an employer must give to their employees when terminating their group health plan contract? This group is under 20 employees and will cease to offer a plan entirely.
There is no federal requirement that dictates a specific minimum notice period in this case that the employer must give employees with them terminating their health plan altogether. However, it is best practice to provide as much advance notice as possible in order to allow employees time to look at alternative options. With this group being under 20 employees, state continuation comes into play versus COBRA, assuming a health plan still exists. If the health plan is being terminated entirely, state continuation would, of course, not apply.
One of our groups had a TPA handle their Form 5500 filing requirements for July 31st and they are telling them that the employer group is also required to provide a copy of the summary annual report to the participants. What is that all about?
Yeah, so that's correct. The Form 5500 filing was due July 31st for calendar year plans. With them being on a calendar year, the summary annual report, which just summarizes the information contained in the Form 5500, needs to be provided by September 30th as that's due within nine months after the end of the plan year.
We have three small employers that are under common ownership. None of them has 20 or more employees on their own, but together they have about 30. One of the companies is asking if they are required to offer COBRA. Can you please confirm?
Yeah, so controlled group rules would apply here to determine COBRA eligibility. If the combined total number of employees across all three companies was 20 or more on more than 50% of their typical business days in the prior calendar year, then all three employers would be subject to COBRA, even if each company has fewer than 20 employees on their own.
Thank you very much, Crystal. We hope you found this podcast helpful and informative. If you have any questions, please contact your account manager or salesperson. This podcast is designed to highlight various employee benefit matters of general interest to our listeners. It is not intended to interpret laws or regulations or to address specific client situations. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional.