PCORI Fees Due July 31

Recently there has been discussion on our Google Group about the requirement under the Affordable Care Act (ACA) for certain entities to pay the PCORI trust fees. This is the second year that the fees have been required.

The PCORI fee, which must be paid for "lives insured" under health plans, is due on Thursday, July 31. The question is, are religious institutes exempt under the provision that allows them to not count members as employees under the employer mandate piece of the ACA? The answer is not clear.

Earlier this year, the IRS issued the final regulations on the employer mandate provisions of the ACA. Therein the IRS gave the option for religious institutes to not count their members as employees for purposes of determining whether the religious institute meets the threshold for falling under the employer mandate (at least 50 employees).

Because that provision specifically deals with counting members for purposes of determining application of the employer mandate, it cannot necessarily be applied to all section of the ACA. The PCORI fee is a different section of the ACA, and it is quite possible the exception does not "translate over" since the exception deals with (not) counting the numbers of hours worked by members. In addition even if the exception could be said to apply, it is not clear that it would exempt religious institutes from the PCORI fee. That is because the PCORI fee is not tied to hours worked, but rather to actual lives covered by a plan, regardless of employment.

If you are liable for the fee, you must use IRS Form 720 to pay it for all "lives insured." This means that if your employees have plans that cover dependents, the fee must be paid for those family members (as "lives insured"). Likewise, if  your members are self-insured and you have a third party administrator for that plan, then you could be required to pay the PCORI fee for your members also. If you have an insurance company, most likely they are paying this fee from the premiums that you pay to them. Make sure to clarify this with the insurer. Note also that if you have health reimbursement accounts (HRA) set up for your employees in addition to an insurance plan, the PCORI fee is due for each of these HRAs also.

This chart on the IRS website might help: http://www.irs.gov/uac/Application-of-the-Patient-Centered-Outcomes-Research-Trust-Fund-Fee-to-Common-Types-of-Health-Coverage-or-Arrangements. There is a PCORI fee due on each life covered by the HRA in addition to the fee on each fully-insured plan. In essence the same “life” causes the fee to be paid twice if there are two different coverage arrangements on that one life.

For more on the method for determining the average number of lives covered, go to the IRS website at http://www.irs.gov/uac/Newsroom/Patient-Centered-Outcomes-Research-Institute-Fee, under the heading "Calculating the Fee." 

Instructions for IRS Form 720 (which you use to pay the fee) includes an explanation of the fee starting on page 8 (http://www.irs.gov/pub/irs-pdf/i720.pdf). There is also information at http://www.irs.gov/uac/Application-of-the-Patient-Centered-Outcomes-Research-Trust-Fund-Fee-to-Common-Types-of-Health-Coverage-or-Arrangements.The fee can be paid electronically through the EFTPS (http://www.irs.gov/uac/Patient-Centered-Outcomes-Research-Trust-Fund-Fee:-Questions-and-Answers).

At this point in time RCRI has not taken a definitive position on this issue. If you conclude that you will not pay the fee, you should be prepared to back up the decision with a legal opinion from experts on the ACA.

Whatever you and your legal counsel decide to do after examining your own situation, be aware that you should discuss whether your decision will have repercussions with regard to the “reinsurance fee” that kicks in this November. That fee is $63 per member per year and will be imposed by the Department for Health and Human Services rather than the IRS. (See, e.g., the explanation at http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/proposed-2015-payment-notice.html.) Another webpage that may help in keeping straight the difference between the PCORI fee and the reinsurance fee is http://www.shrm.org/hrdisciplines/benefits/articles/pages/pcori-reinsurance-fees.aspx.

RCRI and LCWR Receive Grants from GHR Foundation to Assist Women Religious

We are pleased to announce that the GHR Foundation has awarded the Resource Center for Religious Institutes (RCRI) and the Leadership Conference of Women Religious (LCWR) grants for a joint strategic planning effort designed to assure a future for US women’s religious life. The GHR Foundation assists organizations providing sustainable solutions to the world’s most pressing social issues.

With the grants, LCWR and RCRI will assist orders of women religious in this unique moment in history when their demographics include very large numbers of elderly members. The grants will be used by the two organizations to fund cooperative efforts to accompany religious institute leaders through difficult decision-making processes, provide information on the practical aspects of planning and preparing for the future, and offer pastoral care to the members of communities that are in the midst of significant change.

Over the past year, LCWR and RCRI have worked with the National Religious Retirement Office (NRRO) to assess the assistance needed by US women religious institutes in the next several years, particularly those that are now in their last generation.

“LCWR has a responsibility to support its members in navigating these next years – to downsize in order to become what religious institutes have been through the centuries: small, liminal groups seeking God, serving the needs of society at the margins, and raising up for the church unaddressed needs,” said LCWR executive director Janet Mock, CSJ.

“RCRI, LCWR, and NRRO have studied the trends among institutes of US religious and recognize that a number are now completing their journey as an institute,” added RCRI executive director Sharon Euart, RSM. “We also believe that a number of institutes have viability, but are in need of assistance now to plan for a very different future.”

With the GHR grants, the two organizations will implement programs specifically targeting institutes in serious need. Currently, there are more than 200 women’s religious institutes that have fewer than 100 members and have a median age of 75 or older. Additional institutes will reach this stage in the near future.

GHR awarded LCWR $1,125,000 over five years to hire a woman religious who will assess the needs of these religious communities and form teams of religious who can accompany the leaders during the discernment and decision-making processes that need to occur in order to avert crises. The teams will also provide pastoral care to institute members as decisions are made and implemented.

RCRI received a grant of $350,000 to provide practical assistance to leaders with the governance, managerial, and financial decisions facing these religious institutes. RCRI will develop models and resources for use by the institutes, and will train individuals who can assist institutes with the implementation of the resources. RCRI will offer its services through major workshops at the annual RCRI conference, regional workshops, webinars, and online resources.

LCWR and RCRI have created this initiative to strengthen US women’s religious life. “The project is designed so that a religious institute can continue to control and govern its own future,” explained Sharon. “We also hope women religious will understand that many of the duties now performed by leaders can be transferred to management, freeing the leaders to attend the mission and ministry of their institutes. We believe that in the future there will be fewer religious institutes, but these will be vibrant with sufficient membership.”

“The program will assist religious institutes in planning for and celebrating their legacy and making wise decisions about the care of their members,” added Janet. “It also has the potential to release new energy that frees younger religious to focus on mission and carefully discern how religious life may move into the future.”

On behalf of RCRI, the Project Team consists of Sister Pam Chiesa, PBVM, as Project Coordinator, Sister Linda Orrrick, SNJM, and Claire Blohm, with Rev. Dan Ward, OSB, as legal consultant and Sister Sharon Euart as Project Director. 

Catholic Benefits Association and Catholic Insurance Company: Should You Join?

Within the last week, we have been asked by several member organizations about a letter that leadership received from The Catholic Benefits Association. A copy of the letter is depicted below for the purpose of assisting our members in understanding this explanation.

First, our members have indicated that they have never heard of The Catholic Benefits Association (CBA). Neither had we at RCRI until the first such letter came to our attention last week. We did some research, and since there are so many members contacting us, we thought that it might be helpful to our members to have this blog post as a reference to share with others in leadership.

The CBA's website, www.lifeaffirmingcare.com, says this about the organization:

Led by archbishops from throughout the United States, The Catholic Benefits Association (CBA) has formed The Catholic Insurance Company (CIC) and staffed it with a team of organizations and professionals with deep experience in the administration, delivery and operation of self-funded health care plans, in addition to legal counsel experienced in the defense of religious liberty. The CBA owns the CIC, a captive insurer domiciled in and regulated by the State of Oklahoma.

From their website you will see that CBA is a membership organization and that there is an affiliated organization called The Catholic Insurance Company (CIC), which is the "captive insurer" of the CBA. This is what they say about their services:

Membership in The Catholic Benefits Association (CBA) means acquiring a team of highly qualified professionals committed to helping Catholic employers navigate the ever-changing landscape of health care law in the United States while remaining faithful to their religious beliefs. Services of the CBA to its members include:

• Life-affirming health coverage consistent with Catholic values through The Catholic Insurance Company (CIC), the captive insurer of the CBA
• Stop-loss insurance through the CIC to protect employers from large claims
• A national third-party administrator that can customize benefit programs for members and handles full-service claims administration and customer service
• National provider networks (Aetna, Cigna and others, depending on region)
• Vigorous advocacy and defense of members’ First Amendment religious liberty
• Education on the changing requirements of health care regulations

Essentially the CBA and CIC were formed in response to the "contraceptive mandate" as it is being implemented by the final regulations from the U.S. Department of Health and Human Services (HHS). RCRI members may recall that this is one of the provisions in the "essential health benefits" that are required to be provided under the Affordable Care Act (ACA). Specifically, the "women's preventive services" requires group health plans to cover objectionable services or products such as  sterilization and contraception, including all drugs and other devices that have been approved by the Food and Drug Administration or other federal agencies.

When the HHS regulations were being implemented, there were provisions made for religious organizations. The Obama Administration knew that there wold be religious objections to coverage for some of these mandated items. For that reason, HHS built in two exceptions, saying that

• religious employers are exempt all together from providing these objectionable services or products, and 
• other organizations that hold themselves out as religious can be considered qualified employers and seek an accommodation.

It is the second of these two exceptions that is primarily of concern to CBA and CIC. The accommodation requires an organization to sign a self-certification, usually Form EBSA 700, to give to its insurance provider or third party administrator (TPA), stating that the employer will not provide these objectionable products or services. That notice then triggers or transfer the mandate to the insurer or TPA, who then must issue a separate policy or make other arrangements for the employees to receive the objectionable covered items free of charge to the employees and employer.

Some religious institutes and their sponsored ministries have chosen to provide full coverage, including all of the women's preventive services. Others have chosen to sign the EBSA Form 700 and rely on the accommodation. But other Catholic organizations that do not qualify as religious employers (entitled to complete exemption)  have expressed their deeply held belief that the accommodation is not an adequate solution to the problem Rather, it merely shifts the requirement to someone else (the insurer of the TPA), and results in a but-for situation: but-for the employer saying the premiums for its employees, there wold be no entitlement to these preventive services. This is what Archbishop Lori means in the letter when he says, "One does not escape a moral problem by causing someone else to provide the immoral service."

This is why CBA and CIC were formed. CBA was incorporated in Oklahoma in the fall of 2013. The two images below are screen shots from public records available on the Oklahoma Secretary of State website.

CBA's record on the OK SOS website. Note it is a Limited Liability Company. It is unclear whether it is tax-exempt, as the 2014 Official Catholic Directory has not yet been distributed, and that is the most likely way it would obtain tax-exemption.

CIC was formed in February of 2014. Compare the record of the CIC in the Oklahoma records.

CIC's record expressly states that it is a "For Profit Business Corporation" as opposed to a tax-exempt 501(c)(3).

CBA file its lawsuit against the HHS over the contraceptive mandate on March 12, 2014. On June 4, 2014, an Oklahoma federal district court granted it an injunction that exempted all then-current members from having to comply with the contraceptive mandate, until further orders issue. The CBA website links to a number of news stories on their legal battle.

This brings us back to the letter from CBA and Archbishop Lori, and what it means for RCRI members. CBA is soliciting new members to itself (a membership organization) and to its affiliated insurance company, CIC. The letter dated June 19, 2014, expressed an urgency and said "you must move quickly." In marketing circles, this push for expediency is often a red flag that something fishy is up. But in this case the urgency was because it was the intention of CBA to go back to court by June 30 and ask the judge to extend the injunction to cover other organizations that have become members since the date that the injunction was granted. We do not know if CBA successfully got a hearing. There is nothing on their website to indicate it did.

Should religious institutes or their sponsored ministries join this initiative? Every organization must answer this question for itself. Keep in mind that this coverage only applies to employees, not to members of religious institutes. As indicated earlier, leadership in some religious institutes have already made a decision on the preventive services items as they apply to their employees and their insurance coverage. Indeed, many of our RCRI members are affiliated with Christian Brothers Services, who already have a lawsuit under way and who already have an injunction in place protecting them for the time being from the HHS contraception mandate. In addition, there are per employee monthly fees for CBA membership and an additional fee to cover litigation costs. If a member then opts for coverage through CIC, the health insurance premiums will be calculated separately.

Lastly, yesterday's ruling by the Supreme Court in the case Burwell v. Hobby Lobby did not resolve the issue of how the contraceptive mandate applies to (non-profit) religious organizations. Indeed, some have noted initially that the decision actually puts for-profit closely-held companies in a better position than religious organizations since there is no provision in place at this point for the for-profit  employees to receive the objectionable coverages. However, it is almost a certainty that the Obama administration will now go back and add to the existing regulations a provision similar to the accommodation and apply it to closely-held businesses, so that the employees of those companies have the same option as employees of qualified employers whose insurance company or TPA have to cover the contraception products.

As it stands, the issue is far from settled.

Mercer Tables Being Updated

The National Religious Retirement Office (NRRO) and the Resource Center for Religious Institutes (RCRI) are collaborating to update the Mercer Mortality Tables for Women and Men Religious. By the time you read this newsletter you may already have received a request for assistance in this project. 

The current Mercer Mortality Tables for Men and Women Religious were created in 1995 to more accurately represent the longer life expectancies usually experienced by members of religious institutes. Given that the mortality tables for the general population have been updated in recent years, the NRRO and RCRI have consulted with Mercer about validating and, if necessary, updating the tables for religious.  

The Mercer Mortality Tables provide information for various forecasting models, including the Tracking Revenue, Expense, Net Assets, Demographics, Savings (TRENDS) program used by  RCRI. The NRRO uses the tables to calculate the Retirement Needs Analysis. Reliable census projections are a critical component not only of these tools but also of all aspects of your planning for your institute’s membership. 

The NRRO and RCRI need your assistance. In order to create statistically valid tables, Mercer will need census data for 35,000 to 50,000 religious, in other words, for the MAJORITY of U.S. religious. Please aid in this effort by supplying the data requested in the email messages from the NRRO and RCRI.

If you have questions, you can email Brother Larry Lundin at llundin@trcri.org.

Thank you!

CBEBT and Little Sisters of the Poor Lawsuit Update

Yesterday Christian Brothers Services issued an update on the class action lawsuit that it filed last Fall. It is the same lawsuit in which the Little Sisters of the Poor are plaintiffs. Because a large number of RCRI's subscribers participate in the Christian Brothers Employee Benefit Trust (CBEBT) and have called to ask how the recent rulings affect them, we are re-publishing the informative email so that our members are aware of what effect the recent Supreme Court rulings in the case have on those who participate in the CBEBT.

February 11, 2014

Update on Class Action Lawsuit Challenging the Contraceptive Mandate

 

As many of you may know, in September 2013, Christian Brothers Services (CBS), together with a number of participating employers in the Christian Brothers Employee Benefit Trust (the CBEBT), filed a class action lawsuit in federal court challenging the application of the contraceptive mandate under the Affordable Care Act (ACA) to participating employers in the CBEBT. This lawsuit sought to prohibit the government from applying the mandate to participating employers in the CBEBT, or applying any penalties for failing to comply with the mandate.

On December 28, 2013 the federal trial judge assigned to our case denied our request for a preliminary injunction pending the resolution of the case. We ultimately appealed that ruling to the United States Supreme Court and were granted a temporary injunction by Justice Sotomayor on December 31, 2013. On January 24, 2014, the U.S. Supreme Court granted an injunction to the employer applicants so long as they inform the government that they are "are non-profit organizations that hold themselves out as religious and have religious objections to providing coverage for contraceptive services." That injunction prevents enforcement of the contraceptive mandate against those employer applicants until the 10th Circuit Court of Appeals rules on our request for an injunction.

WHAT THIS MEANS FOR EBT MEMBERS

While the case is pending before the 10th Circuit Court of Appeals, Catholic employers participating in the Christian Brothers Employee Benefit Trust will not be required to provide or arrange for contraceptive coverage.

Because the government agreed at the outset of the case that any preliminary injunction for the named plaintiffs would extend to the entire class, the Supreme Court's order affects nearly 400 Catholic organizations throughout the United States that provide health benefits for their employees through the Trust that are not already exempt from the contraceptive mandate. Our attorneys are currently in discussions with government officials as to exactly what employers participating in the Trust need to do to be covered by the Supreme Court's injunction. We will let you know if the government takes the position that there is anything else that you need to do in order to be protected during the pendency of this case.

CBS is dedicated to providing you with current and up-to-date information on this issue. On February 27, 2014 at 1:00 p.m. Central time, we will be hosting a webinar entitled, "Healthcare Reform Update." Also, within the next few weeks we will be releasing a white paper entitled, "Remaining Faithful: Adhering to Catholic Tenets While Abiding by the Affordable Care Act (ACA)" which will be posted to our website.

CBS supports the basic elements of the ACA and is well aware that dimensions of health care in the United States need improvement. However, we were brought to this action by the federal government, which made numerous exemptions and accommodations as ACA was being implemented, but refused to exempt CBEBT plan participants. Through the Church Alliance, Christian Brothers Services had spent three years attempting to work with government officials on these issues as the regulations under the ACA were being drafted, but the government chose to define a "religious employer" narrowly and to target those employers who do not match their cramped definition. We, together with our fellow litigants, are on the front line in this battle to defend religious liberty for ourselves and our participants.

If you have any questions, please contact John Airola at 800- 807-0100 x 2450 or john.airola@cbservices.org.

Thus, participants in the CBEBT which are not classified as "religious employers" but rather as "eligible organizations" (eligible for an accommodation) should know that they are not required to provide contraception, sterilization, and abortion-inducing drugs to their employees. The injunction protects them (for now) from the $100 per day per employee fine that the ACA imposes upon employers who do not cover all the essential health benefits and are not classified as a religious employer or as eligible for an accommodation.

Indeed, even though a Catholic employer that uses CBEBT may not have an objection to these services or products, Christian Brothers is seeking through this lawsuit to protect its own right to be recognized as a religious organization and to not be required to supply these items. Normally, in situations where there is an accommodation, the insurance company must provide these items to the employees in a separate arrangement. Since Christian Brothers is also a Catholic employer, it also is seeking the same right of refusal. It does not qualify under current ACA provisions as a religious employer nor as eligible for an accommodation.

We will continue to follow the developments in this lawsuit.

Form 990 Revocation and Procedure for Reinstatement

The IRS has released Revenue Procedure 2014-11 which "provides procedures for reinstating the tax-exempt status of organizations that have had their tax-exempt status automatically revoked under section 6033(j) of the Internal Revenue Code for failure to file required annual returns or notices for three consecutive years."

In recent years we have received from religious institutes and affiliated ministries a number of requests for assistance with unraveling the notices they have received from the IRS with regard to their requirement to file Form 990. A number of organizations have been notified that their tax-exempt status has been revoked, and they find themselves listed on the IRS' list of revoked organizations. This can be devastating for the organization itself as it affects not only the organization's ability to receive tax-exempt donations but also their donors' ability to claim a charitable deduction for their donations. Once their name appears on the list, donors are deemed to have notice of the revocation and can be penalized for claiming a charitable deduction for their donations.

Most of the organizations that contact us in these situations were not required to file a Form 990. This means that they should not have been penalized for non-filing. However, the IRS may not know the reason for the non-filing exemption with respect to your religious institute. If your organization has received notices asking for your Form 990 in the three years leading up to the revocation, your response (or lack thereof) can be important to how the IRS will respond to the attempt to clarify the situation.

Generally, when we are contacted, we help the Treasurer of other business office personnel construct a letter explaining to the IRS that a Form 990 was not required to be filed based on the exemption for the "exclusively religious activities of any religious order" in IRC section 6033(a)(3)(A)(iii). Sometimes the exemption that applies is for an "integrated auxiliary" under IRC section 6033(a)(3)(A)(i). The test for an integrated auxiliary must be satisfied in this latter case and may require additional explanation.

The reason for bringing up this Revenue Procedure is that it contains some specific language that would be wise to adapt and include in your letters when corresponding with the IRS on matters related to Form 990. This is true whether you are responding to a notice asking why you did not file a Form 990 for a given year or if you receive the dreaded notice that your tax-exempt status has been revoked. The pertinent part is in Section 8.06 (pages 7-8) of the Revenue Procedure. Below is the paragraph that the IRS recommends should precede the signature of a request for retroactive reinstatement.

Although you technically will not be asking for reinstatement if you were not required to file a Form 990 in the first place, it is important to indicate that you are aware of the requirements of the regulations that govern the (non-)filing of Form 990.

 

This is an extremely critical area of law, and the success or failure in resolving these IRS notices will affect, among other things, your institute or ministry's ability to not pay taxes on any and all income and your donors' ability to claim a deduction for donations made to your charitable organization(s).

W-2 Reporting of Health Insurance Costs

We have again been asked about whether religious institutes should or must report the cost of health insurance provided to their members on their W-2s. The requirement to report applies only to employers with regard to their employees. For 2013 the requirement remains optional for employers with fewer than 250 employees. So, the answer to "Must we report for 2013?" is a definite "No" if you file fewer than 250 Forms W-2 for employees. An employer filing fewer than 250 W-2s can, but is not required to, report the insurance costs on their W-2s.

Since members are not employees of their religious institutes, we continue to oppose the reporting of member health care costs on the W-2s that you file reporting the FMV of the care you provide to them (for purposes of being included in the Social Security and Medicare systems). If you do report these costs, you will be using a box on the form that is designed for employers to report information on their employees, in contradiction to the historical stance that members are not employees of their religious institutes. For those institutes which have 50 or more members, you could be binding yourselves to the requirement that you must provide government mandated and approved health coverage to your members.

The IRS explains the reason for including the cost for health insurance on the W-2s of employees at http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage, stating: "The purpose of the reporting requirement is to provide employees useful and comparable consumer information on the cost of their health care coverage." A second IRS web page (http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage) restates this reasoning: "This reporting is for informational purposes only and will provide employees useful and comparable consumer information on the cost of their health care coverage."

The reasons cited by the IRS for including the information on employee Form W-2s--so that employees know how much their health care coverage costs--do not pertain to religious institutes since their members are not employees. Covering the costs of health care is not a perk or benefit of employment for members. Neither civil law nor canon law require religious institutes to provide health insurance to their members. Some members receive coverage through their actual employment outside the institute while others qualify for government-sponsored programs.

Of critical note is the fact that inclusion of health care costs on members' Forms W-2 could indicate your agreement with the assertion that your members are employees. This is contrary to the historical stance that most religious institutes have taken when it comes to the application of federal laws. If you hold your members out as your employees, you could be subject to penalties for failing to provide them with coverage that meets the standards set by the Affordable Care Act. You also could subject yourself to other federal laws that could impose limits on your operations and practices within your sponsored ministries and your religious institute itself.

Lastly, bundling members' Forms W-2 separately from employees' Forms W-2 when submitting them to the IRS can help prevent a misunderstanding. Consider including a note with the members' forms stating that these Forms W-2 are submitted on behalf of members of a religious order who are not its employees, in accord with the election for coverage made under Section 3121 of the Internal Revenue Code.