So, whats so special about a safe harbor plan? A modification to the existing safe harbor for sales of physician practices also was proposed at this time. clarifications. Safe Harbor Credit Union has experienced its best loan growth in years with the assistance of Kasasa®, an award-winning financial technology and marketing provider. A person or business can immediately deduct repair and maintenance expenses if the cost is $2,500 or less per item or per invoice. over-utilization and increased program costs, which could adversely affect The OIG adopted the 1994 clarification to the referral services safe harbor without any modification. Proc. "(fn2), In 1991, the OIG published the first final rulemaking that established safe harbors in ten broad areas: investment interests; space rental; equipment rental; personal services and management contracts; sales of practices; referral services; warranties; discounts; employees; and group purchasing organizations ("GPOs"). §1.263(a)-3h) took effect at the start of 2014. The discount safe harbor as "clarified" makes important structural changes in the safe harbor and contains a significant liberalization of prior restrictions, particularly relating to rebate arrangements and bundled sales. 3. The OIG acknowledges the unique circumstances of radiologists, and emphasizes that occasional recommendation of additional testing by a radiologist to an attending physician with whom the radiologist has no financial relationship, pursuant to a bona fide medical consultation, is not prohibited by the anti-kickback statute and would not taint revenues derived from such acts. There is considerable discussion of this requirement in the preamble. questions about the legality of their specific arrangements are encouraged to Small business 401(k) plans are tailored to meet the specific needs unique to small business owners and their employees. This safe harbor is available for taxpayers who seek to claim the section 199A deduction with respect to a "rental real estate enterprise." On November 19, 1999, the Office of Inspector General ("OIG") of the Department of Health and Human Services ("HHS") promulgated final regulations entitled "Clarification of the Initial OIG Safe Harbor Provisions and Establishment of Additional Safe Harbor Provisions Under the Anti-Kickback Statute," 64 Fed. However, manufacturers may constitute "tainted" investors in certain situations (e.g., when they can influence referrals or furnish items or services to the investment entity). What is a Safe Harbor Plan? The Stark law is a civil statute, and a A 401(k) plan is not only a solid way to attract and retain top talent, but a safe harbor 401(k) may help you avoid potential fees associated with managing a traditional retirement plan. The original safe harbor required that an entity have more than $50,000,000 What is a Safe Harbor 401k? Safe Harbor Investment Advisors, LLC Safe Harbor Investment Advisors, LLC (CRD# 145916) is a financial advisory firm headquartered in Monrovia, MD. Safe harbor 1: limit liability by complying with ERISA Section 404(c) ERISA Section 404(c) may relieve plan fiduciaries from liability on losses resulting from participants’ direction of investments, such as when a participant invests in a stock fund that subsequently loses value. delivery systems or for arrangements between wholly-owned entities. A Safe Harbor Does Not Necessarily Make An Arrangement Illegal Or You can review these changes in our recent publication. at 63521. In addition, the regulations clarified various provisions in the original safe harbors relating to large and small entity investment interests, space rental, equipment rental, personal services and management contracts, referral services and discounts. Safe harbor 401(k) plans are the most popular type of 401(k) used by small businesses today. The discount safe harbor now provides much greater protection for certain types of rebates and bundled discounts for charge-based or fee schedule providers and suppliers. 42 C.F.R. The safe harbor for small investment interests: where do joint ventures go from here? The small entity investment interest safe harbor incorporates the 1994 clarifications and provides that, "no more than 40 percent of the entity’s gross revenue related to the furnishing of health care items and services in the previous fiscal year or previous 12-month period may come from referrals or business otherwise generated from investors." Provided. It provides a $250 incentive for any small business referral. 199A (Rev. Rule 144 is a "safe harbor" under Section 4(a)(1) providing objective standards that a security holder can rely on to meet the requirements of that exemption. 4. There are principles and strategies that may enable you to put together an investment portfolio that reflects your risk tolerance, time horizon, and goals. requests, the OIG declines to provide a safe harbor at this time for integrated The new safe harbors were originally proposed in 1993. The 1991 safe harbors were subject to important limitations, however, such as the absence of protection for bundled sales arrangements and for rebate arrangements with charge-based buyers such as physicians, pharmacies, and DME suppliers. If you do opt for Safe Harbor, then the IRS gives you up to 48 months to put your project in service, a generous amount of time. are not necessarily the same as the requirements of the Stark statute advance. Harbors, a. means: (i) health care items, devices, supplies, and services and (ii) items or services reasonably related to the furnishing of health care items, devices, supplies or services, including but not limited to, non-emergency transportation, patient education, attendant services, social services (e.g., case management), utilization review, quality assurance, and practice management services. As a result, each arrangement must be evaluated on a case-by-case basis. First, the OIG rejects the suggestion that only physicians can make referrals or influence the flow of business, and specifically states that hospitals, nursing homes, skilled nursing facilities ("SNFs"), managed care companies, physician practice plans or other institutions are capable of influencing referrals and thus may be tainted investors for purposes of the 60-40 investor test. De Minimis Safe Harbor Election. There is no definition of "trade or business" in the Code.   While many provisions were not changed, there have been several major modifications as well as considerable fine-tuning. However, the third clarification has been modified. With so many options and so much to consider, one key decision you may have to make is whether to go with a traditional plan design or a Safe Harbor plan design.This is a vitally important decision, as your choice can have long-term implications for both your employees and your company. prohibiting physician self-referrals, 42 U.S.C. Reg. at 63524. c. Certain Loans To Interested Investors 1. The focus must be on the potential for remuneration to investors who are existing or potential referral sources. However, safe harbor protection is afforded only to those arrangements that precisely meet all … (fn1) As a result, there are now a total of 23 safe harbors to the anti-kickback statute. Website Privacy Policy & Terms of Use. SMALL ENTITY COMPLIANCE GUIDE . On the same day, the OIG also promulgated an interim final rule relating to two additional safe harbors for shared risk arrangements. Solely for purposes of this safe harbor, a rental real estate enterprise is defined as an interest in real property held to generate rental or lease income. transaction must fall entirely within an exception to be lawful, regardless of The OIG reiterates throughout the regulations that failure to qualify for a safe harbor does not mean that an arrangement is necessarily illegal. Finally, the OIG rejects the suggestion that further changes be made in the small entity investment interest safe harbor to accommodate general partners for purposes of the 60-40 investor rule. Anti-Kickback Safe Harbors – The Basics In its original 1972 form, the AKS specifically targeted “kickbacks or bribes” and “rebates.” In 1977, Congress expanded the statute’s scope by prohibiting “ any remuneration ” exchanged for purchasing or referring federally funded goods or services. Space And Equipment provided between the parties during the term of the contract. In 1987, Congress amended the anti-kickback law to require the development of safe harbor regulations, which would specify certain business and payment practices that would not be treated as violations of the anti-kickback statute, even though they technically might not comply with its terms. 64 Fed. 63520. at least one year, all three safe harbors now contain a provision that the Several commenters asked the OIG to "grandfather" arrangements that had been structured in good faith reliance on the 1991 safe harbors but which no longer comply with these safe harbors as clarified. A Safe Harbor for Small Business Retirement Plans I was out having a few beers on St. Patrick’s Day when I bumped into an old shipmate of mine from thirty years ago. Also confusing is the difference between “Safe Harbor for Small Taxpayer” (SHST) and “De Minimis Safe Harbor”. 2019-38).Taxpayers whose real estate business does not meet the safe harbor may still qualify as a trade or business if it … Two new criteria have been added to each of the safe harbors for space at 63526. investors in the entity, and are not acting on behalf of the entity or any of The OIG The de minimis safe harbor is most often used to deduct the cost of tangible personal property items (units of property) you use in your business. its investors, even if the loan is used by a prospective investor to purchase an Though you would have spread the write off across several years, the safe harbor election lets you get the full … three safe harbors that aggregate payments be set in advance, and that part-time The safe harbor election lets you deduct depreciable property instead of capitalizing it. Whether your business is a sole proprietorship, corporation, Limited Liability Company or a partnership, there is a 401(k) plan available for you to help provide affordable retirement solutions to your employees. The OIG declines to grandfather these arrangements or to provide a formal transition period, noting that a reasonable time for restructuring may vary depending on the nature and complexity of the arrangement. According to the preamble, these interests do not have to be identical. This fifth investment interest safe harbor, §1001.952(a)(5), would protect the investment interests of members of group practices that meet two prerequisites and three standards. 42 C.F.R. The safe harbors set forth specific conditions that, if met, assure entities involved of not being prosecuted or sanctioned for the arrangement qualifying for the safe harbor. According to the preamble, the rental, 42 C.F.R. The purpose must be reasonably calculated to further the business of the lessee or purchaser, and must be space, equipment, or services that the lessee or purchaser "needs, intends to utilize, and does utilize in furtherance of its commercially reasonable business objectives." The new regulations incorporate the 1994 clarification, which allows equivalent classes of equity investments to be combined and equivalent classes of debt instruments to be combined in order to apportion investors into "tainted" and "untainted" pools for purposes of meeting the 60-40 investor test. a fee for service basis. This election for items $2,500 or less is called the De Minimis Safe Harbor Election. The traditional, safe harbor, and automatic enrollment plans are for employers of any size. However, this comes with an obligation to demonstrate that you have continuously been working on said project from 2019 on. Cons. The 1991 safe harbor regulations implementing the exception defined the types of price concessions that qualified as "discounts," and required buyers and sellers to comply with discount disclosure and reporting mechanisms, which varied depending on the type of buyer involved, in order for an arrangement to be protected. By contrast, the group practice investment safe harbor has been narrowed to apply only to investments in the group practice itself, and will not protect a group’s investment in separate entities. (a) Investment interests. Specifically, the aggregate payments The preamble also contains a brief discussion of the requirements in these Contracts To Specify All Items And Services Investing should be easy – just buy low and sell high – but most of us have trouble following that simple advice. Integrated Delivery However, the definition of underserved area appears to limit the types of practitioners who may qualify for safe harbor protection in certain cases. 42 C.F.R. These Insurance products and services are offered through Safe Harbor Tax Advisory, LLC. The preamble gives two examples involving durable medical equipment ("DME") suppliers which would not fit the safe harbor. Classes of investment interests may be aggregated when they have similar rights with respect to the entity’s income and assets, where investors receive equivalent returns in proportion to their investments, and where there is no preferential treatment of referral source investors (particularly no special treatment in connection with the disposition of the entity’s assets). In the first example, a DME supplier leases space in a physician’s office that includes extra space the DME supplier neither occupies nor uses for its DME business. The OIG expressed concern, however, that "without cause" termination provisions could be used to create sham leases and contracts. Id. Therefore, even if an arrangement does not violate the this variation results from Congressional intent and the fundamental difference § 1395nn, and claims that Update on the U.S.-EU Safe Harbor Framework. Statute. 17 August 2000 The small entity investment interest safe harbor incorporates the 1994 clarifications and provides that, "no more than 40 percent of the entity’s gross revenue related to the furnishing of health care items and services in the previous fiscal year or previous 12-month period may come from referrals or business otherwise generated from investors." The ASC safe harbor has been substantially enlarged, and now covers four types of ASC arrangements. at 63520-21. $50,000,000 Asset the example of a hospital making referrals to a wholly-owned home health agency However, the OIG agrees to use its discretion "to be fair to the parties" who reasonably believed they complied with one of the 1991 safe harbors, and are diligently working in good faith to restructure the arrangement, as necessary, in light of the new regulations. Commercially Reasonable Business Purpose Test. § 1001.952(h). But one plan we recommend quite often is the safe harbor 401(k) because its a great way for employees to reward employees and simultaneously save themselves tons of administrative hassle. At Human Interest, we support all different kinds of retirement plans for small businesses.But one plan we recommend quite often is the safe harbor 401(k) because it’s a great way for employers to reward employees and simultaneously save themselves tons of administrative hassle. Reg. Basic Safe Harbor Match: The employer matches 100% of the first 3% of each employee’s contribution and 50% of the next 2%. With a Safe Harbor 401(k), you, as the business owner, must be willing to make required contributions in the form of a match. Investment. practical difficulties, the OIG continues to insist that these requirements are Reed Smith adds litigation partner Steven Hamilton to Managed Care team, Reed Smith attorneys in Southern California featured by, Department of Justice files statement of interest addressing the preemptive effect of the PREP Act, Reed Smith announces 31 new partners, including 12 women across firm's global platform, New “Safe Harbor” Regulations Under The Anti-kickback Statute, Tax, Private Client Services and Executive Compensation, 3. The definition of "health care items and services" in this context is the same as in the large entity investment interest safe harbor (see discussion supra). De Minimis Safe Harbor introduces another limit of $2500, and some articles indicate right or wrong that the 2%/10K rule still applies. With the help of its Paradigm Saas platform, users can access their retirement plans digitally. This safe harbor is available for taxpayers who seek to claim the section 199A deduction with respect to a "rental real estate enterprise." If I capitalize the $8000 asset, can the $6000 qualify for the safe harbor even though the total is more than $10,000? The clarifications contained in the final rule are generally very similar to the language proposed earlier with one notable exception. Safe harbor election for small taxpayers The safe harbor election lets you deduct depreciable property instead of capitalizing it. 63522-23. between the two statutory schemes. A business with an "applicable financial statement," however, has a safe harbor amount of $5,000. Cost sharing or risk sharing arrangements, and joint research initiatives and data collection arrangements are also discussed. Safe Harbor Election for Small Taxpayers. Safe harbor match types. The U.S. Department of Commerce Safe Harbor used to be a simple $200 investment. requirement is not necessarily satisfied if the method of calculation is set in A plan sponsor should explicitly state its intention to comply with ERISA Section 404(c) and the QDIA safe harbor in its IPS. Although both laws apply to physician Reed Smith Client Alerts. improper intent for a violation. Cons. § 1320a-7b(b). There is a growing popularity among individuals to broaden their investment strategy beyond conventional allocations and investment styles. The new safe harbors pertain to investments in underserved areas, sales of physician practices, practitioner recruitment, obstetrical malpractice insurance subsidies, investments in group practices, cooperative hospital service organizations, ambulatory surgical centers ("ASCs"), and referral agreements for specialty services. The next section introduces the eight elements of the small investment safe harbor. health care items and services. The OIG acknowledges that requiring stock to be acquired "in the same way" could be unduly restrictive but expresses continuing concern about (i) restrictions on the sale or disposition of stock that may "lock in" tainted investors, thereby increasing their incentives to refer to the entity, and (ii) allowing tainted investors to acquire their ownership interests at insider prices or more advantageous terms than the general public. Reg. FINDARTICLES is a CBS Interactive portal that lets you find articles about any topic, by searching in our network of news and technology sites, including CBS News, CNET, TV.com and others Both of these criteria were generally suggested in the 1994 The anti-kickback statute contains an exception for discounts and other reductions in price obtained by a provider which are properly disclosed and appropriately reflected in costs claimed or charges made to federal health care programs by the provider. They manage $42,752,867 in 20 accounts and serve the financial needs of clients across 1 states (or territories). The IRS on Tuesday issued a revenue procedure that provides a safe harbor for taxpayers under which a rental real estate enterprise will be treated as a trade or business for purposes of the qualified business income (QBI) deduction of Sec. Safe harbor plans allow business owners to maximize contributions to their own account while minimizing many of the IRS rules. However, despite Victor and I both went to Massachusetts Maritime Academy, where he was a mate and I an engineer. In Advance. Prohibited. overlapping contracts to circumvent the requirement for contracts with terms of These regulations created eight new safe harbor provisions which protect arrangements from criminal prosecution and civil sanctions under the anti-kickback statute, 42 U.S.C. Id. Employees are required to contribute to their 401(k) in order to get the match. On October 6, 2015, the European Court of Justice issued a judgment declaring invalid the European Commission’s July 26, 2000 decision on the legal adequacy of the U.S.-EU Safe Harbor Framework. 42 C.F.R. 37205. Id. In the final regulations, this language is replaced with the phrase "commercially reasonable business purpose" in order to make clear that the test is not whether the arrangement is lawful, but whether the space, equipment, or services have intrinsic commercial value to the lessee or purchaser. If your adjusted gross income for the year is over $150,000 then it’s 110%. B. Clarifications To Existing Safe Harbors. Rental/Personal Services And Management, Modern Slavery and Human Trafficking Statement. their behalf) from loaning or guaranteeing loans for a tainted investor who uses obtain guidance through the advisory opinion process, set forth at 42 C.F.R. Systems - Intra System Safe harbor 401k plans are one of the most popular 401k retirement plans for businesses that have employees. At Human Interest, we support all different kinds of retirement plans for small businesses. For years, this was done with very little change and no direct enforcement. The estimated safe harbor rule has three parts: If you expect to owe less than $1,000 after subtracting your withholding, you’re safe. For example, I have a rental property with two new assets, one for $8000 (siding) and one for $6000 (roof). The safe harbor is hereby designed to legitimize financial relationships between referring physicians and businesses. provides further guidance by noting that "health care items or services" To facilitate review, this Memorandum focuses on selected issues that we believe will be of most interest to our clients, and describes some of the more significant changes that have been made in the safe harbors. As a potential area of such concern, the preamble gives Put our highly experienced team on your side 42 C.F.R. (fn3), As the original safe harbors were implemented, the OIG became aware of a number of ambiguities that had created uncertainties for health care providers seeking to comply with the regulations. This is up from $500, which was the threshold through December 31, 2015. The new safe harbor regulations finalize the safe harbors and clarifications proposed in 1993 and 1994. When you become a Member of Safe Harbor, you become a Member of our entire portfolio. § 1001.952(b), equipment rental, 42 C.F.R. quality of care and patient freedom of choice. In light of the complexity of the safe harbor regulations, this Memorandum is not intended to be a comprehensive analysis of all the regulatory provisions, and it cannot provide legal advice regarding the safe harbors’ application to any particular business arrangement. 64 Fed. 42 C.F.R. A Safe Harbor 401(k) can be a complicated retirement plan option – so let us take the guesswork out of it. The regulations have been revised, as suggested in 1994, to specifically state that neither the entity nor any investor (or other individual or entity acting on behalf of the entity or investor) may provide a loan or loan guarantee to another "interested" investor to use in acquiring his or her ownership interest in the entity. In the second example, the DME supplier leases more space than "would reasonably be rented by a similarly-situated DME supplier negotiating in an arms-length transaction with a non-referral source lessor." The OIG originally had proposed that the aggregate space, equipment, or services contracted for not exceed that which is reasonably necessary to accomplish a "legitimate business purpose." Ubiquity can be quite expensive for small companies in the short term. § 1001.952(d). The OIG also repeats a familiar theme: a critical aspect of the safe harbor is that federal health care programs have the opportunity to realize t. © 2021 Reed Smith LLP. The potential for manufacturers to be "tainted" for purposes of this test is discussed separately. 37204-05. 63525. If the activity does not meet the safe-harbor requirements, the key is whether it rises to the level of a trade or business, rather than an investment activity. Enhanced Safe Harbor Match: The employer matches 100% of the first 4% of The safe harbor now specifically requires that any payment from a participant to a referral service not be based on the volume or value of any referrals to or business otherwise generated by either party for the other. The preamble notes that "for cause" termination would satisfy the safe harbor if it (i) specifies the conditions under which the contract may be terminated for cause, and (ii) also contains an absolute prohibition on renegotiation of the lease or contract or further financial arrangements between the parties for the duration of the original one year term. In summary Plan sponsors should consider taking advantage of ERISA’s investment safe harbors and further protect themselves by adopting and following an IPS. The OIG received numerous public comments on these regulations, including recommendations for additional safe harbors. ( emphasis added ) generally suggested in the short term manage $ 42,752,867 in accounts! Gave an example which generated additional confusion concerning the anti-kickback statute, 42 U.S.C original safe harbor amount of 5,000. 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