ACA Tax Reporting and Cadillac Tax Update for the Blissfully Ignorant Employer

Transcription

1 ACA Tax Reporting and Cadillac Tax Update for the Blissfully Ignorant Employer Key Compliance Issues for Governmental Employers Tuesday, November 10, 2015 Presented by: Mark Holloway, JD, LLM, CEBS Senior Vice President Compliance Services, Lockton Benefit Group

2 Agenda ACA Big Picture ACA Information Reporting Cadillac Tax Other issues for

3 What s New with ACA in Employer Mandate End of transition relief from the employer mandate ACA tax reporting required for CY 2015, in early 2016 For employers with 50+ FT/FTEq in 2014 ACA Litigation Unlikely U.S. Supreme Court will hear any additional appeals Dave & Busters case reduction in scheduled work hours = ERISA retaliation? Legislative Changes PACE law allows states to leave definition of small group legislation at 50 of fewer employees Auto enrollment repealed 2

4 ACA Information Reporting

5 ACA Employer Reporting Who? Which employers are required to report*? Employers providing self-insured coverage Must report on anyone who had that coverage for even a single day Employers subject to the employer mandate Must report on coverage offers made to full-time employees Also must report coverage offers to dependents of full-time employees These offers can disqualify the dependents from receiving the tax credit Options for employer compliance: Outsourcing Limited capacity quickly drying up In-house may involve internal systems (PeopleSoft) or third-party solutions developed to handle this compliance reporting More on that in a moment * Reporting applies on EIN-by-EIN basis; transmittal form requires information on companies in controlled group 4

6 ACA Reporting Focusing on reporting by employers subject to employer mandate Employee Receiving Tax Credit Form 1095-A Form 8962 Exchange Annual Filing (Form 1095-A?) IRS Monthly Report Data Hub HHS Form 1095-C Form 1095-B Form 1094-C Transmittal of Forms 1095-C Form 1094-B Transmittal of Forms 1095-B Employer Insurer 5

7 ACA Reporting The Tax Forms 6

8 Employer Reporting - Summary Form Used by B Insurers, to report coverage provided to primary insureds and their dependents; form is supplied to the covered primary insured, copy to IRS Non-ALEs providing self-insured coverage; optionally, ALEs providing self-insured coverage to non-employees (retirees, partners, outside directors, COBRA beneficiaries, contractors, etc.) 1094-B Insurers, non-ales and ALEs (as applicable) to transmit the individual Forms 1095-B to IRS 1095-C Parts I and III 1095-C Parts I, II and maybe III ALEs* to report self-insured coverage provided to any primary insured (full-time or part-time employees, partners, outside directors, COBRA beneficiaries, independent contractors, etc.) for at least a day, and their dependents; form is supplied to the primary insured, copy to IRS ALEs* to demonstrate adequate coverage offers to individual full-time employees (Tier 2 compliance) If the full-time employee is covered under insured coverage, or not covered under any coverage, he or she receives just Parts I and II from the employer If covered under self-insured coverage, he or she receives Parts I, II and III Copy supplied to IRS 1094-C ALEs* to transmit the individual forms 1095-C to the IRS, and demonstrate Tier 1 compliance * Without regard to the exemption for

9 The Forms, Submission Process, Due Dates & Extensions When: To full-time employees and other covered primary insureds: February 1, 2016 May apply for a discretionary 30-day waiver by sending letter to IRS; Lockton has a model letter Consider the employee relations issues related to extensions To IRS: February 29 (paper forms), March 31 (e-filing) May obtain automatic 30-day extension on Form 8809; may apply for second, discretionary extension on separate Form 8809 May submit Form 8809 via IRS FIRE system Extensions must be requested BEFORE the applicable due date you can t be late, and then file for an extension to excuse your tardiness 8

10 Issues and Concerns with the Forms/Data Collection Multiemployer, collectively bargained plans (where employer contributes to trust fund for union employees) For 2015, simplified reporting if union plan offers MV, affordable coverage No need to determine if union employee actually enrolls in coverage Unclear if rule will be extended to 2016 and beyond Governmental employers Controlled group determination: Good faith determination, for now, as to entities in the controlled group Transmittal form, 1094-C, requires controlled group information Transmittal of ACA Forms to IRS Governmental unit can delegate responsibility for transmission of forms to another governmental entity ( Designated Governmental Entity - DGE) 9

11 ACA Reporting: Trouble Ahead 90 % the required reports of mid-sized employers indicated that they do not have an in-house or outsourced solution in place to track hours and submit The time needed to complete and file this form will vary depending on individual circumstances. The estimated average time is: Form 1094-C Form 1095-C 4 hours 12 minutes 10

12 Vendors and the DIY Option Three main categories of vendors Comprehensive: The vendor and employer work to establish a direct data feed from the employer s payroll and benefits system vendor s process takes the data, applies logic to it and generates appropriate codes in the appropriate boxes on the appropriate forms, and generates, mails to employees and files with the IRS the appropriate forms. Forms with Partial Employer Input: There s a data feed might be handled via a schema or spreadsheets supplied to and returned by the employer but the employer s data must include employer-determined codes for the appropriate boxes. Form generation, filing and mailing to employees are additional options. Forms Only, Complete Employer Input: Basically, simple software that allows the employer to populate the form, print, mail and file. Some variations on this will have the vendor converting the employer s file to the IRS-approved format and e-filing with the IRS 11

13 Vendors and the DIY Option Three main categories of vendors and the DIY option DIY: Employer takes the forms, and a pen, and has at it prints and files on paper Employers filing 250 or more returns with the IRS must file electronically unless they obtain a waiver of the e-filing requirement 12

14 Data You May Not Be Capturing Employee Offer of Coverage Code for each month in plan year (Part II, Row 14, 1095-C) Employee share of the lowest monthly premium (minimum value where applicable) (Part II, Row 15, 1095-C) Employee Applicable 4980H Safe Harbor Code by Month (Part II, Row 16, 1095-C) Social Security Numbers for dependents enrolled on your medical benefits plan (Part III, 1095-C) Name of person to contact and contact number at Applicable Large Employer Member (Part I, Rows 15-16, 1094-C) Total count of 1095-C documents submitted with 1094-C transmittal (Part I, Row 18, 1094-C) Full-time employee count by month (Part III, Rows 23-35, Column B, 1094-C) Total employee count by month (Part III, Rows 23-35, Column C, 1094-C) Aggregated group information when applicable (Part IV, 1094-C) Place to document employee Notice of Subsidy form, with aggregated data for reconciliation or defense (when required) COBRA Participant information 13

15 ACA Vendor Technology Options Pricing Experience ACA Support - Existing HR/ Payroll or Ben Admin system Data capture capabilities; eligibility tracking, etc. As low as $0; pricing increase as levels of compliance support increase Forms/ IRS Reporting Manual Coding Desktop or Cloud based, some data feeds, employer responsibilities Starting at $500 for entire set up; additional costs for forms printing and submission to IRS Forms/ IRS Reporting Code Mapping Data aggregation and code determination using logic $3,000 to upwards of $15,000. Forms $1.00-$300 Compliance and Forms/ IRS Reporting Stand-alone or in conjunction with existing HR/Payroll or Ben Admin Technology Starting at $0.35 PEPM up to $1.50 PEPM; implementation $5,000 and up Compliance, Forms/ IRS Reporting, Strategic Analysis, Consulting Services Total Outsourcing of ACA Compliance Stand-alone or in conjunction existing platforms As low as $3.00 PEPM upwards of $8.00 PEPM/ Implementation $10k 75k 14

16 Cadillac Tax

17 What is the Cadillac Tax? Beginning in 2018, a 40 percent non-deductible excise tax on health benefits with values exceeding $10,200 individuals; $27,500 for other than individual coverage (indexed) Multiemployer (union) plans can use $27,500 for single and family coverage Is it really a 40% tax? For insurers, the tax will be built into premium rates; premium payments are taxable income to insurer Net tax effect = 60% tax 16

18 Overview Policy argument that unlimited, tax-free nature of healthcare results in inefficiencies and increased costs We need to tax benefits like the ones that the executives at Goldman Sachs have, the $40,000 policies. -White House, 2009 Cadillac tax is intended to slow growth of health costs and be a revenue raiser that helps offset the $1 trillion cost of the ACA. 17

19 Congress s Estimate of Plans Impacted (2010) As time marches on, more plans will be subject to the tax: 18

20 A Real Life Example CT Employer/Projected Tax 2018 PE/PY $3,841 (EE only) $8,328 (Family) 19

21 Lockton s Clients (national ) Percentage of all clients triggering the Cadillac Tax 20

22 Cadillac Tax IRS Guidance IRS has issued two RFIs February 2015 structural issues, definitions July 2015 procedural and payment issues IRS proposed regulations later this year or in early 2016 H.R., 2050, Middle Class Health Benefits Tax Repeal Act of 2015 Bill would repeal the Cadillac tax (145 co-sponsors in House); companion bill introduced in Senate But where does Congress get the $85+ billion? 21

23 What s Included in the Cadillac Tax? Major medical coverage IRS: How do employers develop COBRA rates? HSA contributions Employer and pretax employee But not after-tax employee contributions Health FSA benefits HRA allocations Executive physicals On-site clinics Exception for clinics providing minimal care IRS asked for comments on this 22

24 How Would the Tax Work? Example A An employee chooses family coverage under an insured employer-sponsored plan. Total value of employee s healthcare coverage $28,500 Threshold for family coverage in $27,500 Amount subject to the excise tax $1,000 The employer reports $1,000 as taxable to the insurer, which remits the 40 percent tax ($400) to the Internal Revenue Service. 23

25 How Would the Tax Work? Example B An employee elects family coverage under an insured employer plan with an HRA. The employee also contributes to a health FSA. Value of employee s healthcare coverage $25,000 Value of employee s HRA $2,000 Employee contribution to the flexible spending arrangement +$2,500 Total value of employee s healthcare coverage $29,500 Proposal s threshold for family coverage in $27,500 Amount subject to the excise tax $2,000 The employer reports the taxable amounts: $1,695 to the major medical insurer ($2,000 x $25,000/$29,500) $136 to the administrator of the HRA ($2,000 x $2,000/$29,500) $169 to the administrator of the spending account ($2,000 x $2,500/$29,500) The insurers and the administrator calculate and remit the taxes. If the employer administers the FSA and HRA, the employer has to calculate and remit the taxes. 24

26 Implications/Issues ACTIVE EMPLOYEES: Raise deductibles and copays Eliminate Health FSAs and Pretax HSA Contributions On-site clinic impact? PRE-65 RETIREE MEDICAL: EMPLOYERS CONTINUE TO EXIT REVIEW YOUR CBAS FOR UNION EMPLOYEES LEGISLATIVE FIX NEEDED Where does Congress get the money? 25

27 Other Issues

28 On the Horizon- ACA Self-funded plans owe Transitional Reinsurance Fee ($44) Must complete filing at pay.gov by Nov. 15, 2015 Cash opt out and affordability Issues in a regulatory black hole New 105(h) regulations Auto enrollment rules 27

29 On the Horizon- Other HIPAA audits, round #2 Focus will include employer plans and their business associates EEOC final regulations on wellness incentives Transit vouchers Effective , cash reimbursement of transit expenses is not allowed if the employer is able to purchase transit vouchers without incurring substantial costs (the so-called readily available test ). Where a transit system offers terminal-restricted debit cards for no substantial additional fees, the employer must purchase the vouchers and distribute them to its employees 28

30 Looking for More to Read? Alerts on late breaking news category/employee-benefits Health reform blog H E A L T H R E F O R M 29

31 Any Questions? Mark C. Holloway, JD Senior Vice President Lockton Benefit Group 444 W. 47th Street, Suite 900 Kansas City, MO H E A L T H R E F O R M 30

32 Our Mission To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management Our Goal To be the best place to do business and to work Lockton, Inc. All rights reserved. Images 2014 Thinkstock. All rights reserved. 31