19 th ANNUAL MAINE TAX FORUM Solutions for ACA Implementation

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1 19 th ANNUAL MAINE TAX FORUM Solutions for ACA Implementation BerryDunn Employee Benefits Group November 4, 2015 berrydunn.com GAIN CONTROL

2 EMPLOYER MANDATE: WHO SHOULD WORRY? SIZE MATTERS! Small Employer 49 OR LESS FT & FTE employees Applicable Larger Employer (ALE) MID-SIZE FT & FTE employees LARGE 100 OR MORE FT & FTE employees Controlled Group and Affiliated Service Group member Employers are Aggregated! 2

3 SMALL EMPLOYER ACA EXPANSION PACE Act signed on 10/7/2015. Amends ACA definition of Small Group Market Repeals ACA mandatory expansion that was to start on 1/1/2016 Keeps count at 50 or less employees States still allowed to expand to 100 if they so desire Maine unlikely to do so but not announced yet (as of 10/8/2015) 3

4 EMPLOYER MANDATE JAN Employer Play or Pay rules become effective A PENALTY FT employees only 70% vs. 95% Ignore minimum value & affordability Penalty of $2,080/year/FT employee less deductible [If even one FT employee receives a subsidy] AVOID AT ALL COSTS (UNLESS INTENTIONAL FAILURE) B PENALTY FT employees only Does coverage provide minimum value? Is coverage affordable? Penalty of $3,120/year/FT employee who receives a subsidy Much more room for design ideas than with a penalty 4

5 CONTROLLED & AFFILIATED GROUPS Disaggregation of employers for penalty payments Only one 30/80 employee reduction Shared ratably based on each group member s FT EEs Each member entity owes a penalty, if any, based on its coverage only Penalties are assessed individually to group members 5

6 AFFORDABILITY Employee share < 9.56% of employee household income Cost of lowest priced single coverage Three Safe Harbors available (9.5%): W-2 [reduced income issue] Rate of Pay [reduced hours issue] Poverty line [low annual rate issue] 6

7 AFFORDABILITY Opt out payments impact on affordability Final regulations under Code Section 5000A IRS apparently taking the position that opt-out payment availability must be counted as part of the employee premium cost Beginning 1/1/2015 Watch out for no benefits employee categories with greater pay 7

8 EMPLOYER PENALTIES: HOW DO YOU KNOW? When Section 1411 Certification Right to appeal From the Marketplace Certifies that EE has qualified for a subsidy may trigger penalty IRS Initial Contact Fall 2016 for 2015 Right to respond Written communication to ER Will summarize potential penalty IRS Issues Notice & Demand for Payment 8

9 FULL TIME EMPLOYEE MEASUREMENT Who is full-time is critical!! Monthly measurement is ACA default Count all hours an EE is paid or entitled to be paid 1. hourly: use actual hours 2. salary: use actual or daysworked or weeks-worked equivalencies Monthly measurement can get cumbersome! 9

10 FULL TIME EMPLOYEE MEASUREMENT MONTLY HYPOTHETICAL Calendar year plan. 30 Day waiting period. EE hired 6/5/2016 Expected to be FT. Expected to be Variable Hour. How is this measured? 10

11 FULL TIME EMPLOYEE MEASUREMENT: LOOK-BACK METHOD Useful if many part-time, variable hour and/or seasonal employees Someone has to mind the store and track ongoing measurements First, these documents must be updated for look-back measurement period: Plan document eligibility provisions Summary Plan Description eligibility language Employee Handbook descriptions 11

12 FULL TIME EMPLOYEE MEASUREMENT: LOOK-BACK METHOD New EEs Classified as a Variable Hour EE if reasonably expected to work <30 hours/week and weekly hours are uncertain Classified as a Seasonal Employee if reasonably expected to be a Seasonal Employee even if >30 hours/week Must use an Initial Measurement Period (IMP) process How does the IMP work? 12

13 FULL TIME EMPLOYEE MEASUREMENT: LOOK-BACK METHOD Lookback Hypothetical Calendar year plan / Only ACA FT EEs eligible ER has small pool of FT EEs and large pool of variable hour EEs 1. How could the Standard Measurement Period be done? 2. How could Initial Measurement Periods be done? 13

14 REQUIRED REPORTING: FORM 1095 SERIES Form A Marketplace Statement (issued in January for 2014) -B -C Minimum Essential Coverage (MEC) Reporting Applicable Large Employer (ALE) Reporting 2014 Optional 2015 Required 2014 Optional 2015 Required Timing: Same as Form W-2 Provide to individuals by 1/31 Provide to IRS by 2/28 (paper) or 3/31 (electronic) GOOD FAITH STANDARD FOR 2015 PENALTY RELIEF 14

15 REQUIRED REPORTING FORM 1095 SERIES Forms 1094-C and 1095-C Penalties for failure to file or failure to furnish = $250 per occurrence Extensions: To file with IRS: Use Form 8809 Automatic 30 days + good cause 30 days To furnish to Employees: Send letter to IRS Maximum extension is generally 30 days 15

16 FORM 1094-C REPORTING 16

17 FORM 1094-C REPORTING 17

18 FORM 1094-C REPORTING 18

19 FORM 1095-C REPORTING 19

20 FORM 1095-C REPORTING 20

21 Part II, Line 14: Codes 1A 1B 1C 1D 1E 1F 1G 1H Qualifying offer MEC providing minimum value offered to employee only MEC providing minimum value offered to employee, and at least MEC offered to dependent children (NOT to spouse) MEC providing minimum value offered to employee, and at least MEC offered to spouse (NOT to dependent children) MEC providing minimum value offered to full-time employee; employee and spouse; or employee, spouse AND dependent children MEC not providing minimum value offered to employee; employee and spouse; or employee, spouse and dependent children Offer of coverage to employee who was not a full-time employee during calendar year and who enrolled in self-funded coverage for one or more month of calendar year No offer of coverage 1I Qualified Offer Transition Relief

22 Part II, Line 16: Codes 2A 2B 2C 2D 2E 2F 2G 2H 2I Employee is not employed during the month Employee is not a full-time employee Employee enrolled in coverage offered. Use 2C regardless of whether any other Series Code 2 may apply if the employee is enrolled in health coverage Employee is in a Section 4980H (b) limited non-assessment period. Do NOT use 2B for a variable hour employee in an initial measurement period Multiemployer interim rule relief. Employers should use this code when coverage is offered through a third party The employer used the Form W-2 safe harbor to determine affordability The employer used the FPL safe harbor to determine affordability for this specific employee for any month of the calendar year The employer used the rate of pay safe harbor to determine affordability for any month of the calendar year Non-calendar year Transition relief applies to this employee for the specific month 22

23 OTHER ACA TAXES PCORI FEE Applies to insurers and sponsors of self-insured plans (including HRAs and some Medical FSAs) The fee is: $2 (indexed) [$2.08 for 2014] Reportable and payable by means of IRS Form 720 Filing due date is 7/31 for all Plan Years ending in preceding calendar year 23

24 OTHER ACA TAXES TRANSITIONAL REINSURANCE FEE Applies only to major medical coverage Applies to insurers and sponsors of self-insured plans The fee is: 2014 $63 x # of covered lives 2015 $44 x # of covered lives 2016 $27 x # of covered lives Count reported to DHHS on November 15 th of each year Reporting period the same regardless of Plan Year 24

25 WELLNESS PLANS TAXABLE BENEFITS? Income taxation of incentives & awards Gym memberships, gift cards, fitness equipment, premium reductions etc. Income & payroll taxable unless benefits can be classified as: Employer provided health benefit, or A de minimis fringe benefit cash incentives & equivalents are always taxable! 25

26 CADILLAC TAX TIME TO PREPARE FOR 2018 Excise Tax on high-cost employer sponsored health coverage 40% nondeductible excise tax [Who is responsible for paying the tax?] Tax applies to: Contributions to health flexible spending accounts (FSAs) Contributions to Health Savings Accounts (HSAs) Health Reimbursement Arrangements (HRAs) 26

27 CADILLAC TAX COMPUTING THE EXCISE TAX What is taken into account? Aggregate cost of employer-sponsored coverage Excess Benefit Applicable Dollar Limit $10,200 for self-only coverage $27,500 for other than self-only coverage Health cost adjustment percentage Other Adjustments 27

28 INTERESTED IN MORE? CONTACT US. Roger Prince Bill Enck 28