Employer News. Child Support and the Affordable Care Act. Equipment. Employer Mandate

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1 Employer News All newsletters are downloadable from the MiSDU Website Volume 8, Issue 1 Child Support and the Affordable Care Act For decades, the child support program has had a responsibility to secure health care coverage for each child on its caseload. Nationally, this goal is accomplished by establishing and enforcing medical support orders requiring parents to secure health care coverage or otherwise provide for the child s health care needs.¹ In Michigan, the definition of child support includes the payment of medical and health care related expenses.² Similarly, there is a statutory requirement that child support orders require one or both parents to obtain or maintain health care coverage for their child that is available to them at a reasonable cost as a benefit of employment. The Affordable Care Act (ACA) aims to increase the affordability and prevalence of health insurance coverage for Americans and reduce the overall costs of health care. The ACA requires insurance companies to cover all applicants within new minimum standards and offer the Equipment Imaging System High speed mail openers Document Printers Inserters Sealers Departments Payment Processing ~ Research - CIRU Disbursements ~ Customer Service H R ~ Administration ~ Employer Outreach Quality Assurance ~ Training ~ IT Ancillary Services ~ Finance Payment Processing FIDM-Data Match Electronic Document Management Project Management Software Development Project Management and Oversight Consulting Services Application Maintenance and Operations MiSDU Powered by Informatix, Inc. same rates regardless of age, pre-existing conditions, or gender. Employers who have 50 or more full time employees are required to provide employerprovided health coverage. Parents with a child support order will first look towards employers for health insurance coverage before determining if there is a self-coverage option that meets the criteria outlined under the ACA. Depending on its size, a company may be required to provide health coverage or pay an Employer Shared Responsibility Payment (ESRP). Employer Mandate Businesses with 50 or more employees are considered a "large business" under the ACA. The ESRP is a requirement under the ACA that will apply to some larger companies with 100 or more full-time employees starting in 2015 and employers with 50 or more full-time employees starting in To avoid an ESRP, employers will need to offer coverage to 70 percent of their full-time employees³ in 2015 and coverage to 95 percent of their employees in 2016 and beyond. A large employer will be liable for an ESRP only if: (a) The employer does not offer health coverage or offers coverage to less than 95% of its full-time employees and dependents, and at least one of the Inside this issue AFFORDABLE CARE ACT SINGLE COLLECTIONS SOURCE EMPLOYERS AND TRIBES SPECIAL DELIVERY Continued on page 2

2 Child Support And the Affordable Care Act Continued from page 1 full-time employees receives a premium tax credit to help pay for coverage on a Marketplace; OR (b) The employer offers health coverage to at least 95% of its full-time employees, but at least one fulltime employee receives a premium tax credit to help pay for coverage on a Marketplace. If an employee s s share of the premium for employerprovided coverage would cost the employee more than 9.5% of that employee s annual household income, the coverage is not considered affordable for that employee. Because employers generally do not know their employees household incomes, employers can take advantage of one or more of the three safe harbors to estimate the cost of coverage to their employees: (1) W-2 wages, (2) the rate of pay, and () the federal poverty line. If an employer meets the requirements of any of these safe harbors, coverage will be deemed affordable regardless of whether it was affordable to the employee for purposes of the premium tax credit. When ESRP is Assessed If a large employer does not offer coverage or offers coverage to fewer than 95% of its full-time employees, it owes an ESRP equal to the number of its full-time for the year multiplied by $2,000, as long as at least one full-time employee receives the premium tax credit. If an employer offers coverage for some months but not others, the ESRP is computed separately for each month that the employer did not offer coverage. Such an employer owes a monthly ESRP equal to the number of full-time employees employed for the month multiplied by 1/12 of the $2,000 fine. The ESRP provides for an inflation adjustment mechanism beginning in Reasonable Cost v. ACA In Michigan, when a friend of the court (FOC) office reviews health care coverage, the FOC uses a standard of reasonable cost. The Michigan Child Support Formula (MCSF) states that the cost is reasonable where it does not exceed five percent of a parent s gross income. When applying the MCSF reasonable cost definition, the FOC must use the amount that it costs a parent to add the child(ren) to existing coverage, or the difference between self-only and family coverage per federal regulations. In contrast, the ACA requires each person to have minimum essential coverage or qualify for an exemption for each month in the calendar year. People are required to have coverage outside of an exemption if insurance can be obtained at a rate of 8% or less than the household annual taxable income. The ACA does not examine the difference between self-only and family coverage. For example, let us assume that an obligor is required to provide health insurance for him/herself and one child under a child support order. Obligor s annual household income is $40,000. Coverage through obligor s employer is $200/month for personal coverage, but $00/month to cover obligor and the child (family coverage). Please see Chart A on page to see how the assessment of reasonable cost and the ACA would break down. What Does this Mean for Employers? The ACA does not change any health care coverage enforcement requirements for the child support program. While parents may not be required to have health insurance for themselves and their dependents under the ACA, they may still be required to have medical coverage for a dependent pursuant to the court order. Federal law requires child support orders to include a provision for healthcare coverage. FOC staff has been advised to continue to enforce healthcare coverage provisions, including the continued use of National Medical Support Notices (NMSNs). The ACA assesses a tax penalty through the IRS if a parent does not provide health insurance for his or her dependent(s). This tax penalty does not affect the child support program. As an employer, we ask that you continue to comply with the NMSN. If coverage is not being supplied by your company, we ask that you refer parties to the Federal Continued on page 2

3 Child Support and the Affordable Care Act Continued from page 2 Marketplace to find health insurance coverage. You can remind employees that exemption from the ACA does not exempt an employee from complying with court-ordered medical coverage. ¹ 42 USC 652(f). ² MCL (ee) ³ For calculation of the ESRP, the IRS has determined it an employee is a full-time employee for a calendar month if he or she averages at least 0 hours of service per week. When in doubt, follow the court order and comply with the NMSN. If the employee has questions regarding exemptions or different financial circumstances under his or her court order, you can direct the employee to contact the local FOC for further investigation and possible modification. Reasonable Cost and ACA Assessment Under Reasonable Cost Household income is $40,000 Self-coverage is $200/month ($2,400/year) Family coverage is $00/month ($,600/year) Under the ACA Household income is $40,000 Self-coverage is $200/month ($2,400/year) Family coverage is $00/month ($,600/year) Michigan s reasonable cost standard is 5% of the parent s gross income, or the difference between self-only and family coverage. 5% of obligor s income is $2,000. The difference between self-only coverage and family coverage is $100/month ($1,200/year). ACA s standard is 8% of taxable annual income. 8% of the $40,000 annual income is $,200/year. Self-coverage: No. Not required under MCSF. Family coverage: Yes. 5% of obligor s annual taxable income is $2,000. The cost of insuring the child is $1,200 a year. Since the cost of insuring the child is less than the 5% standard set forth in the MCSF, obligor will be required to provide coverage for the child. Self-coverage: Yes. Obligor would be required to obtain health insurance, since Obligor self-coverage amount ($2,400) is less than the 8% standard ($,600). Family coverage: No. Since coverage of the family would be greater than the 8% standard set forth in the ACA, obligor would not be assessed an IRS penalty for not insuring him/herself or the child. The obligor could be eligible for a subsidy under the ACA to provide health insurance for the child, however, the obligor would avoid the IRS penalty. Chart A This article was written by Elizabeth A. Stomski, Management Analyst State Court Administrative Office Friend of the Court Bureau

4 201 MiSDU Your Centralized Single Collections Source Payment Related Correspondence Sometimes it is necessary for employers to communicate changes to an employee s status; including notices of termination, non-negotiable checks, and change of address requests. Please do not include these or other notifications in the same mailing as your payment. Remember that Post office boxes 050 (for employers), and 051 (for obligors), are specifically assigned by the Postal Service for payments only. Mail payments and remittances only to these two P.O. boxes. A list of MiSDU mail boxes and their assigned usage is below. Employer Payments: P.O. Box 050, Lansing, MI Obligor Payments: P.O. Box 051, Lansing, MI Financial Correspondence & Miscellaneous: P.O. Box 054, Lansing, MI Processing Support Obligations The Michigan State Disbursement Unit (MiSDU) is a federally mandated program, established by the 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), commonly known as welfare reform. It is the main focus of all activity for Centralized Collections, a federally mandated program also established by the 1996 Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA), and is a component of the Title IV-D (child support enforcement) program. We are your centralized location for the collection and disbursement of support payments. If non-custodial parent income is subject to withholding, Federal law requires that all SDUs process payments under orders in all Title IV-D (4-D) cases, as well as all non Title IV-D cases in which the support order was initially issued in the state on or after January 1, As an employer, you share an important role in making sure that Michigan s children receive the support they deserve. Please always include pertinent case information with your correspondence. Case Related Correspondence All case-related inquiries, including arrears, account balances, and all other correspondence that is not directly payment-related, are processed at the County that issued the order. Case related information must be directed to the appropriate County Friend of the Court. Telephone number, fax number, and FOC address can be found on page of of the Income Withholding Notice. 4 2

5 What Employers Should Know When Working With Tribes Office of Child Support Enforcement, Administration for Children and Families, U.S. Department of Health and Human Services state child support agency. Where should I send payments for an IWO that comes from a tribe? Send payments to the address indicated on the IWO. This may be the tribe s accounting office, the tribal court, or it may be the tribal child support agency. Must I honor a request for Verification of Employment (VOE) from a tribe if I am not a tribal employer or located on tribal land? Yes. Please complete all VOEs sent by a state or tribal child support agency. Do tribes have their own child support programs? Many tribes operate federally funded child support programs, and more are developing programs. These tribal child support agencies are sometimes called IV-D (4-D) agencies. IV-D refers to the section of the Social Security Act that authorizes federal funding for the child support program. Do Tribes have their own Laws? Yes. Tribes are sovereign nations and have their own governments with the authority to make and enforce laws, to adjudicate civil and criminal disputes, and to tax and license. A tribal child support agency has similar enforcement authority as a state child support agency and should be responded to accordingly. If a noncustodial parent/employee leaves my employment, where should I send the notification of termination? Send the notice of termination to the address on the IWO. Should I expect to receive a National Medical Support Notice (NMSN) from a tribe? Probably not. Although a tribe can use the NMSN to seek health insurance for tribal children. Questions? Contact Paige Hausburg, Tribal Coordinator, federal Office of Child Support Enforcement at paige.hausburg@acf.hhs.gov or Thank you for helping tribal children! Do tribal child support agencies use the Office of Management and Budget-approved Income Withholding for Support (IWO) form? Yes. Tribal child support agencies are required to use the Income Withholding for Support form (often called an Income Withholding Order or IWO) approved by OMB. Must I honor an IWO from a tribe if I am not a tribal employer or located on tribal land? Yes. You are required to honor an IWO from a tribal child support agency just as you would honor one from a 5

6 201 The SDU Comes Through A Very Special Delivery MiSDU staff that could, braved the roads to be available to accept the mail deliveries. Upon learning that the mail courier was prohibited from travelling the roads, vendor and state staff personally went to the post office to collect the day s mailed payments. Although shortstaffed, they diligently processed all incoming payments with the same level of accuracy and quality as expected and experienced on a daily basis (99.9% accuracy). Because the mail courier was still prohibited from travelling the roads in the afternoon, MiSDU staff personally delivered the day s check disbursements to the post office. They successfully completed every receipt and disbursement process by 5:00 p.m. as they do all year long. Customer service staff were available all day to address child support customer questions and inquiries. As a result of their diligence, staff processed - and customers benefited from the following: Total Payments Received - $5,57,156.1 (6,747 transactions) Total Checks Disbursed - $2,0, (6,40 Checks) by Pratin Trivedi MiSDU Director On Monday, January 6,, Ingham County, Michigan and the surrounding areas were hit with a massive snowstorm, with record snow accumulations starting Sunday afternoon through Monday morning. As a result, almost all localities in the county declared snow emergencies, including the city in which the Michigan State Disbursement Unit (MiSDU) is located. MiSDU operations begin every day at :0 a.m., with the first mail drops and deliveries starting at 4:00 a.m. Total Direct Deposits - $4,844, (27,709 transactions) Total Calls received 868 Total calls answered 848 Whatever the seasons may bring, MiSDU remains committed to providing excellent customer service to the children of Michigan. Employer Advisory Committee Addressing the needs of employers and planting the seeds of responsiveness throughout the business community. If you are an employer who would like the opportunity to share ideas, concerns and solutions relevant to child support administration, please call , or misduoutreach@michigan.gov misduoutreach@michigan.gov MiSDU Powered by Informatix, Inc. 6