UPDATE ON THE AFFORDABLE CARE ACT

Transcription

1 18 th Annual Maine Tax Forum 2014 November 6, 2014 UPDATE ON THE AFFORDABLE CARE ACT berrydunn.com GAIN CONTROL

2 INDIVIDUAL SUBSIDIES 1/1/2014 Individual advance premium tax credits available Income requirements (100% to 400% of Fed. Poverty Level) 100% 400% Single = $11,670 $46,680 Family of 4 = $23,850 $95,400 Credit amount lessens as income goes up / sliding scale Coverage requirements May not be eligible for Medicaid or Medicare or private coverage May not be eligible for Employer coverage (Affordable & Minimum Value) 2

3 INDIVIDUAL SUBSIDIES 1/1/2014 Individual cost sharing reductions available Income requirements (100% to 250% of Fed. Poverty Level) % = $29,175 Family of 250% = $59,625 Applied automatically Must buy a silver plan In effect, increases Metal Level (lowers Deductible & OOP maximums) 3

4 INDIVIDUAL SUBSIDIES 1/1/2014 Will an offer of Employer health coverage void Employee s ability to qualify for an Exchange credit? Affordable coverage EE cost for single coverage may not be more than 9.5% of household income Minimum Value coverage Plan must be designed to cover at least 60% of covered costs 4

5 INDIVIDUAL SUBSIDIES 1/1/2014 Will an offer of Employer health coverage void Employee s ability to qualify for an Exchange credit? Yes. But Employer need not offer coverage to Spouse A way to leave Spouse credit eligible Note Household Income may make spouse ineligible! 5

6 EMPLOYER HEALTH COVERAGE Pre-tax nature of employer coverage Employer premiums are fully deductible / payroll tax free Employee portion is income & payroll tax free (if paid through a Sec. 125 plan) Employers can provide pre-tax HRAs, Health FSAs and HSAs After-tax nature of Exchange coverage Employee cost, after subsidy (if any), is after-tax Any Employer bonus will be subject to income & payroll taxes 6

7 EMPLOYER HEALTH COVERAGE Employer pre-tax payment for individual health insurance premiums Virtually impossible due to Notice No stand alone HRAs, Section 125 Plans, or Employer Payment plans Effective 1/1/2014 7

8 EMPLOYER HEALTH COVERAGE Employer pre-tax payment for individual health insurance benefits Consider a HDHP + HSA strategy Employee individual HDHP policy (on or off Exchange) Tax-free HSA contributions by Employer comparability rule Note: HSA $ may NOT be used to pay premiums! Plus if individual HDHP is on the Exchange Potential individual premium subsidy! The Maine Exchange now offers HSA eligible (HDHP) individual policies 8

9 LARGE EMPLOYERS PAY OR PLAY MANDATE DELAYED EFFECTIVE DATE Applicable Large Employers (ALEs) who are they? Those who employed an average of at least 50 full-time and fulltime equivalent employees in prior calendar year (using all 12 months). FT = 30 hours or more per week. Monthly calculation to derive average (130 hours/month) Mandate was to start on 1/1/2014 Mandate will start on 1/1/2015 DELAYED for all DELAYED if < 100 FTEs 9

10 2015 TRANSITION RULES Short measurement period allowed for determining Applicable Large Employer (ALE) status for 2015 ER may use any consecutive 6 month or longer period from

11 2015 TRANSITION RULES Additional delay in ALE penalty rules until 2016 for medium sized ALEs. Four conditions: 1. Applies to ALEs with FT/FTE Employees (medium sized ERs) Based on 2014 ALE determination rules 2. Eligible ERs must not reduce workforce to meet limit During period 2/9/ /31/ Must not reduce coverage offered For period 2/9/ /31/2015 (or fiscal year end) 4. ER must provide written Certification to IRS Will be part of ALE required reporting to IRS on Form 1095-C 11

12 2015 TRANSITION RULES Fiscal plan year relief if fiscal year existed as of 12/27/12 and not later modified to a later date, then: 1. ACA coverage need not be offered to otherwise eligible FT EEs until first day of fiscal plan year beginning in ACA coverage need not be offered to any EEs until first day of 2015 fiscal plan year if Plan passes significant percentage test IF YOU HAVE A FISCAL YEAR CHECK WITH YOUR ADVISOR! 12

13 EMPLOYER MANDATE 01/01/2015 Applicable Large employers who are they? Seasonal Workers A seasonal worker is a worker that performs services on a seasonal basis (with reference to DOL regulations) Count all workers for all months (including Seasonal Workers) If the count exceeds 50 (100 for 2015) for 120 days (or 4 months) or less, AND The EEs in excess of 50 (100 for 2015) during the period were Seasonal Workers, Then, you are NOT an applicable large ER 13

14 EMPLOYER MANDATE 01/01/2015 Affordable coverage. Defined in IRC 36B. Employee premiums for single coverage may not exceed 9.5% of EE s annual household income (affordability test) W-2 safe harbor Rate of pay safe harbor Federal poverty line safe harbor 14

15 EMPLOYER MANDATE 01/01/2015 Minimum value coverage. Defined in IRC 36B. Plan must be designed to pay at least 60% of covered costs (minimum value test). How to measure minimum value? A minimum value calculator has been made available by the IRS and HHS Excel based spreadsheet available online 15

16 EMPLOYER MANDATE 01/01/ CHANGED Employer Pay or Play rules become effective Code 4980H(a) Penalty Where ER offers no coverage or offers coverage to less than 95% 70% of FT employees and at least 1 FT EE goes to Marketplace and qualifies for a premium tax credit or cost-sharing reduction, then ER must pay $167/Mo (2,000/year) All FT EEs (less first 30 80) FTEs are NOT counted for penalty purposes! 29ers 16

17 EMPLOYER MANDATE 01/01/2015 NO CHANGE Employer Play or Pay rules become effective Code 4980H(b) Penalty Where ER plan meets coverage % but any FT EE is not covered or applicable coverage is either unaffordable or fails minimum value, then ER must pay lesser of $250/Mo ($3,000/year) All FT EEs who go to Exchange and get Premium Credit or Cost Sharing Subsidy OR No more than a Penalty FTEs are NOT counted for penalty purposes! 29ers 17

18 THE EMPLOYER MANDATE DETERMINING FULL- TIME EMPLOYEE STATUS Monthly Measurement Period - Default method used to identify full-time (FT) employees - Coverage must be offered to FT employees within 3 months to avoid penalty - May us weekly measurement rule if certain requirements met 18

19 THE EMPLOYER MANDATE DETERMINING FULL-TIME EMPLOYEE STATUS Optional Look Back Measurement Period method Looks at prior history to determine future treatment Standard Measurement period (SMP) determine status Administrative Period (AP) - enrollment Stability Period (SP) status fixed 19

20 THE EMPLOYER MANDATE DETERMINING FULL-TIME EMPLOYEE STATUS Optional Look-back rules Counting the number of FT EEs for penalty purposes Ongoing EEs Calendar Year Plan Example MP = 10/01/ /30/2014 AP = 10/01/ /31/2014 SP = 01/01/ /31/ months (1,560 hours) 3 months 12 months (coverage year) 20

21 2015 TRANSITION RULES Special measurement/stability periods allowed for using look-back method in 2015 May use a 2014 measurement period of at least 6 consecutive months and get a full 12-month stability period in 2015 if: Measurement period starts no later than 7/1/2014, and Ends no earlier than 90 days before first day of 2015 Plan Year 21

22 THE EMPLOYER MANDATE DETERMINING FULL-TIME EMPLOYEE STATUS Optional look-back rules New EEs: Status during Initial Measurement Period determined by ER s reasonable expectation. Full-time Part-time Variable hour Seasonal 22

23 THE EMPLOYER MANDATE DETERMINING FULL- TIME EMPLOYEE STATUS Seasonal Employees are they full-time? If using the look-back rules an ER may determine EE s status using an Initial Measurement Period if EE is seasonal (same rule as for variable hour EEs) New definition of Seasonal Employee: a. Customary annual employment period is 6 months or less b. Period should begin each year at approximately the same time c. Period may be extended in unusual circumstances 23

24 THE EMPLOYER MANDATE DETERMINING FULL- TIME EMPLOYEE STATUS OPTIONAL LOOK-BACK RULES Are different measurement periods permitted for different classes of employees? YES, for - Salaried vs hourly - Primary employment in different states - Collectively bargained vs non-collectively bargained - Includes each group of collectively bargained EEs 24

25 ACA REPORTING PROVISIONS From Exchanges to Employers: Section 1411 Certifications Notice of FT EEs who have qualified for premium credit triggering a possible penalty HHS intends to send out in batches for 2015 Starting in spring 2015 ER may, but need not, appeal 25

26 ACA REPORTING PROVISIONS Code 6055 Minimum Essential Coverage Reporting Code 6056 Applicable Large Employer Reporting 2014 reporting is optional 2015 reporting is required Timing: same as the Form W-2 rules *provide to individuals by 1/31; file with IRS by 2/28 Good faith standard for 2015 penalty relief *applicable to incomplete or incorrect filings Penalties for non-compliance: *$200 per form 26

27 ACA REPORTING PROVISIONS Code 6055 Minimum Essential Coverage Reporting Required if minimum essential coverage is provided Insurers will complete and file for insured plans All self-funded ERs must file (regardless of size) Electronic filing required if at least 250 forms 27

28 ACA REPORTING PROVISIONS Code 6055 Minimum Essential Coverage Reporting Generally, Forms 1094-B & 1095-B What is reported to the IRS? 1. Name, address, TIN for each Responsible Individual 2. Name, address, TIN for each Covered Individual 3. Months for which each individual was enrolled 4. Whether coverage is SHOP coverage 28

29 ACA REPORTING PROVISIONS Code 6056 Applicable Large Employer reporting Forms 1094-C & 1095-C Required by all Applicable Large Employers (50 or more FTEs) Done by ERs, not by Insurers Electronic filing required if at least 250 forms 29

30 ACA REPORTING PROVISIONS Code 6056 Applicable Large Employer reporting What is reported to the IRS? can be very onerous! 1. Certification as to offer of MEC to FT EEs 2. Months during calendar year that MEC was available 3. Number of FT EEs for each month 4. Each FT EE s share of the lowest cost self-only monthly premium 5. Name, address & TIN of each FT EE 6. The months of the year during which each FT EE was covered 30

31 INTERESTED IN MORE? Contact Bill Enck, a Senior Manager in BerryDunn s Employee Benefit Consulting Group, to learn more. benck@berrydunn.com Phone Website berrydunn.com Blog berrydunn.com/firmfooting 31

32 INTERESTED IN MORE? Contact Roger Prince, a Senior Manager in BerryDunn s Employee Benefit Consulting Group, to learn more. rprince@berrydunn.com Phone Website berrydunn.com Blog berrydunn.com/firmfooting 32