PPACA and IRS Compliance: Top 10 Issues Facing Employers in 2015

Transcription

1 PPACA and IRS Compliance: Top 10 Issues Facing Employers in 2015 Presented by: Patrick C. Haynes, Jr., Esq., LL.M. Consulting Brokerage Compliance Communication Administration

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3 Patrick C. Haynes, Jr. Today s speaker As Crawford Advisors GC and Vice President Compliance, Mr. Haynes advises employers and plan sponsors in a variety of health and welfare benefit plan compliance matters, including, but not limited to, tax qualification and other Internal Revenue Code issues, PPACA, ERISA, COBRA and HIPAA portability and privacy issues. Mr. Haynes lectures frequently and has published many articles on health and welfare benefit plan compliance topics. Practice Areas Employee Benefits & Exec Comp, ERISA, COBRA, HIPAA, 125, and 105, 106, 129, 132 Education Temple University School of Law, LL.M. Rutgers University School of Law, J.D. Rutgers University School of Business, M.B.A. Rutgers University College of Arts & Sciences, B.A. Admitted to Practice U.S. Supreme Court Federal and State Courts of New Jersey Pennsylvania Connecticut District of Columbia 3

4 Topics Top 10 Issues 1095/1094 Reporting Definition Changes Cadillac Tax And, MORE! Poll Questions Key Takeaways Your Question Answered 4

5 Top 10 PPACA Issues Facing Employers in

6 Top 10 Issues 1. PPACA Employer Mandate Reporting: IRS Forms 1094/ Dependent Audits Value for Validating Spouses and Dependents? 3. Wellness Program Compliance Issues (HIPAA, GINA, and PPACA) 4. Temp Employees and Independent Contractors 5. Definition Changes Spouse, Domestic Partner, Civil Union, etc. 6. Health Care FSAs: Grace Periods, Rollover, & Run-Out Periods 7. Cadillac Tax Updates and Issues 8. Advance Premium Tax Credit Reconciliation Discrepancies 9. Opt-Out Credit Guidance Major Impact on PPACA Affordability Testing 10. Electronic Distribution Rules 6

7 PPACA Employer Mandate Reporting; IRS Forms 1094/1095 7

8 PPACA 1094/1095 Reporting Requirements SELF INSURED: LARGE EMPLOYER Under the Affordable Care Act (ACA), new employer and insurer reporting requirements begin in the 2015 calendar year to assist with the IRS enforcement of both individual and employer coverage requirements. Filings are due in 2016 for the 2015 calendar year to implement two new sections of the IRS Code: Minimum Essential Coverage (MEC) Reporting Applicable Large Employer Reporting (ALE) To Employee To IRS To Employee To IRS Documents Required Included on 1095-C Included on 1094-C 1095-C 1094-C Sections to Complete N/A N/A Part I, II Part I, II, III Transmittal to IRS N/A Include 1095-C data in IRS transmittal Provided by N/A N/A ALE ALE Who is affected Enrolled Employees and Dependents All Eligible Employees (Full-Time/Variable Hour) What is Provided Name/Address/TIN (SSN)/ Name/Address/TIN (SSN)/Was MEC offered/ Months Covered Total Eligible by month/cost of Coverage How is it Provided E-file required over 250 returns Paper optional under 250 When is it Needed 1095-B and 1095-C to individual by 2/1/ B and 1094-C to IRS on 3/31/16 (E-file) or 2/28/16 (Paper) Stay Compliant with ACA 1094/1095 Reporting Requirements Crawford Advisors works with you to keep your welfare benefit program in compliance with all applicable government regulations. 8

9 PPACA 1094/1095 Reporting Requirements FULLY INSURED: LARGE EMPLOYER Under the Affordable Care Act (ACA), new employer and insurer reporting requirements begin in the 2015 calendar year to assist with the IRS enforcement of both individual and employer coverage requirements. Filings are due in 2016 for the 2015 calendar year to implement two new sections of the IRS Code: Minimum Essential Coverage (MEC) Reporting Applicable Large Employer Reporting (ALE) To Employee To IRS To Employee To IRS Documents Required 1095-B 1094-B 1095-C 1094-C Sections to Complete Part I, II, III, IV All info. Part I, II Part I, II, III Transmittal to IRS Include 1095-B data in IRS transmittal Include 1095-C data in IRS transmittal Provided by Health Carrier Health Carrier ALE ALE Who is affected Enrolled Employees and Dependents All Eligible Employees (Full-Time/Variable Hour) What is Provided Name/Address/TIN (SSN)/ Name/Address/TIN (SSN)/Was MEC offered/ Months Covered Total Eligible by month/cost of Coverage How is it Provided E-file required over 250 returns Paper optional under 250 When is it Needed 1095-B and 1095-C to individual by 2/1/ B and 1094-C to IRS on 3/31/16 (E-file) or 2/28/16 (Paper) Stay Compliant with ACA 1094/1095Reporting Requirements Crawford Advisors works with you to keep your welfare benefit program in compliance with all applicable government regulations. 9

10 Dependent Audits Value? Without proper dependent eligibility audits, your organization may be paying claims for ineligible dependents and now mandatory PPACA fees. As the overall costs increase, the financial burden that is incurred by each member tends to increase through higher copayments, higher deductibles, tighter limits, and higher payroll deductions. HMS Healthcare states, Well conducted Dependent Eligibility Audits typically find 5%-to- 8% of employees have an ineligible dependent on the company health plan increasing the overall cost of the plan by thousands of dollars. Are you covering a Spouse? Married? Still married? Children? Your natural, adopted or stepchild? Grandchildren? Nieces? Nephews? Foster children? Your parents? The EE s dependent-parent(s) 10

11 Most Recent Update Wellness Program Compliance Issues (HIPAA, GINA, and PPACA) The U.S. Equal Employment Opportunity Commission (EEOC) on March 20 voted to send a Notice of Proposed Rulemaking (NPRM) on the interplay of the Americans with Disabilities Act (ADA) and the Affordable Care Act (ACA) with respect to wellness programs to the White House Office of Management and Budget (OMB) for clearance. This proposed rule, which was approved by a bipartisan vote, would amend the regulations implementing the equal employment provisions of the ADA to address the interaction between Title I of the ADA and financial incentives as part of wellness programs offered through group health plans. The submission of the NPRM to OMB represents the start of the regulatory process. After OMB approval, the proposed rule will be published in the Federal Register for a 60-day public notice and comment period. The NPRM cannot be made public prior to its publication in the Federal Register. 11

12 Wellness Program Compliance Issues (HIPAA, GINA, and PPACA) For more information with HIPAA and GINA? Consider reviewing one of our prior webinars. 12

13 Temp. Employees and Independent Contractors Common-law Employee: A common-law employee is a person who performs services for an employer who has the right to control and direct the results of the work and the way in which it is done. -IRS In general, the law treats temps as employees of the business from whom they are leased (the lessor), and not from the business using the employees services (the lessee). Any worker identified as a common-law employee will need to be included in 1095-C reporting. Therefore, an employer will need to count its contract and temporary workers IF the workers are their common-law employees. Further, temporary workers employed directly by the employer are common-law employees who will need to be counted for PPACA reporting purposes. 13

14 Definition Changes During the roll out of PPACA their have been many definition changes due to the changing landscape of same-sex marriage. Is Domestic Partner the same as Same Sex Spouse? Does Civil Union exist anymore? Why are you still covering DPs? As we can see, 47 states plus D.C. now allow or could allow samesex marriage. 3 states still prohibit it. 14

15 Health Care FSAs Important: You CANNOT have both a Grace Period and a Carryover OR Grace Periods (Both health care AND Dependent Care FSAs) During this time frame you may incur eligible FSA expenses and use the funds remaining in your account to cover those expenses. Grace period begins on the first day immediately following the last day of the plan year. Usually provides 2 ½ months extra. Must be adopted before the end of the current plan year in question and must be provided for in the plan documents & must apply to all plan participants Carryovers (Health Care FSAs Only) You may carry over up to $500 of unused funds into the next plan year. The IRS has set the maximum Carryover limit at $500, but as an employer you may decide to have a lesser amount. Even if your plan has a Rollover feature, the use-it-or-lose-it rule still applies. Your access to those funds (after the run-out period) will only be for claims incurred in the new/rollover plan year. Run-Out Period Pre-determined time frame after the year ends where you may file both health and dependent care FSA claims for expenses incurred during the plan year. 15

16 Cadillac Tax Updates and Issues 16

17 PPACA Excise Tax begins in 2018 PPACA s Excise Tax (known as the Cadillac Tax) is an excise tax scheduled to take effect in 2018 to reduce health care usage and costs by encouraging employers to offer plans that are cost-effective and engage employees in sharing in the cost of care. It is a 40% tax on employers that provide high-cost health benefits to their employees. $1800 above $10,200 threshold $4500 above $27,500 threshold A $12,000 individual plan would pay an excise tax of $720 per covered employee: $12,000 - $10,200 = $1,800 above threshold. $1,800 x 40% = $720 A $32,000 family plan would pay an excise tax of $1,800 per covered employee: $32,000 - $27,500 = $4,500 above threshold. $4,500 x 40% = $1,800 17

18 PPACA Excise Tax begins in 2018 What makes up this excise tax (the Cadillac Tax)? 18

19 PPACA Excise Tax begins in 2018 Who will owe this Tax? Industry surveys suggest as few as 35% to 50% of Employers/Plan Sponsors will owe this tax during the first year (2018) it applies. Fully Insured: Employers calculate and Carriers Pay. Self-Funded: Employers calculate and Pay (also, this is not tax deductible). Why should I worry about this now? Assuming you aren t negotiating a multi-year Collective Bargaining Agreement that will roll into 2018, no employer should wait until 2017 to begin to fix, alter and tailor their benefit offerings to avoid this tax. The CBO (Congressional Budget Office) expects to earn 80 billion dollars from this excise tax between 2018 and 2023 (the first five (5) years of applicability). While indexed, the annual increases in the excise tax thresholds are not based on health care cost inflation, but instead on the CPI (Consumer Price Index), which was 1.5% for 2013 far less than medical cost trend and considerably less than the 4% annual health care cost increase that the better performing employer health plans are expected to achieve in 2015 after plan changes. Don t wait until 2017 s open enrollment to begin preparing your workforce and leadership for harsh changes that will likely be necessary. No one should wai 18

20 Advance Premium Tax Credit Reconciliation Discrepancies What is the Premium Tax Credit? Refundable tax credit Helps eligible individuals and families pay for health coverage Two payment options: Get it NOW advance credit payments Get it LATER without advance credit payments How does reconciliation work? Advance payments $4,000 Calculation of PTC - $3,000 Repayment amount =$1,000 A tax return must be filed to reconcile advance credit payments regardless of any other filing requirement. 20

21 Advance Premium Tax Credit Reconciliation Discrepancies The IRS calculates advance premium tax credit amounts based on taxpayers' estimates of income and family size for the year provided at the time they enroll in an exchange plan. After the end of the year, when the taxpayer files a return, the total amount of premium tax credit is calculated based on the taxpayer's actual circumstances for the year. These circumstances include marital status, dependents, and income, which can often change. Taxpayers who did not report the changes to the exchange may have to repay excess advance premium tax credit payments, subject to limits for taxpayers with household incomes below 400% of the federal poverty line. Some taxpayers may get a refund because the full amount of advance premium tax credit for which they were eligible was not paid. 21

22 Advance Premium Tax Credit Reconciliation Discrepancies Advance premium tax credit reconciliation will affect millions of taxpayers, starting in the 2015 filing season. According to the latest Congressional Budget Office estimates, more than 80% of people enrolling in a plan through an exchange were eligible for a tax credit for And most of these taxpayers likely chose advance premium tax credit payments to afford premiums. The IRS can collect any unpaid excess premium tax credit or advance credit amounts using its standard deficiency procedures, in contrast to the restrictions on collecting the individual shared-responsibility payment. Stay tuned for an important decision on this topic, when the U.S. Supreme Court rules in King v. Burwell (opinion expected this Summer). 22

23 Opt-Out Credit Guidance Major Impact on PPACA Affordability Testing! Let s look at this example: The ER offers $50, taxable cash to the EE in exchange for not enrolling in any health plan. The EE can absolutely not use any of them $50 to participate in the ER s health plan. The minimum required contribution for EE-only coverage is $125 per month. Nevertheless, under this convoluted guidance, we must assume that the cost is $175 per month in order to calculate affordability. Even though it will never cost the EE $175. HHS s Logic? The point is that EEs who do enroll in the ER s health plan are paying $125 for the coverage but they are also giving up their right to receive the $50. EEs who elect health coverage have $175 less in taxable income than EEs that decline coverage. This rule means that the EE is effectively paying $175 per month for coverage. So, the Opt-Out credits are added to the EE-only tier s required contribution (for the ER s cheapest, PPACA-creditable plan) and that result is tested against 9.5% of family income (or the applicable safe-harbor). 23

24 Another Example: Opt-Out Credit Guidance Assume an ER is willing to pay an EE $4,000 per month and charge the EE $200 per month for health coverage. That coverage might not be affordable. If opt-out credits count as ER contributions, the ER could instead say that it is paying the EE $3,800 per month and providing free health insurance, but EEs who opt-out get $200 more per month in taxable income. The result for the EE is exactly the same because in each case--the EE chooses between $4,000 in taxable income with no insurance or $3,800 in taxable income with health coverage. However, for the ER the opt-out approach would mean that the coverage is affordable while the other approach means coverage may not be affordable. If opt-out credits instead count as EE contributions (as the new regulations provide), optout credits are treated just like cafeteria plan contributions for affordability purposes. 24

25 Electronic Distribution Rules The means of distribution must be in a manner reasonably calculated to result in distribution. Posting on an intranet is NOT reasonably calculated to result in distribution. Also, don t forget copies should be mailed to people who don t have computer access and employees out on STD, LTD and COBRA participants (and retirees if applicable). $110 per day fine assessed when participant requests are ignored. There aren t any fines or penalties associated with failing to distribute, only if a plan participant requests for plan documents and the employer fails to distribute within 30 days. 25

26 Electronic Distribution Rules List of Notices that could be sent electronically Summary plan descriptions (SPDs) Summary of Benefits and Coverage (SBCs) Summaries of material modifications (SMMs) Summary annual reports (SARs) Individual benefit statements COBRA notifications (possible, yet tricky for former EEs) Qualified domestic relations order notifications (QDROs) Qualified medical child support order notices (QMCSOs) HIPAA certificates of creditable coverage. (Note: The electronic distribution standards do not alter any requirements related to who is entitled to a disclosure, the content of the disclosure, or the timing of the disclosure) PPACA required and related disclosures FLSA notices (including FLSA 18B - PPACA Open Enrollment/Marketplace Notices) 26

27 How much did you learn? Poll Questions 27

28 Question 1 An independent contractor is ALWAYS considered a common-law employee A. True B. False 28

29 Question 2 All is true about Health Care FSA Carry-overs and Grace Periods EXCEPT A. Grace period provides 2 ½ months extra. B. You may carry over up to $500 of unused funds into the next plan year. C. You may NOT choose a carry-over amount less than $500. D. During the grace period you may incur eligible FSA expenses. 29

30 Question 3 You (the Employer) will be fined $3,000 for each employee that finds your cheapest creditable plan to be unaffordable (more than 9.5%) for the EE-onlycoverage tier. A. True B. False 30

31 Takeaways Proper, accurate and well-maintained dependent eligibility records can ensure that your organization isn t incurring unnecessary claims and fees, keeping prices down for all. Independent contractors and temp. employees could be deemed your common-law employees; thus exposing you to PPACA-related fines (amongst other issues) While same-sex marriage isn t legal in every state, the recognition for same-sex spouse is present in a majority of the states. If you still have an outdated definition for spouse updates are almost certainly required (and may be mandated by any fully insured contracts). Almost all HCFSAs have a run-out period (deadline to submit claims) but they can only have one of the following: a Grace Period or a Carry-Over provision, but not both. Watch for changes to the Opt-Out credit guidance over the next few months. 31

32 If you have any further questions about the the information discussed in this Webinar, please feel to contact us at Crawford Advisors, LLC Questions 200 International Circle, Suite 4500, Hunt Valley, MD Devon Square Two, 744 West Lancaster Avenue, Suite 215 Wayne, PA Via to: To Download These Slides: Questions & Requests: 32