Affordable Care Act (ACA) Forms 1095-B and 1094-B: Line by Line Analysis

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1 Affordable Care Act (ACA) Forms 1095-B and 1094-B: Line by Line Analysis Presented by Five Points

2 Today s Agenda Introductions Overview of Employer Obligations Under ACA ACA Aggregation Rules & Large Employer Calculation Line by line review of Form 1095-B (Statement) Line by line review of Form 1094-B (Transmittal) ACA Notice Requirements Cadillac Tax Questions & Answers Please complete survey

3 Disclosure If any advice concerning one or more U.S. Federal tax issues is contained in this material or is provided by a speaker reviewing this material, such advice is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code; or (ii) promoting, conducting, or recommending any transaction or matter addressed herein, and you should seek advice from an independent tax advisor based on your particular circumstances.

4 The ACA Puzzle Track ACA Employment Status Provide ACA Required Notices (30+hrs per week) Or Or Pay up to $1,000 Per Form Pay 4980H A/B Penalties up to $2,000 Per Full Time Employee Less 30 Employer Requirements File ACA Annual IRS Reporting (1095/1094) Or Pay up to $500 Per 1095 Form Monitor Cadillac Tax Threshold Limits Or Pay 40% Excise Tax on Amounts Above Threshold $

5 ACA Large Employer Calculation

6 Definitions Large Employer - an employer who employed an average of at least 50 full-time and/or full-time equivalent employees during the preceding calendar year. Full-Time Employee employees who, with respect to any month, work at least 30 hours per week or 130 hours for the month. Full-Time Equivalent Employee figure determined by aggregating the hours of service of all part-time employees for the month and dividing by 120.

7 Large Employer Calculation Step 1: Calculate the number of full-time employees for each month during the prior calendar year. Step 2: Calculate the number of full-time equivalent employees for each month during the prior calendar year. Step 3: Add the number of full-time employees and full-time equivalent employees for each month. Step 4: Average the monthly total for all 12 months of the prior calendar year. Step 5: If the number obtained in Step 4 is less than 50, the employer is not a large employer for the current calendar year.

8 Special Rules Seasonal Workers an employer can avoid the large employer status if its workforce exceeds 50 full-time employees for 120 days or fewer due to employment of seasonal workers Large Employer Status for purposes of determining large employer status for 2015, an employer is permitted to choose any period of six consecutive months in 2014 (rather than the entire calendar year) for performing the large employer calculation.

9 Questions?

10 ACA Employer Aggregation

11 Aggregation Decision Guide In your materials, please find an Aggregated ALE Group Decision Guide for Non-Profit Organizations. IRC Section 414 provides guidance for aggregation of for-profit entities. Unfortunately, it is not very analogous for non-profit entities. Given the absence of specific IRS guidance regarding this issue, the Guide is designed to provide helpful factors for an employer s consideration when making this determination with respect to their IRS reporting.

12 Questions?

13 2015 IRS Reporting Requirements for Small Employers

14 IRS Reporting First reporting period began Jan 1, 2015 Final requirements have been released!!! All employers that sponsor self-insured health plans Referred to as Code 6055 Filing Forms 1094-B and 1095-B

15 Filing Forms 1094 and 1095 We won t discuss 1094/95-Cs (applicable only to Large Employers) Form 1094-B (Transmittal) Identifies who you are, as the employer, to the IRS Form 1095-B (Statements) Identifies who was covered under your plan during 2015.

16 Due Dates 1095-B (Statements) Only one 1095-B per recipient! Deadline for sending is Jan 31st (2/1/2016) Statements are mailed to employees last known permanent address Can deliver statements electronically if certain requirements are met: Must receive employee affirmative electronic consent, right to request paper, and ability to withdraw

17 Due Dates 1094-B (Transmittal) Paper forms due Feb 28 th (2/29/2016) Mail to address provided in instructions Must file efile if 250+ return filings Electronic transmittal returns are due March 31, 2016 for 2015 Third party can be used for filing returns and employee statements

18 For Employer: Information Needed to Complete 2015 Forms Name and Employer Identification Number (EIN) Address and telephone number Contact person For each covered individual: Name, Social Security Number (SSN) and Address Months during 2015 in which the individual was covered by minimum essential coverage. The names and social security numbers for each member of the individual s family and for what months they were covered.

19 Penalties for Reporting Failures Like Form W-2 penalties Failure to file timely and correct returns = $250 each return Failure to file timely and correct statements = $250 each return

20 Penalty Example Self-Insured Employer didn t file the IRS return and statements timely or correctly: 40 covered employees: $500 x s 40 statements = $20,000 Max penalty for failure to file $3 million

21 Good Faith Relief for 2015 Short term penalty relief is available for 2015 if you make a good faith effort This relief is provided only for incorrect or incomplete information reported on the return or statement, including social security numbers, TINs or dates of birth No relief is provided for reporting entities that do not make a good faith effort to comply with these regulations or that fail to timely file an information return or statement

22 Questions?

23 Form 1095-B Health Coverage

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25 Form 1095-B: Small self-insured employers must file for each individual covered (other than in their capacity as a spouse or dependent) under the plan at any point during This may include employees, COBRA beneficiaries, board members, directors, retirees... Coverage for 1 day is sufficient to trigger this obligation.

26 Form 1095-B Part I Responsible Individual

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28 Form 1095-B: Part I Covered Individual Info On lines 1 through 7, indicate the name, social security number and address of the covered individual. On line 8, code B is entered to indicate that the coverage is employer-sponsored. Leave line 9 blank for 2015.

29 Form 1095-B Part II Employer Sponsored Coverage

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31 Form 1095-B: Part II Fully-Insured Plan Info Self-Insured employers will leave Part II blank. This part of the 1095-B is used by an insurance company when completing these forms under a fully-insured plan.

32 Form 1095-B Part III Issuer or Other Coverage Provider

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34 Form 1095-B: Part III Employer Info On lines enter Employer s name, employer identification number (EIN), telephone number, and address.

35 Form 1095-B Part IV Covered Individual

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37 Form 1095-B: Part IV Covered Individual In this part, the name and social security number of each covered person must be entered. If the social security number for the covered person cannot be obtained, then the person s date of birth must be entered. For the statement furnished to participants, the SSN may be truncated (showing only the last four digits and replacing the first five digits with asterisks(*). In addition, if the person was covered for twelve months, column (d) is checked. If the person was not covered for twelve months, then months during the calendar year covered must be indicated in column (e).

38 Questions?

39 Form 1094-B Transmittal

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41 Form 1094-B: Employer Information The name, address and Employer Identification Number of the employer filing the forms must be indicated. This should match the employer s address on Form 1095-B. On lines 3 and 4, a contact person s name and telephone number must be indicated if questions arise. On line 9, the total number of Form 1095-B to be filed must be indicated.

42 Questions?

43 ACA Required Notices

44 Summary of Benefits and Coverage (SBC) The SBC is a standardized document outlining the benefits and coverage available under an employer s plan. SBC templates are available on the websites of the DOL and HHS. Must be provided to eligible individuals and their dependents at open enrollment, initial enrollment, special enrollment and upon request. Penalty of up to $1,000 per failure to properly furnish SBC.

45 Health Insurance Marketplace (HIM) Notice The HIM Notice is a DOL model notice providing information concerning coverage available under government-run marketplace or exchange. This notice must be provided to new employees within 14 days of their start date. As a best practices approach, we also recommend providing this notice to ongoing employees at open enrollment. There is currently no penalty for failure to provide this notice.

46 What s Next? The Cadillac Tax

47 What is the Cadillac Tax? The Cadillac Tax is a 40% nondeductible excise tax on high-cost health coverage, which is scheduled to be assessed on a calendar-year basis beginning in No employers are exempt regardless of size or industry

48 How is the Cadillac Tax Calculated? The Cadillac Tax is calculated on a per employee basis using one of the following equations. Self-Only Coverage: (Total Cost of Self-Only Coverage - $10,200) x 40% = Cadillac Tax Coverage Other Than Self-Only: (Total Cost of Coverage other than Self-Only - $27,500) x 40% = Cadillac Tax

49 What s Included in Threshold? Group health plans (including Government and Retiree Plans) Health Flexible Spending Accounts (FSAs) Health Reimbursement Accounts (HRAs) Health Savings Accounts (HSAs) (pre-tax contributions) On-site medical clinics providing more than de minimis care Certain wellness programs, and executive Physical Programs Pre-tax coverage for a specified disease or illness Pre-tax Gap, hospital indemnity or fixed indemnity insurance

50 Cadillac Annual Increases Single Coverage Single Health Plan $6,480 $7,144 FSA $2,600 $2,800 Pre-tax Vol Benefits $1,000 $1,055 Total $9,980 $10,999 Threshold Excess N/A N/A $799 Employer Owes N/A N/A $320 Per Number Employees Total Excise Tax N/A N/A $131,036

51 Who Calculates & Reports the Cadillac Tax? Employers are responsible for calculating the excise tax on an employee's applicable employer-sponsored coverage, as well as the share attributable to each coverage provider. There is also a notification requirement, under which an employer must report the taxable excess benefit attributed to each coverage provider both to that coverage provider and to the IRS.

52 Cadillac Tax Penalties If an employer fails to accurately calculate the excess benefit attributable to each coverage provider, and as a result the coverage provider pays too little tax, the coverage provider will not pay any penalty. It must simply pay the amount of the additional tax. However, the employer who miscalculated the tax will have to pay a penalty equal to 100% of the additional tax that must be paid by coverage provider. The employer will also pay interest on the underpayment from the due date until the date of payment of the penalty.

53 Cadillac Tax Repeal? U.S. Sens. Dean Heller (R-Nev.) and Martin Heinrich (D-N.M.) introduced legislation seeking to repeal the Affordable Care Act s excise tax on high-cost group plans. Rep. Joe Courtney (D- Conn.) has introduced similar legislation in the House. The Problem The Cadillac Tax is currently projected to generate $87 Billion in tax revenue by This future revenue stream is needed to offset other subsidies and expenditures provided under the ACA. In order to repeal the Cadillac Tax, Congress must find a way to address this issue.

54 MBC Cadillac Tax App Concept Assist employers with the identification of benefits subject to the Cadillac Tax. Determine total costs of an employer s benefits for purposes of the Cadillac Tax. Guide employers into benefit selections based on pre-tax and after-tax deductions that reduce exposure to the Cadillac Tax. Provide consulting regarding modifications to benefit structure for reduced costs of coverage. Enable employers to maximize the tax deductibility of their health plan options without creating a Cadillac Tax liability.

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