ACA Refresher on Key Issues and Planning for Tuesday, October 11, :00 pm 3:00 pm

Transcription

1 ACA Refresher on Key Issues and Planning for 2017 Tuesday, October 11, :00 pm 3:00 pm

2 Today s Speakers Joe DiBella Executive Vice President of the Health & Welfare Practice Conner Strong & Buckelew Phyllis Saraceni Senior Vice President, Compliance & Audit Practice Leader Conner Strong & Buckelew 2

3 Refresher on Key ACA Issues Past, present, and future ACA Recent trends and litigation concerns Emphasis on planning for Employer mandate and IRS reporting (Forms 1094 and 1095) - Nondiscrimination issues - Disclosure and notice issues (exchange notices, wellness, SBCs, etc.) - Audits and inflation adjusted penalties - Fees and assessments 3

4 Past, Present, and Future ACA Organizational challenges and expectations continue related to Affordable Care Act (ACA) ongoing implementation - Constant changes - Increasing audits, penalties, and data breach issues - Patchwork of laws and regulations > ERISA > Internal Revenue Code > ACA > Other (federal, state, local, Medicare, Medicaid, etc.) Must be adaptable, flexible, and maneuverable - Need knowledge of legal/regulatory environment / good advisors - Need administrative support (administration, payroll, wellness, ACA reporting, payroll) 4

5 Past: Pre-ACA ERISA (1974) - SPD/Plan document requirement, 5500s, fiduciary rules Cafeteria plans under Code Section 125 (1978) Nondiscrimination rules geared towards self-insured plans (1981) COBRA (1985) HIPAA Privacy (1996) HIPAA Portability (1996) - pre-existing conditions, special enrollment rights, health factor discrimination/wellness exception HITECH (2009) Additional health care laws Mothers and Newborns (1998) - Post-mastectomy reconstructive surgery (1998) - Mental health parity (1998) - Michelle s law (2008) - GINA (2009) 5

6 Past: Early ACA Insurance Reforms/Mandates (2010) - Young adult/age 26 coverage - Ban on lifetime and annual limits - Ban on rescissions (retroactive cancellation) of coverage - Ban on pre-existing condition exclusions - Enhanced claims procedures - Waiting periods limited to 90 days - Dollar-one coverage of preventive services Notice of grandfathered status (2011) Patient protection notices (2011) Summary of benefits and coverage (2012) W-2 reporting (2012) Exchange notices (2013) 6

7 Recent Past/Present: ACA New Wellness Rules (2014) Taxes and fees - PCORI ( ) - Transitional reinsurance fee ( ) - Employer shared responsibility penalties and reporting (2015) Final Section 1557 Nondiscrimination (2016) 7

8 2017 and Future: ACA Exchange marketplace unstable? Insurers pulling out Increased affordability percentages, penalties, and dollar and cost sharing limits Form 1094/1095 penalty demands and appeals More enforcement likely and general penalty assessment Increased focus from agencies on plan governance process - consideration for committee structure and need for minutes - attorney review/oversight important for plan governance Nondiscrimination rules geared towards insured plans (to come) Cadillac tax (2020) repeal likely 8

9 Participant Question How much will the Cadillac tax be? - Annual tax beginning in 2020 on high-cost employer-sponsored health coverage - Tax is 40% of cost of applicable health coverage - Applies to applicable employer-sponsored coverage in excess of statutory (indexed) threshold. base thresholds: $10,200 for self-only and $27,500 for family - Revenue raiser to pay for other aspects of ACA (e.g., Exchange subsidies) 9

10 Future: Form 5500 Proposed Changes Last round of changes effective in 2009 electronic filing ACA mandates reporting of information on GHP operations, ERISA compliance, and compliance with certain ACA provisions Using Form 5500 to satisfy this ACA requirement - recent proposed changes published 7/21/16 Filing required for small plans - Looking for information on plans not currently subject to filing (less than 100 participants) New Schedule J for large medical plans - Looking for more information on larger plans (claims data, etc.) Proposed changes would be effective beginning with 2019 plan year reporting (filings due in 2020) No corresponding revised forms/schedules provided to date Comment deadline extended to 12/5/16 10

11 Future: Litigation Concerns Legality of ACA Subsidies - Payment of cost sharing subsidies despite lack of congressional appropriation; unconstitutional? Contraceptive Coverage - Is a religious rights or other compromise workable as instituted or is religious or other exemption possible? ACA 1557 Nondiscrimination - Are transgender services required under a plan due to ACA or Title VII? Interaction of ERISA Section 510 and ACA Can full time employment be reduced to part time to avoid penalty or cost of medical coverage? HIPAA Endorsement and Data Breaches Will employer GHPs be next major target? Significant penalty assessment against insurers and providers 11

12 Future of ACA: Political Landscape Clinton Health Initiatives Trump Initiatives 12

13 Future: Clinton Health Initiatives Supports ACA more of same Repeal Cadillac Tax Supports public option plan on Marketplace Expand Medicare to age 55 and above Restrict unreasonable premium rate increases Further restrict out of pocket costs No discussion of any employer-provided health care laws 13

14 Future: Trump Health Initiatives Repeal ACA itself Repeal Cadillac Tax Allow purchase of insurance across state lines Expand self-employed deduction for health insurance premiums to everyone Promotes use of HSAs No discussion of any employer-provided health care laws 14

15 Emerging Health Plan Trends Private Exchanges - Continued employer focus - Retiree health exchanges leading the way; Post-65 most common Clinics - Part of the plan or stand-alone? - Open to all employees/dependents? - Subject to ERISA? - HIPAA privacy concerns - HSA and COBRA issues 15

16 Emerging Health Plan Trends Telemedicine - Clinical communication between providers or between provider and patient - Telephone, text, , video, home monitoring devices etc. - Follow-up care/questions, Monitoring of chronic conditions, Diagnosis and treatment of new conditions - May be offered by insurer/health plan administrator or separate entity - Evolving and expanding, application of rules not entirely clear Provider Utilization Focus - Narrow Networks, Centers of Excellence, Reference-Based Pricing - Sufficient quality providers? Sufficient geographic access? Necessary integration with plan and statutory coinsurance and OOP limits 16

17 Emerging Health Plan Trends Other Creative Ideas - Prescription drugs: generics first - Preventive care: medical management techniques - Best-in-market provider reimbursement rates - Expanded and wellness and disease management programs - Spousal surcharges - Dependent audits - Domestic partner coverage changes 17

18 Quick Timeline Upcoming Deadlines October 12, 2016 TIN solicitation October 15, Medicare Notice of Creditable Coverage October 17, 2016 Form 5500 extended due date November 1, Exchange OE begins. Also calendar year plan OE season; prepare and distribute OE materials such as SBC November 15, Transitional Reinsurance Fee December 15, Exchange coverage enrollment due date for January 1, 2017 coverage December 31, Provide annual CHIP Notice and WHCRA Notice (often provided with annual OE materials) January 1, 2017 Compliance with ACA 1557 gender nondiscrimination rules. Also due date for compliance with wellness program final rules January 31, ALEs provide FTEs with Form 1095-C 18

19 Soliciting Social Security Numbers (TINs) Self-insured health plans collect/report taxpayer identification number (TIN) of covered individuals (Social Security Number) IRS cross checks to verify individuals coverage/subsidy Request as part of application for new health coverage and solicit TINs separately for individuals added to plan Penalty may be waived if no willful neglect reporting year special rule for individuals already enrolled in coverage - Request TIN as part of application for health coverage or at any time before July 29, Make second request by October 12, If TIN still not received, request third and final time by December 31,

20 Participant Question When we did the reporting last year, we had some corrections due to staff not changing their name with social security when they got married. Besides informing them to do this, is there any way to also list a person who made a life change for reporting? Unfortunately, no method to list life changes for reporting purposes Many employers received Form 1095 validation error notices from IRS for 2015 Forms - missing or incorrect TINs - name/tin mismatches - correct TIN, but error resulted from using wrong middle initial or no middle initial, or the wrong last name (due to marriage, divorce, etc.). 20

21 TIN Errors IRS uses Form 1040 to verify information on 1095-C, but employers do not know how applicable information is reported Good news: Form 1095 validation error for TIN/name mismatch is not a penalty notice or indication that filer is required to solicit TIN Not clear whether failing to re-solicit a TIN after receiving TIN validation error message would preclude filer from relying on reasonable cause penalty waiver 21

22 Summary of Benefits and Coverage (SBC) Health plans/health insurance issuers must provide SBC to participants SBC must follow strict formatting requirements Agencies issued new templates Prepare to use new SBC template for health plans with OE periods or plan years beginning on or after 4/1/17 (1/1/18 for calendar year plans) For self-funded plans, plan administrator is responsible for creating and providing SBC For insured plans, issuer is required to provide SBC to plan sponsor and both plan and issuer must provide SBC (most issuers will assume responsibility for providing SBCs) 22

23 ACA Gender Nondiscrimination Covered entities receiving federal funds from HHS cannot discriminate in health programs/activities Covered entities include any entity that receives funding from HHS - hospital, clinics, physician offices - group health plans that receive HHS funding for programs such as the Retiree Drug Subsidy (RDS) - applies to insurers Rules related to health care for transgender and disabled individuals, and those with limited English proficiency. Does not require coverage of certain benefits, but does prohibit blanket and categorical exclusions for transgender related health services. Imposes notice requirements regarding nondiscrimination practices Changes to group health plan provisions must be made by 1/1/17 23

24 Wellness Incentives Final rules amend both ADA and GINA on wellness plan incentives - take effect on first day of first plan year beginning on or after 1/1/17 New requirements for programs that ask employees to provide medical information (health risk assessments or medical exams/tests) Both rules allow employers to offer employees and their spouses incentives to encourage wellness plan participation that equal up to 30% of total cost of self-only coverage Final ADA and GINA rules detail how employers can offer inducements for wellness plan participation while ensuring they don't coerce employees/ covered spouses to submit to involuntary medical exams or to divulge genetic information, including family medical history Rules add complexity - in addition to HIPAA wellness incentive and notice rule 24

25 Review Grandfathered Status Grandfathered plans are exempt from some of ACA s mandates; grandfathered status affects compliance obligations from year to year. If grandfathered, determine whether grandfathered status continues for 2017 plan year. - If your plan will lose its status for 2017, confirm that plan has all patient rights and benefits required by ACA for non-grandfathered plans (e.g., coverage of preventive care without cost-sharing requirement, etc.) - If keep status, continue to provide the Notice of Grandfathered Status 25

26 Check Cost Sharing Limits Review out-of-pocket maximum for ACA limits for 2017 plan year ($7,150 for self-only coverage and $14,300 for family coverage) If HDHP with an HSA, 2017 out-of-pocket maximum for HDHP must be lower than ACA s limit ($6,550 for self-only coverage and $13,100 for family coverage) If plan uses multiple service providers to administer benefits, confirm plan will coordinate all claims for EHB across plan s service providers, or will divide out-of-pocket maximum across categories of benefits, with combined limit that does not exceed maximum for 2017 Confirm plan applies self-only maximum to each individual in plan, regardless of whether individual is enrolled in self-only coverage or family coverage 26

27 Cafeteria Plans Generally Determine whether plan allows employees to make additional mid-year changes in salary reduction elections in event of employee's enrollment in Health Insurance Marketplace coverage and/or reduction in employee's hours of service, as permitted in agency guidance If so, adopt appropriate plan amendments Confirm your section 125 plan complies with prohibition on providing qualified health plan offered through Marketplace as benefit under employersponsored cafeteria plan 27

28 Check Health FSA Contributions Employee s annual pre-tax salary reduction contributions to health FSA must be limited to $2,500 - increased to $2,550 for 2015 and limit projected to increase to $2,600 for 2017 Limit does not apply to employer contributions to health FSA Limit does not impact contributions under other employer-provided coverage (e.g., salary reduction contributions to dependent care assistance or adoption care assistance are not affected by the health FSA limit) 28

29 Health Reimbursement Arrangements (HRAs) Confirm that HRA (other than retiree-only HRA or HRA consisting solely of excepted benefits) is "integrated" with other group health plan coverage in order to satisfy preventive services requirements and annual dollar limit prohibition - To be "integrated," HRA must meet specific requirements under either of two methods described in agency guidance - Both methods require that employer offer group health plan (other than HRA) to employees either a plan that does not consist solely of excepted benefits or a plan that provides minimum value Confirm that HRA is not being used to reimburse employee's individual insurance policy premiums - Such an arrangement may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) 29

30 Review Opt-Out Arrangements Opt-out payments which provide cash if employee declines medical coverage must be added to employee s cost for self only coverage Makes it more difficult to satisfy affordability under employer mandate (employee cost for self only coverage under plan s lowest cost option can not exceed 9.5% of household income) Eligible opt-out arrangement is not added to the employee s contribution to determine affordability: - Employee declines employer coverage and must provide reasonable evidence that they and their expected tax dependents have or will have minimum essential coverage during period opt-out arrangement applies - Other coverage cannot be Marketplace coverage or any other individual coverage - Employees must provide evidence of alternative coverage (annual attestation) 30

31 Review Plan Documents and SPDs for Required Changes to Plan Benefits For group health plans, confirm no annual dollar limits apply to coverage of "essential health benefits If plan limits the number of visits to health providers or days of treatment, verify that visit or day limit does not amount to a dollar limit Verify no preexisting condition exclusions are imposed on any individual, regardless of age Ensure that an employer payment plan is not in place employer reimburses an employee for some or all of premium expenses incurred for individual health insurance policy, or uses its funds to directly pay the premium for an individual policy 31

32 Medical Loss Ratio (MLR) Rebates Applies to insured plans only Insurers must provide rebates (refunds) if percentage of premiums spent on medical claims (and quality improvement) for policies issued in a state is less than 80% in small group and individual markets or 85% in large group market Rebates must be paid by Aug. 1 of year following year for which MLR data are calculated Employers must distribute rebates received from insurance companies to eligible plan enrollees (if required and as deemed appropriate) 32

33 Health Insurer Fee ACA created fee, to be paid by September 30 of each year, beginning in 2014, on covered entities engaged in business of providing health insurance Definition of covered entities excludes self-insured employer plans Cost of fee will be passed through to enrollees and plan sponsors of insured plans (including large group plans) in form of increased premiums Legislation enacted in December 2015 suspends collection of annual fee for 2017 year - insurers are not required to pay fees for

34 Form W-2 Reporting of Employer- Provided Health Coverage ACA requires employers to report cost of coverage under employersponsored group health plan on employee s Form W-2, Wage and Tax Statement, in Box 12, using Code DD Forms W-2 must be furnished to employees by January 31 of each year This requirement does not apply to employers required to file fewer than 250 Forms W-2 for preceding calendar year Employers generally required to provide employees with 2016 Forms W-2 in January 2017 Amount reported does not affect tax liability, as value of employer excludible contribution to health coverage continues to be excludible from an employee's income, and it is not taxable Reporting is for informational purposes only 34

35 Transitional Reinsurance Fees Health insurers and self-funded group health plans pay fees for first three years of Exchanges operation ( ). Fees are used to help stabilize premiums in individual market. Fully insured sponsors do not have to pay fee directly. Fees do not apply for 2017 and beyond, although 2016 fees are paid in Reinsurance fees may be paid in either one lump sum or in two installments. For 2016 benefit year, reinsurance fees are due as follows: PAID IN TWO INSTALLMENTS: Due Nov. 15, 2016: Submit 2016 contribution form and schedule payment of t first collection, then duplicate form and schedule payment of second collection Due Jan. 15, 2017: Remit first contribution amount of $21.60 per covered life Due Nov. 15, 2017: Remit second contribution amount of $5.40 per covered life PAID IN ONE LUMP SUM: Due Nov. 15, 2016: Submit 2016 contribution form and schedule payment Due Jan. 15, 2017: Pay full contribution amount of $27 per covered life 35

36 PCORI Fees Employers sponsoring certain self-insured health plans are responsible for fees to fund Patient-Centered Outcomes Research Institute (PCORI) Plan sponsors of fully-insured health plans are not responsible for paying fee (obligation rests with insurer) IRS Form 720 must be filed annually to report and pay fees no later than July 31st of year following last day of plan year to which fee applies Fee applies for plan years ending after 9/30/12, and before 10/1/19 Fee is equal to average number of lives covered during plan year multiplied by applicable dollar amount for year - $2.17 for plan years ending on or after 10/1/15 and before 10/1/16 - dollar amount to be adjusted to reflect inflation for plan years beginning on or after 10/1/16 and before 10/1/19 36

37 Forms 1094 and 1095 Beginning January 2016, all applicable large employers ALEs were required to file Forms 1094 and 1095, as determined appropriate, for 2015 calendar year 2016 forms will be due starting January 2017 information collection is year round, continuous effort. forms provide certification as to whether employers offered FTEs opportunity to enroll in MEC at an affordable, minimum value for each month of year and helps employees determine eligibility for Exchange premium tax credit 1095-C employee statements sent on or before 1/31 following end of calendar year for which statements apply 1094-C IRS transmittal filed with IRS each year no later than 2/28 (or 3/31, if employer files electronically) following end of calendar year for which return applies along with 1095-C employee statements 2016 filings not likely to receive automatic extension 37

38 Participant Question I have a district with less than 50 employees in the State Health Benefit Plan. What are my reporting requirements for 2016? Reporting requirement depends on employer status as ALE; employer penalty rules apply only to ALEs ALEs are employers with 50 or more FT employees (including FT equivalent employees, or FTEs) on business days during preceding calendar year Employers determine each year, based on their current number of employees, whether they will be considered an ALE for following year Controlled group rules apply; until further guidance is issued, government entities expected to rely on reasonable, good faith interpretation of controlled group aggregation rules in determining whether an entity is an ALE Each participating employer in the NJ SHBP is directly responsible for meeting the IRS reporting requirements 38

39 Keep Track of Required Reporting Information For each month in 2016, identify all FTEs Determine whether FTEs and their dependents (if any) were offered minimum essential coverage that meets the ACA's minimum value requirements and is affordable Insured and self-insured ALEs must report information for all 12 months of calendar year for any of its employees who were FT for one or more months of calendar year All self-insured employers (regardless of size) must identify each covered individual and months for which individual was enrolled in coverage 2016 final Forms 1094-B/C and 1095-B/C released Review Forms and instructions to understand all required reporting information 39

40 Participant Question How do we handle COBRA enrollees and SCA employees? COBRA not reported as offer of coverage for terminated employees - Forms should be coded as no offer of coverage for any month for which offer of COBRA applies; employer should also not report enrolled in coverage even if employee actually elects and enrolls in COBRA Offers of COBRA to active employees (e.g., those who experience a reduction in hours and lose coverage) should always be reported as an offer of coverage; special rules apply for certain non-employees Employers subject to the Service Contract Act (Davis Bacon) must meet the ACA s mandate to offer MEC that is affordable and provides MV to FTEs in order to avoid penalties; monetary contributions to fringe benefits can be taken into account for purposes of affordability 40

41 Participant Question We have a large group of unionized employees who are enrolled in medical coverage through their national union. As part of their collectively bargained agreement, we pay the union a fixed monthly amount to enroll the employee and eligible dependents in medical coverage. We do not have access to any of the medical enrollment information. The union sends the employees an annual 1095-B. What is our obligation for annual reporting (1094 and 1095) to the employee and to the IRS? Multiemployer plan transition relief provides that contributing employer is treated as offering coverage, and therefore generally protected from penalty for that individual Contributing employers must still file 1095-C for FTEs and must use special codes for any month in which employer claimed multiemployer plan transition relief 41

42 Select Reporting Method / Determine If Third Party Will Be Used Determine whether third party will assist in fulfilling reporting Large employers required to file 250 or more Forms 1095-C during calendar year must file returns electronically Utilizing third-party to fulfill reporting responsibilities does not transfer large employer's potential "pay or play" liability, nor does it transfer potential liability for failure to report and furnish statements 42

43 Participant Question For those with mid-year plans, there was transition relief for How will this be handled for 2016? Certain employers that had non-calendar year plans were able to delay compliance with employer mandate rules until beginning of their 2015 plan year (penalty rules applied effective 7/1/15 if employer maintained July 1 plan year) Non-calendar year plans had to report coverage offers for all months of 2015, although no penalty would be assessed for failures to offer coverage prior to first day of 2015 pan year Non-calendar year plans are now subject to full reporting and full penalty calculation for all of

44 Determine FTEs Can use monthly measurement method or the look-back measurement method to confirm that health plan coverage will be offered to all FT employees (and dependent children) If have employees with varying hours, the look-back measurement method may be best fit To use look-back measurement method, need to select measurement, administrative and stability periods If do not offer coverage to all FTEs identified under IRS 30-hour rules, need to consider risk of employer shared responsibility payments 44

45 Define Eligible Employees Plan eligibility language does not need to match IRS employer shared responsibility measurement period rules (look-backs, 30 hours average hours of service counting, etc.) Workforce management rules may differ from plan eligibility rules If using look-back and look-forward periods, work with legal advisers to update plan eligibility rules for variable hour counting and employee eligibility provisions in advance of applicable period Plan documents should include language describing how plan defines eligible employees under medical plan Describe any provisions for variable hour tracking and identification, measurement periods, stability periods, and administrative periods that may apply 45

46 Review Plan Documents and SPDs for Eligibility and Waiting Period Rules Ensure any waiting period time that must pass before coverage can become effective for employee or dependent that is otherwise eligible to enroll in plan does not exceed 90 days (other conditions for eligibility that are not based solely on lapse of time period are generally permissible) If plan requires completion of reasonable and bona fide employment-based orientation period as condition for eligibility, ensure orientation period does not exceed one month and maximum 90-day waiting period begins on first day after orientation period Note: Employers subject to "pay or play" may not be able to impose full onemonth orientation period and full 90-day waiting period without potentially becoming subject to penalty 46

47 Participant Question We want to hire college students from a university that offers students a "co-op" learning experience. The assignments are 6 months and the students are required to work 40 hours per week. Our look back period is 12 months. Can we classify these students classified as "Seasonal Employees and not offer medical coverage without penalty? A true seasonal employee is an employee hired into a position for which customary annual employment is 6 months or less (for a period that begins each calendar year in approximately the same part of year, such as summer (for a camp counselor) or winter (for a ski instructor) A seasonal employee hired to work 30+ hours/week may be treated like a new variable hour employee with respect to determining if employee is FT If employer uses measurement period safe harbor for determining if PT and variable hour employees are benefits eligible, employer can apply initial measurement period and stability period to seasonal employee (rather than offering benefits within 90 days) 47

48 Determine Applicable Penalties Large employers may be liable for a "pay or play" penalty in 2016 if they do not offer affordable coverage that provides minimum value to at least 95% of FTEs Employer that offers coverage to at least 95% of FTEs may nevertheless owe penalty if any FTE receives premium tax credit In determining if penalty applies, employers should be aware of limited non-penalty periods (limited non-assessment periods) provided for in "pay or play" final regulations, during which employer generally will not be subject to penalty Employers may use a number of safe harbors to determine affordability, including reliance on Form W-2 wage. 48

49 Employee Penalty Rules An ALE is only liable for penalty rules if at least one FTE receives a premium tax credit or cost-sharing reduction for coverage purchased through an Exchange Employees who are offered health coverage that is affordable and provides MV are generally not eligible for these Exchange subsidies Depending on circumstances, one of two penalties may apply the 4980H(a) penalty or the 4980H(b) penalty 49

50 4980H(a) Penalty Penalty for ALEs Not Offering Coverage ALE will be subject to penalty if it does not offer health coverage to substantially all FT employees (and dependents) and any one of its FTEs receives a premium tax credit or cost-sharing reduction toward his or her Exchange plan ALE will satisfy requirement to offer minimum essential coverage (MEC) to substantially all of its FTEs and their dependents if it offers coverage to: At least 95% or fails to offer coverage to no more than 5% (or, if greater, five) of its FT employees (and dependents) in 2016 and beyond (up from 70% for the 2015 plan year). 50

51 4980H(a) Penalty Amount ALEs that meet substantially all requirement are still subject to potential 4980H(b) penalties for time period that health plan coverage is unaffordable or does not provide MV The monthly penalty assessed on ALEs that do not offer coverage to substantially all FT employees and their dependents will be equal to the ALE s number of FTEs (minus 30) X 1/12 of $2,000 (as adjusted), for any applicable month. After 2014, the $2,000 amount is indexed for the calendar year, as follows: - For 2015, annual penalty is $2, For 2016, annual penalty amount is $2,160. The IRS expects adjustments for future years to be posted on IRS.gov. 51

52 4980H(b) Penalty Penalty for ALEs Offering Coverage Employers that do offer coverage to substantially all FTEs (and dependents) may still be subject to penalties if at least one FTE obtains premium tax credit or cost-sharing reduction through an Exchange because: The employer did not offer coverage to all FTEs; or The employer s coverage is unaffordable or does not provide MV. The monthly penalty assessed on ALE for each FTE who receives premium credit will be 1/12 of $3,000 for any applicable month. However, the total penalty for employer would be limited to 4980H(a) penalty amount After 2014, the $3,000 amount is indexed for the calendar year, as follows: - For 2015, annual penalty is $3, For 2016, annual penalty amount is $3,240. The IRS expects adjustments for future years to be posted on IRS.gov. 52

53 Calculate Potential Penalty Review cost of health plan coverage to determine whether it s affordable by using one or more of affordability safe harbors. - Coverage is affordable if employee portion of premium for lowestcost, self-only coverage that provides MV does not exceed 9.5% (as adjusted) of an employee s W-2 wages, rate-of-pay income or the federal poverty level for a single individual. The cost of family coverage is not taken into account. Determine whether plan provides MV by using one of four available methods (MV calculator, safe harbor checklists, actuarial certification, or metal level Calculate any penalties that may apply under Section 4980H(a) or 4980H(b) 53

54 Reporting of Coverage ACA requires ALEs to report information to IRS and to employees regarding employer-sponsored health coverage IRS will use information that ALEs report to verify employer-sponsored coverage and to administer the employer shared responsibility provisions Rules are extremely fact specific and require review and analysis by each affected employer to determine specific application of these tax rules to any business As penalty and reporting function is a significant tax issue for any business, employers are encouraged to work with their internal finance and HR teams as well as with their tax and legal advisors on these issues Working with payroll and HRIS providers is also recommended as tracking and recording data is needed to complete required IRS reporting requirement 54

55 Participant Question Who should actually submit the 1095 form if an employee is missed? If Form is not completed for an affected employee, such as a FTE who does not get Form, then ALE may be subject to failure to file penalty A reporting entity that fails to comply with reporting requirements may be subject to general failure to report penalties - penalties may be waived if failure is due to reasonable cause and not to willful neglect - penalties may also be reduced if reporting entity corrects the failure within a certain period of time 55

56 Reporting of Coverage Penalty amounts for failures related to returns required to be filed and statements required to be furnished in 2017 are as follows: Penalty Type Per Violation Annual Maximum Annual Maximum for Employers with $5 Million in Gross Receipts General $260 $3,193,000 $1,064,000 $1,064,000 Corrected within 30 days $50 $532,000 $186,000 $186,000 Corrected after 30 days, but before Aug. 1 $100 $1,596,500 $532,000 $532,000 Intentional disregard $530* None N/A *For failures due to intentional disregard of the filing requirement, the penalty will be equal to the greater of either the listed penalty amount or 10% of the aggregate amount of the items required to be reported correctly. 56

57 Notice of Coverage Options Employers are required to provide written notice with information about a Health Insurance Marketplace to each new employee at time of hiring, within 14 days of employee's start date Employers are not required to provide separate notice to dependent Two model notices are available one notice for employers that offer a health plan another notice for those that do not 57

58 Federal Exchange Notices Certain employers will receive Exchange Notices intended to alert employer of possibility of penalty payment being assessed by IRS Receiving notice does not mean penalty payment is owed Penalties assessed by IRS only after reconciliation of ALE reporting process (without regard to whether Exchange issued a notice or whether an employer engaged in any appeals process) As an alternative to appeal route, employer could reach out to any FTE identified in an Exchange notice and explain employer offer and possibility of employee repayment to the IRS for the subsidy if they find employee was not eligible Presumably next step may be for employee to voluntarily alert Marketplace to error and rectify it 58

59 Thank you for your participation!