Affordable Care Act Employer Reporting and Compliance Update

Transcription

1 Affordable Care Act Employer Reporting and Compliance Update 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 Roadmap Introduction Cadillac Tax Updates and Issues Minimum Essential Coverage ER Mandate Reporting More on ACA Reporting 4980H, 6055, 6056 IRS Forms 8962, 720, 1094, 1095 Penalties Examples - timelines Poll Questions Takeaways 4

5 Cadillac Tax Updates and Issues 5

6 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. {How will this happen when the EE s HCFSA and HSA contributions trigger the need to pay? TBD by HHS/IRS/DOL.} 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. 18

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

8 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

9 What does ACA Reporting mean? 9

10 Haven t we been doing ACA Reporting for several years now? Consider. ACA Pay-or-Play Analysis (brokers, consultants, attorneys & accountants provide- to their clients ACA Affordability Analysis - to the client. Including opt-out-credits, bumped up against last year s W-2 wages, etc. ACA MEC - to the client (& members on their SBCs). ACA MV - to the client (& members on their SBCs). ACA PCORI/CERF - to the client, who then files it with the IRS on Form 720 (and pays the IRS). ACA Transitional Reinsurance Fee - to the client; who then files it with HHS (and pays them through Pay.gov). ACA SBCs - to the client and members. Today, when some vendors say, ACA Reporting them mean 1094s and 1095s. The IRS calls this AIR (ACA Information Returns). 10

11 Minimum Essential Coverage, The Employer Mandate & Penalties 11

12 Minimum Essential Coverage Employers must offer health insurance that is affordable and provides minimum value to their full-time employees and their children up to age 26 or be subject to penalties. This is known as the employer mandate. It applies to employers with 50 or more full-time employees (or full-time equivalents) and will be phased in during 2015 and 2016 based on employer size. Employees who work 30 or more hours per week are considered full-time. This chart shows how the employer mandate will be phased in based on employer size. Employer Size 2015 Plan Year 2016 Plan Year and Beyond 1-49 full-time employees Does not apply Does not apply full-time employees* Does not apply Employer must offer coverage to 95% of full-time employees and dependents to age or more full-time employees Employer must offer coverage to 70% of full-time employees and dependents to age 26 Employer must offer coverage to 95% of full-time employees and dependents to age 26 * For 2015, these employers will need to certify that they are not reducing the size of their workforce to stay below 100 employees. 12

13 The Employer Mandate & Employer Penalties Q: What Are the coverage Requirements and penalties? A: Employers subject to the employer mandate are required to offer coverage that provides minimum value and is affordable. The chart below explains these requirements and the penalties that apply if they are not met. Do you offer coverage? Yes Does the plan provide minimum value? (60% of total allowed costs) Yes Is the coverage affordable? (less than/= to 9.5% of income to purchase EE-only tier) Yes No Penalty No No No $2,000 per FTE (minus first 30)* Applies if one full-time employee receives federal premium subsidy for Marketplace coverage. Lesser of: $3,000 per FTE receiving that is receiving a subsidy or $2,000 per FTE (minus first 30)* * For plan years beginning in 2015, the penalty is $2,000 for each full-time employee minus the first 80 employees. For plan years beginning in 2016 and beyond, employers can exclude 30 employees from the penalty calculation. See questions 38 & 39, IRS FAQs. 13

14 The Employer Mandate & Employer Penalties Q: How do I determine if my plan provides minimum value? A: A plan provides minimum value if it pays at least 60% of the cost of covered services (considering deductibles, copays and coinsurance). HHS has developed a minimum value calculator that can be used to determine if a plan provides minimum value. The minimum value calculator is available at Q: How is affordable coverage determined? A: Coverage is considered affordable if employee contributions for coverage at the employee-only tier do not exceed 9.5% of an employee s household income. There are three safe-harbor methods for determining affordability: 9.5% of an employee s W-2 wages (not reduced for salary reductions under a 401(k) plan or cafeteria plan) 9.5% of an employee s monthly wages (hourly rate x 130 hours per month) 9.5% of the Federal Poverty Level (FPL) for a single individual 14

15 Examples of Employer Penalties The employer does not offer coverage to full-time employees The penalty is $2,000 per employee, excluding the first 30 employees*. This example shows how the penalty would be calculated. Employer Trigger Penalty 500 full-time employees No coverage offered 1 employee purchases coverage on the Marketplace and is eligible for a federal premium subsidy $2,000 per employee, minus the first 30 employees* = 470 employees 470 x $2,000 = $940,000 penalty The employer offers coverage that does not meet the minimum value and affordability requirements The penalty is the lesser of the two results, as shown in this example. Employer Trigger Penalty 1,200 full-time employees Employer offers coverage, but coverage is not affordable and/or doesn t provide minimum value The penalty is triggered if 1 employee purchases coverage on the Marketplace and receives a federal premium subsidy 250 employees purchase coverage on the Marketplace and are eligible for a subsidy Lesser of $2,000 per employee, minus the first 30 employees* OR $3,000 per employee receiving a federal premium subsidy 1,170 x $2,000 = $2,340,000 penalty 250 x $3,000 = $750,000 penalty (lesser penalty applies) For plan years beginning in 2015, the penalty is $2,000 for each full-time employee minus the first 80 employees. For plan years beginning in 2016 and beyond, employers can exclude 30 employees from the penalty calculation. See questions 38 & 39, IRS FAQs. 15

16 More on ACA Reporting... 16

17 Section 4980H Shared Responsibility for Employers ALEs may be subject to a penalty tax for (1) failing to offer MEC to employees and their dependents or (2) offering MEC that is not affordable: or does not offer minimum value. Employers with Fewer than 100 Full-Time Employees To qualify for transition relief, the employer must employ at least 50 but no more than 100 FTEs. An employer that offers coverage to at least 70% of its FTEs will not be subject to a penalty tax. Penalty The employer s number of FTEs is reduced by 80. For employers that are part of a controlled group, the 80 FTE reduction is adjusted to the employer s pro rata share of

18 Health Insurance Marketplace Form 1095-A with IRS Used if you enrolled in a health plan through the Health Insurance Marketplace in 2014 Form 8962 Premium Tax Credit When applying for health coverage through the Marketplace, you provided an estimate of your 2014 income and other information You will use this form to compare the amount of tax credit you took in advance during the year to your final premium tax credit (Reconciling). 18

19 Reporting under Section 6055/6056 Code 6056 Large employer health coverage reporting (at least 50 full-time employees, including full-time equivalents) Required- terms and conditions of health plan coverage offered to full-time employees (helps the IRS administer the ACA s shared responsibility penalty for large employers) Code 6055 Employers with self-insured health plans Required- information on each individual provided with coverage (helps the IRS administer the ACA s individual mandate) 19

20 ACA 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 Cored: 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 Reporting Requirements Crawford Advisors works with you to keep your welfare benefit program in compliance with all applicable government regulations. Consulting Brokerage Compliance Communications Administration

21 ACA 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 Cored: 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 Reporting Requirements Crawford Advisors works with you to keep your welfare benefit program in compliance with all applicable government regulations. Consulting Brokerage Compliance Communications Administration

22 Forms 1094-B/C & 1095-B/C Who Must Report An applicable large employer (ALE) must file and provide Form 1095-C to all fulltime employees regardless of whether they were offered coverage during the year. An ALE with no full-time employees for any month of the year is not obligated to report UNLESS they sponsor a self-insured health plan in which any employee, spouse, or dependent is actually enrolled. Controlled Groups Employers working for multiple divisions must receive aggregated information on a single 1095-C. Employees will receive a separate form 1095-C for full-time employment with each ALE in the controlled group Reporting Qualifying Offer Method Allows ALEs to furnish a simplified employee statement to employees receiving qualifying offers for all 12 months of the year 22

23 Forms 1094-B/C & 1095-B/C Delivery to Employees Form 1095-C may be delivered to employees in any manner permitted for delivery of Form W-2, including hand-delivery. However, unlike Form W-2, employers need not furnish a midyear Form 1095-C upon an employee s request following termination of employment. New Hires and Terminating Employees Part II of Form ALEs may indicate that an offer of coverage was made for a month only if the offer would have provided coverage for every day of the month. Part II of Form An employee should be reported as having coverage if enrolled on any day of the month. Third Party Reporting ALEs may designate third parties to perform reporting on their behalf Reporting on COBRA Coverage 23

24 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. 24

25 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. 25

26 Advance Premium Tax Credit Reconciliation Discrepancies Advance premium tax credit reconciliation will affect millions of taxpayers, starting with 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. Today s (06/25/2015) U.S. Supreme Court decision in King v. Burwell upheld the subsidies 6-3. They will continue in both Federal Exchanges and State Exchanges (status quo maintained). 26

27 Examples Timeline considerations 27

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30 How much did you learn? Poll Questions 30

31 Question 1 Has your organization begun compiling, collecting & organizing the data to complete IRS Forms 1094 & 1095? A) Yes, we have. B) No, not yet. C) I am not sure. 31

32 Question 2 Do you know if you provide Minimum Essential Coverage to your employees? A) Yes B) No C) Not Sure 32

33 Question 3 Are you tracking the hours your variable hour EEs work? A) Yes B) No C) Not Sure 33

34 Question 4 Are you prepared to pass the IRS 4980H test for the 2016 plan year? Will 95% or more of your EEs be offered coverage? A) Yes B) No C) Not Sure D)We will, but we re not there yet. 34

35 Takeaways When filing 1094 and 1095 forms you must file for all eligible employers or else face a penalty Capturing all your Variable Hour EEs is important. And, you must act on that information (enroll them, keep them enrolled during their stability period, etc.) An employer that offers coverage to at least 70% of its FTEs will not be subject to a penalty For 2016, that ratio will increase to 95% of your FTEs in order to remain penalty-free Reminder: PCORI/CERF fees due in July, as are Forms 5500 (for 1/1 Plans) 35

36 Questions Questions? Comments? Requests? Crawford Advisors, LLC 200 International Circle, Suite 4500, Hunt Valley, MD Via to: To Download These Slides: Register once, login and download Questions & Requests: Be sure to review a prior webinar on a topic of interest to you: 36