ACA Compliance for Employers: Preparing for New 2016 Information Reporting Requirements

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A ACA Compliance for Employers: Preparing for New 2016 Information Reporting Requirements Documenting and Reporting Workforce Classifications and Health Plan Offerings Under the Employer Mandate TUESDAY, OCTOBER 6, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Susan M. Nash, Partner, McDermott Will & Emery, Chicago Tiffany N. Santos, Director, Trucker Huss, San Francisco The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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3 Continuing Education Credits FOR LIVE EVENT ONLY In order for us to process your continuing education credit, you must confirm your participation in this webinar by completing and submitting the Attendance Affirmation/Evaluation after the webinar. A link to the Attendance Affirmation/Evaluation will be in the thank you that you will receive immediately following the program. For additional information about CLE credit processing call us at ext. 35.

4 ACA Compliance for Employers Preparing for New 2016 Information Reporting Requirements Tiffany N. Santos October 6, 2015 Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

5 Outline Overview of ACA employer mandate provision Forms 1094-B/1095-C and Forms 1094-B/1095-B IRS filing an distribution deadlines Workforce classification and documentation Best record keeping practices Potential Employer mandate liability and penalties Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

6 Why Is There a Reporting Requirement? Affordable Care Act (ACA) requires providers of health coverage (plans and insurers) and employers to report information on an annual basis to help the IRS administer > Individual taxpayer requirement to cover themselves and their tax dependents (Section 5000A) > Employer requirement to offer coverage to full-time employees (Section 4980H) > Individual taxpayer eligibility for premium tax credit to buy individual Exchange/Marketplace coverage (Section 36B) 6

7 Employer Shared Responsibility Section 4980H Beginning in 2015 (per transitional relief), applicable large employers will be subject to the shared responsibility provision under IRC Section 4980H Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

8 Employer Shared Responsibility Section 4980H > Either of two payments ( A payment or B payment) may be assessed depending on Whether at least one full-time employee buys State Exchange/Marketplace coverage with a federal premium tax credit; and No tax credit no penalty Full-time employee = receives payment for working an average of 30 hours/week (130 hours/month) Whether employer offers health care coverage to full-time employees and their dependents and whether such coverage is affordable and provides minimum value 8

9 What Employers Are Subject to the Payment? Applicable Large Employers > Must have employed an average of at least 50 fulltime employees (takes into account full-time equivalents or FTEs) on business days during the prior calendar year Transition relief for 2015 at least 100 or more business days Must aggregate hours worked by part-time employees to determine FTEs Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

10 What Employers Are Subject to the Payment? Note: Section 4980H applies to all common law employers, including governmental entities (federal, state, local) and tax-exempt organizations (such as churches) 10

11 Is the Employer an ALE? All entities of a controlled group are treated as a single employer > Count all employees of the entities in a controlled group under Section 414(b) or (c) or an affiliated service group under Section 414(m) > If controlled group has at least 50 full-time employees and FTEs, each member of group will be an applicable large employer Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

12 Is the Employer an ALE? Seasonal employees include if they work full-time, and count their part-time hours to determine FTE calculation > Seasonal employees are those who work on a seasonal basis as defined by the DOL, including those considered seasonal under the FLSA (e.g., certain agricultural workers), and holiday season retail workers > Note: different definition applies when calculating assessment Not an ALE if the total # of FTe s and FTEs exceeds 50 for no more than 120 days (i.e., 4 calendar months) during year because of seasonal employees 12

13 Is the Employer an ALE? Note: aggregation rules DO NOT apply to determine liability for, and the amount, of any penalty under Section 4980H > Payment may be assessed on each member of a controlled group Some members may be subject to the penalty, but others may not Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

14 Who Reports What? B Forms Providers of health coverage (plans and health insurers) file Forms 1094-B (transmittal form) and 1095-B (filed with IRS and copy provided to each covered individual) > Insurers for insured coverage > Plan sponsors who are not employers file the B forms for the self-funded plan For example, multiemployer trust > Employers are NOT required to file the B forms > 14

15 Who Reports What? C Forms Employers with 50 or more full-time employees (including, full-time equivalents) must file the C forms > Form 1095-C: prepare for each full-time employee and provide a copy to each employee and file with IRS > Form 1094-C: transmittal form (file with Forms C) > 15

16 Form 1094-C Transmittal Form Part I Applicable Large Employer Member (ALE Member) > Report identifying information, including its EIN and contact information and the number of Forms 1095-C submitted with that Form 1094-C transmittal It also can identify its Form 1094-C Authoritative Transmittal Part II ALE Member Information > Complete this on the Authoritative Transmittal Each ALE member must file one Authoritative Transmittal reporting aggregate employer-level data > Report the total number of Forms 1095-C that will be filed by and/or on behalf of the employer, including Forms 1095-C for the employer s fulltime employees (and non-full-time employees who enroll in the employer s self-insured plan, if applicable) that are filed with that transmittal, as reported in Part I, and those that will be filed with additional transmittals Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

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18 Completing the Form 1095-C Prepare a Form 1095-C for each of your full-time employees > If an employee works for two divisions of an employer, combine information on one Form 1095-C Three parts > Part I: Basic information about the employee and the employer > Part II Information about the coverage offered to full-time employees for each month COBRA need not be reported Multiemployer interim guidance no longer need to report whether employee actually enrolled in coverage > Part III: Information about covered individuals for each month Employers Do NOT complete this section unless the employer sponsors a self-funded plan If employer provides insured coverage, insurance carrier will furnish this information to IRS and employees via Form 1095-B 18

19 Completing Part II of the Form 1095-C Part II: Information about coverage offered and enrollment > Completion of Lines 14 and 16 requires the use of specific codes > Line 15: Enter the employee share of the lowest cost monthly premium for self-only coverage Note: Employer is not required to report supplemental coverage (e.g., HRA) it provides to an employee if the employee is also covered by employer s medical plan 19

20 Completing Part II of the Form 1095-C Scenario: Qualifying offer made to employee in January and February, then employee terminates on March 28 (coverage terminates on same day) > Qualifying Offer - MEC provides MV and is affordable because it doesn t exceed 9.5% of the single FPL for employee only coverage ($1,100 for 2015 or $93/month) > Line 14 January and February, enter 1A March 1A not applicable, because offer of coverage must be for every day of month March December, enter 1H no offer of coverage Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

21 Completing Part II of the Form 1095-C > Line 15 no entry because 1A > Line 16 -January and February blank, because 1A on line 14 March 2B not a full-time employee and did not enroll or a full-time employee, but coverage ended before end of month April December 2A not employe Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

22 Alternative Method for Completing Form 1095-C Qualifying Offer Method Allows employer to furnish a general statement about the offer of coverage instead of furnishing a Form 1095-C (but still must file form with IRS) > Must certify made qualifying offer made to full-time employee, spouse and dependents, if any, for all 12 months > Enter 1A on line 14, leave lines 15 and 16 blank Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

23 Qualifying Offer Method General Statement Available if qualifying offer was made to a full-time employee for all 12 months and > Coverage was insured; or > Coverage was self-insured, but employee did not enroll If employer offers self-insured coverage and employee enrolled in the coverage, alternative method is not available > Must furnish Form 1095-C to employee Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

24 Qualifying Offer Method General Statement Provide statement containing > Employer name, address and EIN > Contact name and telephone number at which > Statement that for all 12 months, qualifying offer made to employee, spouse and dependents, if any, and, therefore, are not eligible for premium tax credit Information directing employee to see Publication 974 Premium Tax Credit Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

25 Qualified Offer Method Transition Relief For 2015 only, available if employer made qualifying offer for one or more months during year to at least 95% of its full-time employees (excluding those employees in a limited non-assessment period) > Enter 1A on line 14 for those months the employee received a qualifying offer, leave line 15 blank and enter 1I for months employee did not receive a qualifying offer Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

26 Qualifying Offer Method Transition Relief Available if qualifying offer was made to a full-time employee for all 12 months and > Coverage was insured; or > Coverage was self-insured, but employee did not enroll If employer offers self-insured coverage and employee enrolled in the coverage, alternative method is not available > Must furnish Form 1095-C to employee Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

27 Qualifying Offer Method Transition Relief Provide statement containing > Employer name, address and EIN > Contact name and telephone number at which > Statement that employee and his spouse and dependents if any, and, may be eligible for premium tax credit Information directing employee to see Publication 974 Premium Tax Credit Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

28 98% Offer Method Employer certifies that it offered affordable, MV coverage to at least 98% of its employees (exclude those in a limited non-assessment period) for whom it is filing a Form 1095-C and their dependents > Not required to identify which of its employees for whom it is filing were full-time employees Not required to complete Full-Time Employee Count in Part III of Form 1094-C, column (b) > Must be able to confirm for any employee for whom employer fails to file a Form 1095-C that the employee was not a full-time employee Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

29 Section 4980H Transition Relief for 2015 No shared responsibility payment > Applies to ALE member with full-time and full-time equivalent employees in 2014 > Enter code A in Authoritative Transmittal Form 1094-C, line 22, column E Calculation of assessable payment reduce number of full-time employees by employer s allocable share of 80 (instead of 30) > Enter code B in Authoritative Transmittal Form 1094-C, line 22, column E Note: Employer cannot claim both types of relief Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

30 Filing and Distribution Deadlines Form 1095-C and Form 1095-B > Furnish to each full-time employee by January 31 (for 2016, provide by January 31) by mail or hand delivery > If you prepare more than 250 Forms 1095-C in 2016 for coverage offered in 2015, you must file them electronically with the IRS on or before March 31 (you must register with the AIR Program, see Developers/Information-Returns/Affordable-Care-Act- Information-Return-AIR-Program for details) If not filed electronically, file by February 28 (for 2015 forms, file by February 29, 2016) Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

31 Filing and Distribution Deadlines Form 1094-C and Form 1094-B transmittal forms > File this form with the IRS with the Forms 1095-C or Forms 1094-B, as applicable, on or before March 31 for electronic filing Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

32 Filing Extension Automatic 30-day extension for filing with IRS is available if Form 8809 is filed by due date of applicable form > No signature or explanation is necessary 30-day extension may be requested for the furnishing of Forms 1095-B or 1095-C to employees > Signature and explanation letter is required > Not automatic Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

33 Waiver from Electronic Filing Requirement Waiver from requirement available if Form 8508 is filed with IRS at least 45 days prior to the due date Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

34 Contact Tiffany N. Santos, Esq. Trucker Huss, APC One Embarcadero Center, 12 th Floor San Francisco, CA (415) Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

35 Disclaimer These materials have been prepared by Trucker Huss, APC for informational purposes only and constitute neither legal nor tax advice Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship Anyone viewing this presentation should not act upon this information without seeking professional counsel In response to new IRS rules of practice, we hereby inform you that any federal tax advice contained in this writing, unless specifically stated otherwise, is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding tax-related penalties or (2) promoting, marketing or recommending to another party any tax-related transaction(s) or matter(s) addressed herein Copyright Trucker Huss, APC One Embarcadero Center, 12th Floor, San Francisco, California Telephone: Facsimile:

36 ACA Compliance for Employers Preparing for New 2016 Information Reporting Requirements October 6, 2015 Susan M. Nash Boston Bruxelles Chicago Düsseldorf Houston Londres Los Angeles Miami Milan Munich New York Orange County Paris Rome Silicon Valley Washington, D.C. Alliance stratégique avec MWE China Law Offices (Shanghai) 2011 McDermott Will & Emery. Les entités suivantes sont collectivement désignées "McDermott Will & Emery", "McDermott" ou "la Firme": McDermott Will & Emery LLP, McDermott Will & Emery AARPI, McDermott Will & Emery Belgium LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato et McDermott Will & Emery UK LLP. Ces entités coordonnent leurs activités via des contrats de prestations de services. McDermott bénéficie d'une alliance stratégique avec MWE China Law Offices, cabinet d'avocats distinct.

37 Preliminary Questions To be prepared to for ACA reporting, you ll need to: Determine if your organization is an applicable large employer. Determine the kind of health insurance coverage you offered to full-time employees and their dependents, if any; i.e. was it minimum essential coverage? Was it affordable? Did it provide minimum value? Identify who your full-time employees are for each month and track health coverage information in 2015 to help complete new IRS forms. 37

38 Employer Pay or Play Mandate Identifying Full-Time Employees (FTE) Definition of FTE: A common law employee who performs on average at least 30 hours of service per week (130 hours of service in a calendar month) IRS common law employee definition Tracking Hours - Must count actual hours worked, plus PTO, holidays, and other paid leave periods Does not matter how employer categorizes employees; individuals are either expected to be full-time or not. Employees must be classified into Full-Time; Part-Time; Variable; Seasonal; Special issues for Contract Workers/Staffing Agency Employees 38

39 Employer Pay or Play Mandate Counting hours for new employees» Newly hired employees expected to work a 30 hour per week schedule must be immediately eligible» Hours for new part-time or variable hour employees who are not expected to work a full-time schedule tracked and measured under the look-back measurement method Special rule for seasonal employees who work a full-time schedule Look-back measurement method can be used to determine eligibility for new seasonal employees who typically work for a period of six months or less that begins in approximately the same part of each calendar year, such as summer or winter Regulations provide specific rules for counting hours during unpaid FMLA, jury duty, and military leave periods and in rehire situations Special rules apply for employees that change status (e.g., from part-time to fulltime) 39 39

40 What You ll Need - Form 1095-C Who is a full-time employee for each month. Identifying information for employer and employee such as name and address. Information about the health coverage offered by month, if any. The employees share of the monthly premium for lowest-cost selfonly minimum value coverage. Months the employee was enrolled in your coverage. Months the employer met an affordability safe harbor with respect to an employee and whether other relief applies for an employee for a month. If the employer offers a self-insured plan, information about the covered individuals enrolled in the plan, by month. 40

41 What You ll Need to Report - Form 1094-C Identifying information for your organization. Information about whether you offered coverage to 70% of your full-time employees and their dependents in (After 2015 this threshold changes to 95%.) For the authoritative transmittal» Total number of Forms 1095-Cs you issued to employees. Information about members of the aggregated applicable large employer group, if any. Full-time employee counts by month; Total employee counts by month.» Whether you are eligible for certain transition relief. 41

42 Reporting Penalties Employers failing to file the Form 1095-C to report the required information under Code Sections 6055 or 6056 may be subject to the following penalties Failure to file correct information returns under Code Section 6721 Failure to furnish correct payee statement under Code Section 6722 Special rules and waiver of penalty may apply under Code Section 6724 (and applicable regulations) Penalties will not be imposed on employers who show they made a good faith effort to comply with the reporting requirements. E.g., employers filing returns in 2016 for coverage provided in 2015 with incorrect or incomplete information Any errors must be corrected timely to avoid penalties 42

43 Reporting Penalties The penalty for failure to file an information return generally is $250 for each return for which such failure occurs. The total penalty imposed for all failures during a calendar year cannot exceed $3,000,000. The penalty for failure to provide a correct payee statement is $250 for each statement with respect to which such failure occurs, with the total penalty for a calendar year not to exceed $3,000,000. Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to furnish a payee statement. 43

44 Exchange Notices Who is eligible for premium subsidies? Section 1411 Certifications (Exchange Notices) How/whether to respond to Exchange Notices 44

45 Premium Subsidies Individuals who purchase coverage on the public exchange may be eligible for assistance to receive a premium tax credit to pay for some of the premium (APTC) Household income must be in excess of Medicaid eligibility (100% or 138% of federal poverty level depending on whether state opted into expansion) and under 400% of the federal poverty level to qualify 400% of federal poverty level currently set at $95,400 for a family of four in 2015 based on 2014 federal poverty levels 45

46 Premium Subsidies Employer Health Coverage Can Affect Eligibility for Premium Subsidies An individual who is offered minimum essential coverage by their employer that is affordable and provides minimum value is barred from receiving any exchange subsidies Enrollment in employer s minimum essential coverage blocks subsidy eligibility regardless of whether it s affordable or provides minimum value 46

47 Premium Subsidies Additional cost-sharing subsidies (for deductibles, coinsurance, copayments) are available to individuals eligible for the premium tax credit who are under 250% of the federal poverty level and enroll in a Silver-level plan. The U.S. Supreme Court in King v. Burwell upheld subsidies obtained in federally facilitated exchanges 47

48 Premium Subsidies The exchanges make a determination when the individual enrolls as to whether the individual should receive an advance payment of the 36B premium tax credit Employees who are offered minimum essential coverage that is affordable and provides minimum value by their employer are not eligible for the 36B premium tax credit 48

49 Premium Subsidies Employees who are certified as eligible for the 36B premium tax credit in advance will have their exchange premiums reduced by the amount of the tax credit throughout the year (subject to employer appeal). If it turns out that they were not eligible for the 36B premium tax credit, they will have to pay some or all of the advanced amount back to the IRS. 49

50 Premium Subsidies For any tax year, if individual receives advance credit payments in any amount or plans to claim the premium tax credit, they must file a Form 8962, Premium Tax Credit (PTC) and attach it to federal income tax return for that year. If individual receives any advance credit payments, tax return is to reconcile the difference between the advance credit payments made on their behalf and the actual amount of the credit that they claim. 50

51 Section 1411 Certification Exchanges will contact employers to verify notify the employer that the employee has qualified for a premium subsidy on an exchange delayed to Spring of H(a) and (b) penalties triggered when employees receive premium subsidies or cost-sharing reduction as demonstrated by Section 1411 Certification from an Exchange Employer has a right to appeal a determination that an employee is eligible for advance payment of a premium tax credit or cost-sharing reduction 51

52 Section 1411 Certification Why Appeal? Prevents employee from incorrectly receiving advance payment of premium tax credit and having to pay it back when they reconcile on their individual tax return First chance for employer to prevent application of a potential 4980H penalty If appeal is successful and the employee does not receive a subsidy, the employee cannot trigger a penalty Employer has 90 days to appeal; can submit evidence that employee was offered coverage that was affordable and minimum value Separate appeal process for assessment of 4980H penalties 52

53 4980H IRS Appeals IRS will contact employers to inform them of a potential penalty, including appeal rights IRS will use the information from the employer s 6056 reporting (via the Forms 1094-C and 1095-C) to determine whether the employer may owe pay or play penalties (i.e., the A penalty or B penalty) The Forms 1094-C and 1095-C are not due to the IRS until March 31 of the year following the year in which the employer may be subject to penalties, and individuals don t have to file until April 15 IRS won t notify an employer of a potential penalty and the ability to appeal until April of the subsequent year or later 53

54 Best Practices Appeal 1411 Certifications Keep good records of FT/PT status, look back and measurement periods and offers of coverage to FTEs to support appeals and avoid penalties Make sure 1411 Certifications and IRS Appeals are routed to appropriate individual in the organization Document eligibility in Plan Documents and SPDs 54