5 Steps to Conquer the Affordable Care Act Employer Mandate. Prepared for Annual Government Contracting Seminar

Transcription

1 5 Steps to Conquer the Affordable Care Act Employer Mandate Prepared for Annual Government Contracting Seminar

2 Affordable Care Act ( ACA ) - BACKGROUND Before the passage of the health care reform legislation, all employers had complete discretion whether to offer health coverage. Tax laws incentivized employers to provide some type of health plan but there was no punishment for not providing health coverage. With the passage of the Affordable Care Act or "Obamacare" as it is commonly called, the rules have drastically changed.

3 5 Steps to Conquer the ACA Employer Mandate STEP 1 1. Understand if, and when, the employer mandate will apply. Are you an applicable large employer? Expiration of transition relief provisions Employee classification Tracking hours worked Measurement methods

4 Applicable Large Employer 50 to 99 Effective date delayed until or more Requirement effective in 2015

5 Full-Time Employee Average of at least 30 hours per week or 130 hours per month Consolidated group considered together Includes full-time equivalent employees

6 Full-Time Equivalent Hourly employees Actual hours of service Non-hourly employees Actual hours of service Days-worked equivalency Weeks-worked equivalency Seasonal Worker

7 Hourly Employees - EXAMPLE Month Part-time Hours FTE Full-time Employees Total 1 2, , , , , , , , , , , Total AVERAGE 58.00

8 Non-Hourly Employees - EXAMPLE Ktown Medical employs Jackie as a nurse. Jackie works three 12-hour shifts each week (i.e., 36 hours a week). Ktown Medical cannot use the days-worked equivalency method because under that method, Jackie would only receive credit for eight hours of service for each of the three days a week she works, which would understate her weekly hours of service as 24 hours, instead of the actual 36 hours of service a week (which is full-time).

9 Seasonal Worker - EXAMPLE Month Part-time Hours FTE Full-time Employees Total Month Seasonal Hours FTE Full-time Employees 1 1, , , TOTAL AVERAGE 51.00

10 Measurement Methods Monthly measurement method Look-back measurement method

11 Look-Back Method Measurement period Stability period Administrative period

12 Measurement Period - EXAMPLE Ktown Financial is an ALE that pays its employees based on a two-week payroll period that ends on Saturday. Ktown Financial can use either of the following periods as the standard measurement period and be considered to have used a one-year measurement period: Beginning December 29, 2013 (the beginning of the pay period that includes January 1, 2014), and ending on December 27, 2014 (the last payroll period ending before December 31, 2014). Beginning January 12, 2014 (the first pay period beginning after the pay period that includes January 1, 2014), and ending January 10, 2015 (the pay period that includes December 31, 2014).

13 Stability Period - EXAMPLE 12 Month Look-Back (Ongoing Employees) N D J F M A M J J A S O N D J F M A M J J A S O N D Standard Measurement Period Admin Stability Period Admin

14 Look-Back Period - EXAMPLE 12 Month Look-Back (New Variable Hour Employee Hired 4/15/14) N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D Standard Measurement Period Admin Stability Period Standard Measurement Period Admin Stability Period Initial Measurement Admin Initial Stability Period

15 5 Steps to Conquer the ACA Employer Mandate STEP 2 1. Understand if, and when, the employer mandate will apply. 2. Determine if current plans satisfy coverage requirements. Affordable Minimum Essential Coverage Minimum Value

16 ACA Key Concepts Coverage Requirements All Employees 30 hrs/ week Minimum Essential Coverage with at least 60% minimum value Eligibility Limitations < 9.5% of Household Income

17 Affordable Lowest cost-only coverage is not more than 9.5% of the employee s household income 3 Safe Harbors Form W-2 Safe Harbor Rate-of-pay Safe Harbor Federal Poverty Line

18 Form W-2 Safe Harbor - EXAMPLE Jim works full-time for Ktown Professional during all of calendar year Ktown Professional offers its employees and their dependents health insurance that provides minimum value for Jim's contribution for self-only coverage was $2,400 for the calendar year (i.e., $200 per month). Jim's 2015 Form W-2, box 1, wages from Ktown Professional were $36,000 (i.e., $3,000 per month). Since the $2,400 is less than 9.5% of Jim's wages from Ktown Professional ($36,000 x 9.5% = $3,420 > $2,400), Jim's coverage is considered affordable using the Form W-2 safe harbor.

19 Federal Poverty Line Safe Harbor - EXAMPLE Jim works full-time for Ktown Professional during all of calendar year Ktown Professional offers its employees and their dependents health insurance that provides minimum value for Jim's contribution for self-only coverage was $2,400 for the calendar year (i.e., $200 per month). Jim's 2015 Form W-2, box 1, wages from Ktown Professional were $36,000 (i.e., $3,000 per month). Since the $2,400 is less than 9.5% of Jim's wages from Ktown Professional ($36,000 x 9.5% = $3,420 > $2,400), Jim's coverage is considered affordable using the Form W-2 safe harbor.

20 Minimum Essential Coverage Includes all government and jobbased insurance and most private insurance Self-insured plans Does not include coverage providing only limited benefits, such as coverage only for vision or dental care

21 Minimum Value Pays, on average, 60% of the cost of covered services MV Calculator available at

22 5 Steps to Conquer the ACA Employer Mandate STEP 3 1. Understand if, and when, the employer mandate will apply. 2. Determine if current plans satisfy coverage requirements. 3. Evaluate coverage options. Effect on HRAs Use of wellness plans Other employer payment plans

23 Health Reimbursement Accounts Health Reimbursement Account (HRA): Paid solely by the employer Reimburses employee for qualified medical expenses Provides reimbursement up to max amount

24 Health Reimbursement Accounts Stand-alone HRA HRA without an employer-sponsored group health plan Do NOT meet ACA requirements Integrated HRA Considered to meet the annual dollar limit prohibition and preventative service requirements

25 Wellness Plans (excluding tobacco-reduction) Minimum value determined without regard to reduced cost-sharing available Must assume each employee fails wellness program requirements

26 Wellness Plans Tobacco-Reduction Programs Employers may determine minimum value and affordability taking into account certain rewards for wellness programs that reduce tobacco use Premium rewards (or penalties) may be taken into account in determining affordability

27 Other Employer Payment Plans Employer reimbursed employees for coverage purchased in the individual market Group health plans subject to ACA Generally provided tax-free to employee and tax-deductible business expense for employer Prohibited plan, subject to employer penalty

28 5 Steps to Conquer the ACA Employer Mandate STEP 4 1. Understand if, and when, the employer mandate will apply. 2. Determine if current plans satisfy coverage requirements. 3. Evaluate coverage options. 4. Report coverage.

29 Forms 1094 and 1095 Reporting Health insurance issuers must report health coverage details to the IRS and individuals ALEs must report to the IRS and employees if health coverage was offered and provide coverage details Self-insured employers must report health coverage details to the IRS and covered individuals

30 EMPLOYER TYPE Self-Insured Applicable Large Employer (ALE) FORMS TO FILE Form 1095-C. Complete Parts I, II, and III for each full-time employee. Fully complete only Parts I and II for each non-full-time employee covered under the self-insured plan (and only complete Line 14 of Part II). Form 1094-C. Complete Parts I, II, III, and IV. This form is used to summarize information and to transmit Form 1095-C to the IRS. Self-Insured Non- Applicable Large Employer Form 1095-B. Complete Parts I, II, III, and IV. This form is completed for each employee covered under the self-insured plan. Form 1094-B. Complete this entire form. This form is used to summarize information and to transmit Form 1095-B to the IRS. Fully-Insured Applicable Large Employer (ALE) Form 1095-C. Complete Parts I and II. This form must be completed for each full-time employee. Form 1094-C. Complete Parts I, II, III, and IV. This form is used to summarize information and to transmit Form 1095-C to the IRS.

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32 Forms 1094 and 1095 Reporting Deadlines Forms 1094-C and 1095-C for the 2016 calendar year are due to the IRS by February 28, 2017, if paper filing (or March 31 if filing electronically) Form 1095-C for the 2016 calendar year must be furnished to an employee by January 31, Must obtain affirmative consent to furnish electronically

33 Form W-2 Reporting Employers must report aggregate reportable cost of employer-sponsored group health coverage in box 12 of Form W-2 Employers who file fewer than 250 Form W-2 are excused from requirement under transitional relief Transitional relief will continue to apply until further guidance is issued

34 5 Steps to Conquer the ACA Employer Mandate STEP 5 1. Understand if, and when, the employer mandate will apply. 2. Determine if current plans satisfy coverage requirements. 3. Evaluate coverage options. 4. Report coverage. 5. Identify and quantify financial exposure under the ACA.

35 ACA Violations Penalties and Excise Taxes $100 per day, per individual, per violation for not complying with ACA group health plan reforms $1,000 per day for each willful failure to provide the summary of benefits and coverage $30 - $100 per Form W-2 for filing incorrectly, late and/or not filing $100 per return or statement for failure to file correct information returns (Form 1095) and furnish correct payee statements

36 Employer Coverage Mandate Penalties No minimum essential coverage (MEC) for substantially all full-time employees (and dependents ) Applicable large employer 50 or more full time employees (including FTEs for this purpose only) Determined on an IRC controlled group basis Offers MEC but it is either unacceptable or unaffordable $2,000* annually per total number of full time employees Exclude first 30 full time employees (for 2015 only, offset is 80 if ALE has 100 of more full time employees $3,000* annually per each full time employees that receives federal assistance from a public exchange Capped at level as if no minimum essential coverage offered * Indexed to medical inflation after 2014

37 5 Steps to Conquer the ACA Employer Mandate REVIEW STEPS 1. Understand if, and when, the employer mandate will apply. 2. Determine if current plans satisfy coverage requirements. 3. Evaluate coverage options. 4. Report coverage. 5. Identify and quantify financial exposure under the ACA.

38 Questions??

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