ACA UPDATE David C. Smith EbenConcepts Company Benefits Experts March 17, 2016
USDOL Audit Five Page list of compliance items Presented two three-inch binders to USDOL auditor Ninety minute interview with auditor and client Completed review by 5:00 pm Wednesday Client feedback: We greatly appreciate you and your staff s assistance in the matter. You ve done excellent work. I can t imagined having that interview without you.
Changes for 2016 2015 Poverty Levels for 2016 eligibility determinations Household Size 100% 200% 250% 300% 400% 1 $11,770 $23,540 $29,425 $35,310 $47,080 2 $15,930 $31,860 $39,825 $47,790 $63,720 3 $20,090 $40,180 $50,225 $60,270 $80,360 4 $24,250 $48,500 $60,625 $72,750 $97,000 5 $28,410 $56,820 $71,025 $85,230 $113,640 6 $32,570 $65,140 $81,425 $97,710 $130,280 7 $36,730 $73,460 $91,825 $110,190 $146,920 8 $40,890 $81,780 $102,225 $122,670 $163,560
2017 Changes 2017 open enrollment period would be from November 1, 2016 to January 31, 2017 Standard plan options for the federal exchange would increase to six levels: Existing: bronze, gold, standard silver New: three other plan options at various actuarial values of 73%, 87%, and 94% Note elimination of Platinum standard.
Employer Reporting Requirements One central requirement on certain employers under the Affordable Care Act is to provide annual reporting to employees and the IRS Forms and reporting varies by size of employer Fully-Insured Self-Funded EEs IRS EEs IRS 1-49 FTEs 50 or more FTEs Carrier 1095-B 1094-B n/a n/a Employer none none 1095-B 1094-B Carrier 1095-B 1094-B n/a n/a Employer 1095-C 1094-C 1095-C 1094-C
Employer Reporting Requirements Why is this so important? Regulators are most concerned about two things: Has employer complied with the ACA mandate to offer coverage? Is the employee receiving premium subsidies when you shouldn t? Why do you care? They are viewing the responsibility to provide these reports as essential as providing W-2 and W-3 reports on income You don t want to pay penalties
Penalties Increased under provision buried in recently adopted law passed by Congress and signed by President Failure to provide 1095-C to full-time employees: $250 per EE Failure to transmit 1094-C to IRS: $250 per form Intentional disregard for filing obligation: $500 per form Max penalty per employer increased to $3M (from $1.5M)
Employer Reporting Requirements What this is not: W-2 Reporting Payroll providers discuss helping their clients with preparing these reports Less than 25% of information needed to provide 1094/1095 reporting has any connection to payroll
Line 14 Offer of Coverage Code - taken from the Series 1 Codes for each month
Line 14 Series 1 Codes Code 1A 1B 1C 1D 1E 1F 1G 1H 1I Representation MEC/MV offered to full-time employee that is affordable using the FPL Safe Harbor (employee rate of $92.39 per month or less), and MEC offered to spouse and dependents MEC/MV offered to employee only MEC/MV offered to employee, and MEC offered to dependents (not spouse) MEC/MV offered to employee, and MEC to spouse (not dependents) MEC/MV offered to employee, and MEC to spouse and dependents MEC without MV offered to employee or any combination of employee, spouse and dependents SELF-FUNDED ONLY: Offer of coverage to employee who was not a full-time employee for any month and who enrolled in coverage for one or more months (e.g. part-time employee, COBRA participant, retiree) No offer of minimum essential coverage Qualifying Offer Transition Relief Employee (and spouse or dependents) received no offer of coverage, an offer that is not a qualified offer, or a qualified offer for less than 12 months
Line 15 Provide the employee share of the lowest cost monthly premium option that provided minimum value. Note: Line 15 need only be completed if Series 1 Codes 1B, 1C, 1D, or 1E was entered for Line 14 in the All 12 Months column or any of the monthly boxes If the employee share was the same for all 12 months, only enter the amount in the all 12 months box. Note: this will typically only be the case for a calendar year plan If the employer funds 100% of the health cost for the employee, enter $0.00 in the All 12 months box
Line 16 For each applicable month (or for all 12 months, if appropriate), enter a selected code from the Series 2 Codes.
Line 16 Series II Codes Code 2A 2B 2C 2D 2E 2F 2G 2H 2I Representation Employee not employed during the entire month (did not work a single day) Employee not a full-time employee that month or if coverage ended during the month Employee enrolled in coverage offered for the entire month (if so, this is the only code that need be selected in Series 2) Employee in a limited non-assessment period: waiting period, measurement period, variable hour employee Multi-employer interim rule relief (not common) Form W-2 Affordability Safe Harbor (if waiving coverage) FPL Affordability Safe Harbor (if waiving coverage) Rate-of-Pay Affordability Safe Harbor (if waiving coverage) Non-Calendar-Year Transition Relief applies to this employee
COBRA Continuants COBRA continuants: 1H on Line 14, Code 2A on Line 16 for any month COBRA was offered (for self-funded & fully insured)
Example #1 Joe hired May 15, 2015 and full-time at hire 90 day waiting period and employer allows spouses & children Joe enrolls effective August 10, 2015 Joe quits on October 20, 2015 1H 1H 1H 1H 1H 1H 1H 1A 1A 1A 1H 1H 2A 2A 2A 2A 2D 2D 2D 2C 2C 2B 2A 2A
Example #2 Wendy hired February 21, 2015 and is part-time at hire On April 10, becomes full-time employee, and fulfills waiting period on May 31 st (first of the month after 30 days) Employer offers coverage to Wendy and her children (spouses are not eligible) but she waives coverage 1H 1H 1H 1H 1H 1C 1C 1C 1C 1C 1C 1C 118 118 118 118 118 118 118 2A 2B 2B 2D 2D 2F 2F 2F 2F 2F 2F 2F A C A R E P O R T I N G
IRS Threat Issued IRS representatives indicated during December 2 payroll teleconference that penalty relief would not necessarily be granted for failure to file 2015 ACA returns just because filers don t have sufficient electronic systems. Penalty relief for failing to properly file 2015 ACA returns in 2016 was intended for those that made a good-faith effort to comply with the ACA and filed the forms Not for those that were unable to file the forms Martin Pippins, Director for customer service and stakeholder relations, IRS's ACA compliance office
ACA Reporting Extension 1095-B and 1095-C Form Deadline is pushed from February 1, 2016 to March 31, 2016 1094-B and 1094-C Transmittal deadline are also extended based on how filed: Paper: New deadline is May 31, 2016 Electronic filing: New deadline is June 30, 2016
Employee Confusion 1095-C Form Not Required to File Taxes One of the requirements created by Obamacare is notice about your health care coverage. This new form called the 1095-C is something that is being prepared for employees of EMPLOYER NAME in the next few weeks. The deadline to send these forms was extended to March 31 but this form is not required for you to file your 2015 taxes. If your tax preparer says you must have this form to file your income taxes for 2015, remind them that the IRS has said on its website last month: While the information on these forms may assist in preparing a return, they are not required. Individual taxpayers will generally not be affected by this extension and should file their returns as they normally would.
Counting Policies Federal rules require these policies so that they can verify eligibility rules and should be included by reference in wrap plan document
Counting Hours when on Disability Hours that an employee is out on disability benefits usually count toward hours of service for ACA purposes if: Recipient of disability payments is still an employee (not terminated) Disability insurance premiums paid by employer (all or part) or by employee on pretax basis Exception: Employee out of work due to work-related injury (and receiving workers comp wage replacement benefits) are not hours of service What counts? Each hour is counted even if employee is receiving less than 100% of regular compensation
Explanation: MEC & 4980H Some vendors claim that offering only minimum essential coverage (MEC) plan will save employer from ACA penalties since they will be offering them coverage False: Consistent with guidance, only offering a MEC plan will not get the employer out of employer mandate to offer coverage, nor does it meet the minimum value standard
Cadillac Tax Reform Cadillac tax delayed until 2020 Ongoing efforts to completely repeal tax or revise to meet much higher standard than current ($10,800 for employee only, $27,500 for family coverage) President s budget proposed changing Cadillac tax from cost per year to plans above a certain actuarial level (80% AV) and also adjusting by region Expect more discussion on this issue in the coming months, but for it to be repealed
Penalties increase each year Employer Shared Responsibility (Employer Mandate) Penalties increase each year based on inflation Not Offer Coverage Unaffordable or Non-MV 2014 $2,000 $3,000 2015 $2,080 $3,120 2016 $2,160 $3,240 2017 $2,260 $3,390
Auto-Enroll Mandate Repeal Included in Boehner-Obama Budget compromise Resolves an outstanding concern for many large sized employers nationwide
Changes for 2016 PCORI Fee: $2.08 for groups who renew before October 1, 2015 $2.17 for groups who renew October 1, 2015 through September 30, 2016 Unaffordable: 9.5% (groups) vs. 9.66% (individual)
Veterans Excluded for ALE Count Veterans can be disregarded solely for the purpose of determining whether an employer is an applicable large employer (ALE) under a recent change. An employee is not taken into account for the ALE determination for any month that he or she has medical coverage provided by any of the uniformed services (including TRICARE) or under certain Veterans Affairs (VA) health care programs. The exemption applies for months beginning after December 31, 2013.
Veterans Excluded for ALE Count Impact: Only those employers who will drop below 50 FTEs if these veterans covered by other programs are excluded Does not impact eligibility or penalties Employer will be required to have a process for identifying these individuals and to collect proof of other coverage
Seasonal Worker vs. Employee Seasonal Workers matter for ALE determination only If employer has 50+ FTEs for 120 or fewer days due to seasonal workers, then employer is not an applicable large employer Seasonal Employees are relevant for eligibility only Even if they average 30+ hours per week, seasonal employees are not eligible for benefits if they are hired during the properly designated season But if they become regular employees, treated like FT/PT/VHE
Spousal Reimbursement HRAs An employee may be reimbursed by an employer-sponsored standalone HRA (on a tax-free basis) for premiums paid by the employee s spouse for either the employee only (as the spouse s dependent) or the employee and the spouse under a health plan maintained by the spouse s employer. Employers who do this must issue a 1095-C to the employee
Spousal Reimbursement HRAs Reimbursements are tax-free only if the spouse paid those premiums on an after-tax basis This is an important limitation, because most employees pay their health premiums on a pre-tax basis (through a Code Section 125 cafeteria plan). Workaround: An integrated HRA might be designed to reimburse an employee for medical expenses described in Code Section 213(d) other than medical premiums that were paid on a pre-tax basis but with the amount of those reimbursements determined by reference to the premiums paid for coverage under a health plan maintained by a spouse s employer (regardless of whether those premiums were paid on a pre-tax or after-tax basis).
Regulatory Clarifications Wellness impact on affordability determination Under the Final rule, affordability is based on the noncompliant cost of coverage, except with respect to certain requirements related to the use of tobacco. Affordability determinations for a plan that charges a higher premium to tobacco users is based upon the premium and cost sharing charged to non-users.
Impact of Affordability Example: Employer charges more to employees who don t complete HRA and to tobacco-users Cost per pay period Tobacco User Non-Tobacco User Complete HRA $100 $50 Did Not Complete HRA $150 $100 How affordability determined by employee depends: Initial: Pre 5/3 Initial: Post 5/3 Final Regs all gps Completed HRA, non-tobacco $50 $50 $50 Did not complete HRA, non-tobacco $100 $100 $100 Completed HRA, tobacco user $100 $100 $100 Did Not Complete HRA, tobacco user $150 $150 $150
EE Contributions Minimum Amount Employee pays 9% of gross wages for EE Only Coverage, but has a weekly minimum of $21.86 Gross paycheck 9% Gross Wages Amount Withheld Safe Harbor $1,000 $90 $90.00 W-2 Box 1 $500 $45 $45.00 W-2 Box 1 $200 $18 $21.86 Fed Pov Level
Regulatory Clarifications Affordability with cash in lieu of benefits scenarios Employer offers option to employees: taxable income (e.g. $100 per month) to an employee solely based on not enrolling in employer s plan (not when covered on a spouse s group health plan or other coverage) enroll in coverage and pay $100 per month (before or after tax) for employee-only coverage Affordability determination based on $200 per month employee contributions for EE-only coverage Effective 2/1/2016 and after (no impact on 2015 reporting)
Regulatory Clarifications Adjustments to 9.5% Affordability Standard Guidance issued in IRS Notice 2015-87 says that affordability indexing applies to all provisions under Code 4980H and 6056, including the three 4980H affordability safe harbors IRS intends to amend the associated regulations; in the interim, employers may rely on the indexed percentages 2015: 9.56% 2016: 9.66%
2017 Changes Out of Pocket Maximum expected to increase to $7,150 for individual, in-network benefits with a family maximum of $14,300 (2x for out-of-network) Proposed rule would change standards for income verification from 10% predicted level from the trusted data source (tax return) to 20% variation or $5,000 Expected 2017 penalty for non-compliance to rise to $2,260 for 4980H(a) non-offer penalty and $3390 for 4980H(b) unaffordable/non-mv penalty
2017 Changes 2017 open enrollment period would be from November 1, 2016 to January 31, 2017 Standard plan options for the federal exchange would increase to six levels: Existing: bronze, gold, standard silver New: three other plan options at various actuarial values of 73%, 87%, and 94% Note elimination of Platinum standard.
New SBCs Coming Final rules released yesterday Apply for 1/1/2017 renewals Requires weblink to individual policy/group certificate
MSP Data Matching Letters Four clients got requests to provide information about potential Medicare Secondary Payer issues last week Highlights a broader effort to identify potential situations where employees are enrolled on Medicare primary when CMS thinks they should be on a group health plan Working on piece to provide to employers about this critical issue that requires very specific responses
Medicare Reimbursements Remember the following: No Medicare reimbursements if 20 or more employees not FTEs or other fractional employee counting Notice 2015-17 allows this type of reimbursement if: Group health plan in place for full-time employees Medicare eligible and enrolled employee is also eligible for group health plan Reimbursed as alternative to being enrolled in group health plan
Joint Employer Guidance USDOL Wage & Hour Division issued new Administrator s Interpretation last week on joint employers, mainly targeting temp services providers and PEOs DOL states that definition of "employ" is "expansive," and should be construed to be "as broad as possible." At any given time and for any given employee, there may be multiple entities that qualify as "employers" of that employee. When this occurs, the two entities are "joint employers."
Joint Employer Guidance Impact of AI: Employers are responsible for ensuring that all of their employees are properly paid. In many cases this includes workers who are employed indirectly or by a third party, such as temps or workers employed by a contractor or PLA. Employers can be liable for a vendor's screw-up. If temporary staffing agency isn't paying minimum wage, or isn't paying people overtime at the proper overtime rate for all hours worked over 40 in a single workweek, it will impact the employer too. Employers who use staffing firms, temp agencies, employee leasing arrangements, etc., need to carefully look at the legal documents establishing these relationships. Before any workers set foot on worksite, insist on language in agreement expressly delegating responsibility for wage and hour compliance to the vendor and obligating vendor to indemnify and defend employer if they fail to pay people as legally required. Doesn t stop from being sued, but at least an indemnity clause gives employer a better chance of recovering any resulting expenses.