Category Archives: Affordable Care Act (ACA)

IRS Gives Employers a Welcome Christmas Gift

Contributed by Kelly Haab-Tallitsch, December 28, 2017

On December 22, 2017, the Internal Revenue Service (IRS) announced a 30-day extension of the deadlines for certain information reporting requirements under the Affordable Care Act (ACA).

In IRS Notice 2018-06, the agency announced a 30-day automatic extension — until March 2, 2018 — for employers and insurers to provide 2017 IRS Forms 1095-C (Employer-Provided Health Insurance Offer and Coverage) and 1095-B (Health Coverage) to employees. The original due date was January 31. This extension is virtually identical to the extension provided last year for 2016 Forms.

Despite the extension, the IRS encourages employers and other coverage providers to furnish the forms to individuals as soon as possible and states that due to the automatic extension, further extension beyond March 2, 2018 is not available.

Employers and insurers should be aware that although the due date to furnish forms to individuals has been extended, the due date to file the forms with the IRS was not extended and remains February 28, 2018 for paper filers, or April 2, 2018, if filing electronically.

Notice 2018-06 also extends the prior good-faith transition relief from certain penalties related to the 2017 information-reporting requirements. Relief from penalties for incomplete or inaccurate information reported on a 1095-C or 1095-B is available to employers or insurers that can show they made a good faith effort to comply with the requirements. No relief is available for entities that fail to furnish the forms to employees by the due date or fail to file the forms with the IRS.

Employers should be ready for questions from employees who do not receive their Forms 1095-B or 1095-C by the time they are ready to file their 2017 individual income tax return. Although the forms contain information that can be helpful when preparing a tax return, they are not required to file an individual income tax return. Notice 2018-06 explains that individual taxpayers can prepare and file their returns using other information about their health coverage. Individuals do not have to wait for Forms 1095-B or 1095-C.

To address employee questions head on employers should consider a proactive communication to employees. Such a communication should:

  • Provide the expected timeframe for distribution of the Forms 1095-B or 1095-C;
  • Remind employees the forms are not required to file an individual tax return; and
  • Provide information on employer-sponsored health coverage to assist employees in preparing their returns, such as whether the coverage provided was minimum essential coverage under the ACA.

ACA Employer Mandate Penalty Letters Coming Before Year-End!

Contributed by Kelly Haab-Tallitsch, December 7, 2017

With only 30-days to respond, employers should be watching their mail for Affordable Care Act (ACA) employer mandate penalty letters (IRS Letter 226J), coming before the end of 2017.

Recent updates to the “Questions and Answers on Employer Shared Responsibility Provisions (ESRPs) Under the Affordable Care Act” on the Internal Revenue Service (IRS) website indicate the agency is gearing up to begin enforcement of the ESRP provisions of the ACA, commonly known as the employer mandate. According to Q&As 55-58, “Making an Employer Shared Responsibility Payment,” the IRS will start sending penalty notices in “late 2017” to employers whom the IRS believes may owe penalties for not complying with the ACA employer mandate in 2015. Penalties will be proposed and assessed via Letter 226J.

The determination of whether an employer is liable for a penalty and any proposed amount is based on the information reported to the IRS on Forms 1094-C and 1095-C and information on which full-time employees received a premium tax credit. The 2015 information reporting process was not without problems and it is possible employers who complied with the employer mandate may receive IRS 226J letters due to reporting errors or other issues.

Employers have the opportunity to respond to a Letter 226J within 30 days, prior to official assessment of liability and demand for payment.

I received a Letter 226J…Now What?

  1. Review the letter and enclosed information carefully. Letter 226J will include information showing your proposed penalty by month and a listing of employees that received a premium tax credit.
  2. Compare with your records. Review the Forms 1094-C and 1095-C you filed for 2015, and other relevant records.
  3. Complete and return the Form 14764 included with your Letter 226J within 30 days. Include any supporting documentation.
    • If you agree with the IRS’s penalty determination:
      • Complete Form 14764 indicating your agreement.
      • Include payment for the penalty (or pay electronically). If you do not pay the entire penalty amount, the IRS will issue a Notice and Demand for payment.
    • If you disagree with the IRS’s penalty determination:
      • Complete Form 14764 indicating your disagreement.
      • Include a signed statement explaining why you disagree with part or all of the proposed penalty.
      • Include any documentation supporting your statement (i.e. date of employment termination records, proof of offer coverage or premium amounts).
      • Make changes, if any, to the Employee PTC Listing enclosed with your Letter 226J and submit with Form 14764.
  4. The IRS will acknowledge your response with a Letter 227 describing any further actions you may need to take.
  5. If, after receipt of Letter 227, you still disagree with the proposed or revised penalty, you may request a pre-assessment conference with the IRS Office of Appeals within 30 days. Instructions on requesting a pre-assessment conference will be included in the Letter 227. Upon receipt of your request, the IRS will contact you to arrange the time and place of the conference. According to IRS Publication 5 “Your Appeal Rights and How To Prepare a Protest If You Don’t Agree,” conferences with Appeals Office personnel are held in an informal manner by correspondence, by telephone or in-person.

Bottom Line

Failure to timely respond to a Letter 226J can result in steep penalties for employers – even those who complied with their responsibilities under the ACA. Be sure to closely watch your mail this holiday season.

Premium Reimbursement Plans No Longer Off the Table for Small Employers

Contributed by Kelly Haab-Tallitsch, March 31, 2017

Small employers struggling to assist their employees with the cost of health coverage, but daunted by the high cost of a group health plan, now have another option.

Stethescope and money

Stethoscope and money 

The 21st Century Cures Act, passed at the end of 2016, created a new type of reimbursement plan called a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). QSEHRAs allow eligible small employers to reimburse employees for premiums for individual health insurance policies and other eligible medical expenses. This is a change, as since the implementation of the Affordable Care Act (ACA), employers of all sizes have been unable to reimburse employees for the purchase of individual health coverage without facing stiff penalties. QSEHRAs may be an attractive option for small employers that qualify.

Who can offer a QSEHRA?

QSEHRAs may only be offered by employers that:

  • are not Applicable Large Employers (ALEs) under the ACA, defined as those with fewer than 50 full-time equivalent employees in the prior year, on a controlled group basis, and
  • do not currently offer a group health plan to employees, including vision or dental plans.

How does a QSEHRA work?

Employers determine the amount they wish to contribute to employees’ accounts, up to annual IRS limits ($4,950 for an individual or $10,000 for family coverage) and must pay the full cost of the benefit – no employee contributions are allowed. Employees may receive reimbursement on a pre-tax basis from a QSEHRA for documented medical expenses under IRC Section 213(d) incurred by the employee or the employee’s family members, such as co-pays, health insurance premiums, deductibles, dental and vision expenses. Depending on how the QSEHRA is set up and the amount of the employer’s contributions, employees may be able to carry over unused funds from one year to another; however, the total amount of reimbursement permitted in a given year is capped at the annual IRS limits ($4,950 for an individual or $10,000 for family coverage).  For employees participating in a QSEHRA for less than a full calendar year, the maximum reimbursement amount is prorated.

A QSEHRA must be offered to all full-time employees, with a handful of limited exceptions. Such exceptions include employees covered by a collective bargaining agreement, under age 25, and certain nonresident aliens.

Other Considerations

QSEHRAs are subject to certain administrative and ERISA requirements, including substantiation requirements, W-2 reporting, and written plan documents, including summary plan descriptions. Generally, written notice of the availability of the QSEHRA containing specific information must be provided to employees at least 90 days before the beginning of the plan year and upon eligibility for new hires.

The value of benefits provided under a QSEHRA is taken into account in the determination of an individual’s eligibility for premium subsidies or tax credits for purchase of individual policies.

Can you still offer a QSEHRA for 2017?

Yes! The IRS has waived the notice deadline for QSEHRAs that begin in 2017, until further guidance is issued. As a result, it is not too late to adopt a QSEHRA for 2017.

Final Rule on Health Plan Nondiscrimination

Contributed by Rebecca Dobbs Bush, March 21, 2017

Although bathroom use seems to be at the forefront with the media in regards to transgender issues; there are several other issues to consider, and the final rule on health plan nondiscrimination is no exception. Transgender related health services tend to deal with gender dysphoria, a medical condition where an individual’s gender identity is different from the sex assigned to that individual at birth.

12837750 - stethoscope wrapped around health insurance policies, soft focusThe final regulations implementing Affordable Care Act (ACA) Section 1557 is applicable to plan years beginning on or after January 1, 2017. Within the final rule, the following prohibitions apply to covered entities, such as insurance companies and insurance marketplaces:

  • A plan may not impose additional cost sharing on the basis of race, color, national origin, sex, age or disability. Such discrimination is also prohibited if based on the fact that an individual’s sex assigned at birth, gender identity, or gender otherwise recorded is different from the one to which such health services are ordinarily or exclusively available;
  • A plan may not have or implement a categorical coverage exclusion or limitation for all health services related to gender transition; or
  • Otherwise deny or limit coverage of a claim, or impose additional cost sharing or other limitations or restrictions on coverage for specific health services related to gender transition if such denial, limitation or restriction results in discrimination against a transgender individual.

In short, transgender related health services would need to be on par with other covered services to avoid claims of discrimination.

While employers are generally not “covered entities” and are not directly mandated to comply with the final regulations, the regulation affects insurance companies that market and sell health plans to employers. Some states, such as Illinois, have already incorporated requirements in their Insurance Code mandating coverage of transgender related services.

In any case, whether offering an insured plan or a self-insured plan, employers should give consideration to providing some level of additional transgender related benefit coverage to avoid potential claims of discrimination from participants or investigations from the EEOC. The Office of Civil Rights (OCR) has indicated that complaints of discrimination, such as plan design based discrimination, against non-covered entities (such as employers) will be referred to the EEOC as they will be outside the scope of the final regulation. For most employers, the employee population will provide a very low instance of those seeking to utilize coverage for transgender related services. With this in mind, the potential plan cost may be equivalent or less than the cost of defending a claim of discrimination, making it economical to incorporate such coverage in a plan. It remains to be seen whether employers will be able to avoid compliance on the basis of moral or religious reasons and whether any changes will be made by the newly elected administration.

President Signs Executive Order on the Affordable Care Act

Contributed by Kelly Haab-Tallitsch, January 23, 2017

56033703 - words affordable care act  aca written on a paper.Shortly following his inauguration on Friday, President Trump signed an Executive Order affirming his intent to eliminate the Affordable Care Act (ACA). The executive order is not a repeal of the ACA and does not make any changes to the law or regulations thereunder, but rather addresses the actions of federal agencies in enforcing the existing law. The executive order directs the agencies responsible for overseeing ACA enforcement (Health and Human Services, Treasury Department, and Department of Labor) to, “take all actions consistent with the law to minimize the unwarranted economic and regulatory burden of the act” and “prepare to afford the States more flexibility and control to create a more open healthcare market.”

Specifically, the executive order directs the agencies to exercise the maximum discretion and authority available to them under the law to waive, defer, grant exemptions from or delay implementation of any provision of the ACA that imposes a cost, fee, tax or penalty.  It is unclear exactly how much discretion the agencies have with respect to many ACA provisions; however, this is a clear message that they have been instructed to identify ways to lessen the law’s impact during the interim period as lawmakers work towards an appeal.

What Does This Mean for Employers?

It’s too early to tell how or when employers will be impacted. The executive order did not actually change anything, but rather signaled the intent to make changes. Until further guidance is issued by the federal agencies, employers should continue compliance with all applicable ACA provisions. While the Trump administration appears committed to swift action on the ACA, we would not expect further information until the new heads of Health and Human Services, Treasury Department and the Department of Labor are in place.

We will continue to monitor developments on the ACA and provide additional information as it becomes available.

ACA Information Reporting Deadlines Extended by the IRS

Contributed by Kelly Haab-Tallitsch

Late yesterday afternoon, the Internal Revenue Service (IRS) announced it was extending the due dates for certain 2015 Affordable Care Act (ACA) information reporting requirements. The welcome delay gives employers almost two additional months to furnish statements to employees and close to three additional months to file required returns with the IRS.

Specifically, Notice 2016-4 extends:

  • the due date for providing individual Forms 1095-C and 1095-B to clock and calendaremployees from February 1, 2016, to March 31, 2016
  • the due date for filing Forms 1094-B, 1094-C and 1095-C with the IRS from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically

Previous posts covering the ACA information reporting requirements for employers can be found here and here.

How does the extension impact employees?

The IRS is also providing relief to employees who receive their Form 1095-C or Form 1095-B after they have filed their individual tax returns.  Individuals are required to furnish information from their Form 1095-C or Form 1095-B with their individual tax returns to determine eligibility for the ACA premium tax credit and demonstrate compliance with the individual mandate to maintain qualified health coverage.  According to the Notice, individuals who rely upon other information received from employers or health coverage providers about their coverage, or offers of coverage when filing their 2015 income tax returns, will NOT be required to amend their return once they receive their Forms 1095-C or 1095-B.  As such, employers should not be concerned that providing the Forms 1095-C on the extended timeline will require employees to file amended 2015 income tax returns.

What if an employer fails to meet the new deadlines?

In light of the extended due dates, the IRS states that requests for additional extensions of time to furnish individual statements and or file information returns will not be granted.  Employers that fail to meet the extended due states are still encouraged to comply and the IRS states that it will take such filing and furnishing of statements into account when determining whether to abate penalties for reasonable cause. Additionally, the IRS will take into account whether an employer made reasonable efforts to prepare for reporting for 2015 and the extent to which the employer is taking steps to ensure that it is able to comply with the reporting requirements for 2016.

 

“Cadillac Tax” on Health Plans Delayed Until 2020

Contributed by Kelly Haab-Tallitsch

Employers are receiving a temporary reprieve from the controversial “Cadillac Tax” on health plans as part of a large spending and tax bill signed into law by President Obama on Friday, December 18, 2015. The Consolidated Appropriations Act (the “Act”) delays the effective date of the Affordable Care Act’s (ACA’s) excise tax on so-called high cost health plans, known as the “Cadillac Tax,” until January 1, 2020.

The Cadillac Tax, previously scheduled to take effect on January 1, 2018, is a 40% excise tax on employers and insurers who offer health insurance plans that exceed specified high-cost limits ($10,200 for individuals and $27,000 for families for 2018). The 40% tax applies to the cost of the plan above these thresholds.

In addition to the delay, the Act makes the Cadillac Tax a tax-deductible expense for employers, somewhat cushioning its impact. The Act also calls for an examination of suitable benchmarks to be used for the adjustment of the excise tax thresholds in future years.

The delay comes after mounting criticism of the Cadillac Tax from employers, insurers, labor unions and lawmakers. Critics argue that the tax, which was expected to affect an estimated 25% to 30% of employers in 2018, and as many as 50% within the next 10 years, unfairly penalizes employers and unionized workers and will ultimately lead to employees paying more out of pocket for medical expenses.

What Does this Mean for Employers?

While opponents of the Cadillac Tax are citing the delay as the first step towards a repeal of the tax, employers must remain cautious and plan for the tax to be implemented in 2020. Employers should continue evaluating the costs of the health coverage offered to their employees and begin to consider alternatives to reduce exposure to the tax in 2020. Additionally, employers should review the accounting consequences of the now deductible Cadillac Tax.