affordable care act employer provisions chapter 11 pp. 411 - 463 2015 national income tax...

Affordable Care ActEmployer Provisions

Chapter 11 pp. 411 - 463

2015 National IncomeTax Workbook™

pp. 412-413

Types of Health Coverage Minimum Essential Coverage (MEC)

▪ Individual must have▪ Large employer must provide to full-time EEs

Excepted Benefits: Not = MEC ▪ Will not satisfy employer mandate▪ Will not satisfy individual mandate

2

pp. 412-413

Types of Health Coverage – MEC

Eligible employer plans Individual state Marketplace plans Certain Government plans Grandfathered plans Coverage recognized by HHS

3

Types of Health Coverage pp. 413-414

Excepted Benefits

Always Excepted Benefits – listed p. 413

Limited Excepted Benefits ▪ FSA▪ Limited-scope dental or vision benefits▪ Benefits for long-term care/nursing home▪ Employee Assistance Program (EAP)▪ Noncoordinated and supplemental▪ Wraparound Coverage

4

Types of Health Coverage p. 414

Excepted Benefits

Wraparound Coverage – Pilot Program▪ Offer coverage no earlier than 1/1/2016▪ Offer coverage no later than 12/31/2018▪ Coverage to end 3 years after 1st offered▪ Annual reporting requirements▪ Wraparound eligible individual coverage

or coverage in a multistate plan

5


Excepted Benefits Wraparound Coverage – Individual

▪ Eligible individuals

• Cannot be in health FSA

• Limited to part-time EEs or retirees

• Can cover spouse/dependents

• ER must offer full-time EEs coverage substantially similar to ACA coverage

6


Excepted Benefits Wraparound Coverage –Multi-state Plan

▪ Coverage must be approved by OPM▪ Provides benefits in conjunction w/ multistate plan▪ In 2013 & 2014 Employer

• Offered coverage substantially similar to ACA required offers to full-time in 2015

• Offered affordable, minimum value coverage to “substantial portion” of full-time

▪ Annual employer payments for primary and wraparound coverage ≥ 80% of 2013 or 2014 $

7

p. 415

ACA Employer Timeline -2015

Employer & insurer reporting required▪ All large ERs & small ERs if self-insured

No ESRP for some ERs with 50 – 99 FTEs Excise tax relief

▪ Small employers through 6/30/15▪ For health care arrangements re: 2% S

corp S/H through 12/31/15

p. 416

ACA Employer Timeline - 2016

Employer & insurer reporting required▪ All large ERs & small ERs if self-insured

ESRP could apply to all ALEs Excise tax relief

▪ For health care arrangements re: 2% S corp S/H if no guidance issued yet

SHOP available to ERs with ≤ 100 FTEs▪ 2015 PACE Act: 100 to be State decision

p. 417

Whistleblower Protection

§ 1558 of ACA expands protection to EEs who Received a PTCProvided/will provide info relating to any act or omission employee believes violates ACATestified/will testify regarding such violationAssisted/participate in related proceedingObjected to/refused to participate in activity EE believes to be in violation of any part of ACA

p. 417


Prohibited ActsDemotion or reassignment to less desirable jobDenial of overtime, benefits, promotionHarassment, intimidation, threatening behaviorReduction in pay or hoursWrongful discharge/termination

p. 417


Effects on EmployerAdverse OSHA determination – reinstate, back pay w/interest, damages, related feesSubstantial ESRP penalty

▪ Financial reward to EE of 15% to 30% of collected ESRP

Practitioner Note: Staff Education a Must!

p. 418Employer Shared Responsibility Payment

(ESRP)

Applicable large employer (ALE) liable if ≥ 1 full-time employee (FT EE) gets premium tax credit (PTC)

AND

ALE did not offer MEC to FT EEs or offers MEC to < 95% of FT EEs and dependents

or

MEC not affordable, w/o minimum value (MV), or MEC not offered to FT EE getting PTC

2015 Transition Relief pp. 418-419

50-99 Employee Relief

No potential ESRP in 2015 if▪ FTEs in 2014 were at ≥ 50 < 100▪ No reduction in # of EEs or EE hours

from 2/9/14-12/31/14 ▪ No elimination or material reduction in

coverage offered 2/9/14-12/31/14 Applies to plan years beginning in 2015



Not considered elimination or material reduction in coverage if:▪ ER contributions ≥ 95% of $ or ≥ %

of cost paid on 2/9/14▪ Benefits changed but still MV▪ Class of EEs covered not narrowed or

reduced from those covered 2/9/14



Relief applies to all months of a plan that begins in 2015 (includes those in 2016)

If qualifies for relief, still an ALE in 2015 Required to file information returns ER certifies qualification on Form 1094-C

▪ Box 22C in Part II

2015 Transition Relief p. 419

> 100 Employees Relief

Coverage requirement met if offer to ≥ 70% of full-time EEs

Check Box 22C, Part II, on Form 1094-C

p. 419

Applicable Large Employer (ALE)

Employer with ≥ 50 FTEs in 2014 For-profit, nonprofit, or gov’t entity Businesses under common control

▪ One employer for ALE determination▪ Separate for ESRP determination

p. 419

Businesses Under Common Control

Ex. 11.1

Corp Z owns 100% of Y and X

2015 FTEs: Z: 0 Y: 30 X: 40

FTEs combined ≥ 50, each is an ALE

If 70 in 2014 & group met all 3 conditions, could qualify for 50-99 relief in 2015

p. 420


Ex. 11.2

Business as sole prop 2015: 15 FTEs

Owns 80% of ABC P/S 2015: 40 FTEs

Sole prop and ABC P/S = 1 Employer

Sole prop and ABC P/S are ALEs for 2016

If 2014 FTEs of 55, will be ALE for 2015 but may qualify for 2015 50-99 relief

p. 420


If businesses under common control determined to be an ALEEach separate business treated as an ALEESRP determined separately for eachEach must file reporting forms for 2015Qualification for 50-99 relief made by the group combined, not each separately

p. 420

First Year of Existence

Not in existence any business day of prior yearWill be ALE in current year if:

▪ Expects to employ average of 50 FTEs and▪ Does employ average of at least 50 FTEs

For 2015 can qualify for 50-99 relief if for 2015▪ Reasonably expects to employ < 100 FTEs▪ Reasonably expects & does meet tests for

workforce, hours, coverage from first day

p. 420

Full-Time Employees

Full-time = 30 hour/week average or

130 hours any given month

All employees in for ALE determinationMust include those exempt from coverageMust include those eligible for other coverageSeasonal worker exceptionReligious order exception – vow of poverty

p. 421

Full-Time Equivalents

Using those working < 30 hours/weekTotal hours per month (up to 120 each)Divide total by 120Round to nearest one hundredth

p. 421

ALE Determination

Determine average FTE count of prior year▪ Total full-time employers and full-time equivalents for each month▪ Add together all months totals▪ Divide yearly total by 12

For 2015 determination only, may use any consecutive 6-month period in 2014

Example 11.2

p. 422

Hours of Service

Hour worked or not worked for which EE paid or is entitled to pay▪ Includes vacation, holiday, illness, layoff, jury duty, military duty, disability,

any paid absence Does not include:

▪ Bona fide volunteer for a government or tax-exempt entity in federal work-study program

▪ Compensation constituting income from sources outside the U.S.

pp. 422-423

Hours of Service

Seasonal Workers▪ One performing labor or services on a seasonal basis (farm, holiday retail

workers)▪ Counted in number of FTEs▪ If average FTEs > 50 for ≤ 120 days in year & seasonal workers caused

excess, no ALE▪ 4 calendar months = 120 days▪ 120 days/4 months need not be consecutive

pp. 422-423

Hours of Service

Adjunct faculty: 2.25 hours/teaching hour + 1 hour for each hour outside classroom Paid interns counted same as other employees Shared employees

▪ Treated as 1 employer, all hours counted▪ Treated as separate, allocate hours

Layover hours – p. 423 On-call hours – p. 423

pp. 423-424

Coverage

ALE must offer coverage to full-time employees▪ Affordable AND▪ Provides minimum value

2015: Offer to 70% of full-time 2016 and later: Offer to 95% of full-time Offered for a calendar month if for FULL month January 2015: Coverage offer by first day of first pay period treated as January

coverage

p. 424

Full-time Employees - Coverage

Methods to determine is full-time for coverage requirement (who must be offered coverage?)▪ Monthly measurement method▪ Look-back measurement method

Look-back method cannot be used in determining full-time for ALE determination

p. 424

Full-Time Employees – CoverageMonthly Measurement Method

Identify full-time based on hours of service per month 130 hours/month (30/week) New Employee:

▪ No ESRP if (must meet both)• Coverage by day after 3 full calendar mos.• Coverage provided has MV

• Applies only once per employment period• Relief even if employee leaves < 3 months

p. 424

Full-Time Employees – CoverageMonthly Measurement Method

Rehired Employee▪ Treated as continuing employee if period with no hours of service is

• Less than 13 weeks • Less than 26 weeks if educational org.

• May treat as new hire if period of no hours is ≥ 4 consecutive weeks & such period exceeds length of immediately preceding employment

p. 424

Full-Time Employees – CoverageLook-Back Measurement Method

Full-time status determined for future period (stability period) based on hours worked in prior period (measurement period)

Measurement Period▪ At least 3 months but not more than 12▪ Employer chooses start and end

• Must be uniform w/in EE category

pp. 424-425


Administrative Period▪ Optional period▪ Time to determine EE’s status and notify EEs of status and eligibility▪ No > 90 days (can differ for EE categories)▪ Between measurement and stability▪ Overlaps prior stability – no coverage break

p. 425


Stability Period▪ EE averaging 30 hours/week treated as full-time in subsequent stability period

• Regardless of hours in stability period• At least 6 consecutive months long• No shorter than measurement period

p. 425


Example 11.6 - 2015

JAN FEB MAR

APR Administrative Period

MAY(Stability period begins)

JUNE

JULY AUG SEPT

OCT Administrative Period(Stability period ends)

NOV (Stability period begins)

DEC

Measurement Period for May 2015 – Oct 2015 Stability Period

Measurement Period for Nov 2015 – Apr 2016 Stability Period

p. 425

Employee Categories

Measurement, stability, admin periods may vary in length, start, end for each employee category ▪ Collectively bargained EEs and non-collectively bargained EEs▪ Each collectively bargained group under separate agreement▪ Salaried and hourly employees▪ Employees primarily in different states

pp. 425-426


New Employees: Reasonably expected to be full-time employee

▪ Determine status based on hours/month worked▪ Becomes ongoing EE after employed for one complete standard measurement period▪ Once an ongoing EE, the ER may apply the look-back method for future periods

p. 425


New Employees: Variable-hour employee, seasonal, part-time

▪ Determine status with initial measurement period of 3-12 months▪ Initial measurement must begin employee’s start date up to 1st day of next calendar month▪ Stability period must = that of ongoing EEs

p. 426


Factors for “reasonably expected” ▪ Replacing a full-time or variable-hour employee▪ Service hours of those in same or comparable positions in recent measurement periods▪ Whether job was advertised or otherwise communicated as involving certain level of hours per

week

pp. 426-427

Minimum Value

Minimum Value (MV) is covers at least 60% of total costs of plan benefits expected (bronze)

Options for determining▪ HHS website calculator▪ Plan designed to meet safe harbors▪ Actuarial Certification

HSA/HRA (integrated with ER plan) contributions by ER count as costs if cannot pay plan premiums

p. 427

Minimum Value – Notice 2014-69

Minimum value ONLY if meets 60% test PLUS

Benefits include substantial coverage of inpatient

hospital services & physician services

New definition applies to 2015 plan years Certain plans in process at 11/4/14 excepted

p. 427

Minimum Value – Notice 2014-69

ALEs with nonhospital/nonphysician plans will not be subject to ESRP on 2015 plan if:▪ Binding written commitment to adopt such a plan prior to 11/4/2014▪ Enrolled employees prior to 11/4/2014, relied on HHS MV calculator and plan year

begins no later than 3/1/2015 EEs may treat all such plans as without MV for purposes of PTC

p. 427

Affordable Coverage

ER coverage not affordable if self-only premiums exceed 9.56% of EE’s 2015 household income Employer safe harbors – Employee premium for lowest cost self-only plan does not exceed

▪ 9.5% Form W-2 wages▪ 9.5% Employee’s rate of pay▪ 9.5% Federal poverty line

Safe harbor used reported on Form 1095-C

p. 427

Liability for ESRP

ALE liable for an ESRP if ≥ 1 full-time employee gets premium tax credit

AND

Employer failed to offer MEC to 70% of full-time employees for 2015 (95% for 2016)

OR

Coverage offered not affordable, not of minimum value, or not offered to employee getting the PTC

p. 431

Offer of Health Coverage

Offer made if employee has effective opportunity to enroll or decline once per plan year If coverage continued, provide chance to opt out

First year as an ALE – no ESRP for Jan-Mar if coverage offer by April 1▪ Not first year as ALE in 2015 (2016) if met ALE definition in a prior year 2014 (2015)

pp. 431-432

Dependent Coverage - Transition Relief

2015 plan year - no ESRP if▪ Dependent coverage not offered,▪ Dependent coverage offered not of MV, or▪ Dependent coverage offered to some but not all

N/A if dependent coverage offered in 2013 or 2014 plan year and was dropped Applies to dependents not offered in 2013/14 if steps taken in 2014/15 to extend them coverage

p. 432

Notices to Employers

Section 1411 Certification▪ Sent to employer by Exchange when an employee determined eligible for PTC▪ Employer may appeal – within 90 days▪ Appeal determination sent to employer and employee▪ Appeal determination does not affect employer ability to challenge a later IRS ESRP

proposal

p. 433

ESRP Calculation - § 4980H(a)

2015

Offer not made to 70% of FT EEs and ≥ 1 FT EE gets PTC (based on Section 1411 certifications)

ESRP = $2,080 x (# full-time employees – 80)FT equivalents and employees in a limited nonassessment period not in # of full-time80 reduction is allocated if in related groupComputed monthly if offer made for some months

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p. 433


Example 11.12 102 FTEs in 2014 => ALE in 2015 92 full time in 2015 Offer to 50 full time, 50/92 = 54% 2 full-time employees qualify for PTC

ESRP = $2,080 x (92 – 80) = $24,960

50

pp. 433-434


Example 11.13 102 FTEs in 2014 => ALE in 2015 92 full time in 2015 Offer to all full-time employees beginning 9/2015 2 full-time employees qualify for PTC Jan-Aug

ESRP = ($2,080 x 9/12) x (92 – 80) = $16,640

51

p. 434

ESRP Calculation - § 4980H(b)

ALE meets coverage requirement but ≥ 1 employee gets PTC because coverage:▪ Does not provide minimum value▪ Is not affordable for an employee

(self-only premiums > 9.56% household income - 2015)

▪ Not offered to employee getting PTC (in 30%) Computed monthly ESRP = # FT getting PTC x $3,120/12 Limited to what 4980H(a) ESRP would have been

52

p. 434

ESRP Calculation - § 4980H(b)

Example 11.14 Dillon offered coverage to all full-time employees Not affordable for 2 employees – purchased

Marketplace coverage/received PTC for 12 mos Employer did not qualify for any affordability safe

harbor ESRP = $6,240

$3,120 / 12 x 2 PTC employees x 12 months $6,240 < $24,960 if coverage % not met

53

p. 434

ESRP – Other Considerations

ESRP is non tax deductible Dollar amounts subject to annual inflation adjustmt Full-time employee count for computation of ESRP

▪ Excludes full-time equivalents▪ Excludes EEs in Limited Nonassessment Period

(Period in which an employer is not assessed an ESRP regardless of whether an offer made)

54

p. 434

Limited Nonassessment Period

For § 4980H(a) only if coverage is offered by the 1st day of the 1st month following the end of the period

or

For § 4980H(b) only if coverage offered at the end of the period provides minimum value

1.First year as ALE – runs January thru March – applies only to EEs not offered coverage in past

55

pp. 434-435


2. Waiting period / monthly measurement method▪ Begins 1st full month EE otherwise eligible▪ Ends 2 full calendar months after 1st full month

3. Waiting period / look-back measurement method ▪ EE reasonably expected to be full-time ▪ Begins on EE’s start date ▪ Ends at end of 3rd full calendar month of

employment56

p. 435


4. Initial measurement period & admin period under look-back measurement method

▪ Variable-hour, seasonal, or part- time EE only

57

p. 435


5. Period following EE status change occurring in initial measurement period in look-back method▪ Begins on date EE’s status change▪ Ends no later than end of 3rd full calendar

month following status change▪ Only if:

• Variable-hour, seasonal, part-time @ start• In new position/status would have

reasonably been expected to be full-time58

p. 435


In all cases:

6.First partial calendar month of employment▪ If 1st day is other than the 1st day of a month

59

p. 437

Health Coverage Reporting

Form 1095-C and Form 1094-C▪ Employers with > 50 FTEs

Form 1095-B and Form 1094-B▪ Health insurance issuers – individual market

coverage and employer plans (includes SHOP)▪ Small employer sponsoring self-insured plans

Form 1095-A▪ Marketplace coverage

60

p. 437

Form 1095-C

Due dates to IRS – same as W-2▪ 30-day extension with Form 8809

Furnish to employee same date as W-2▪ Mail or electronic (if consent)

One per EE who was FT any time during the year Limited nonassessment period EE ≠ full time One per any EE with self-insured coverage for EE

or any family member whether FT or not Used for ESRP and PTC purposes

61

pp. 437-439

Form 1095-C

Part II, Line 14: Codes for whether or not coverage was offeredMonth by month entries or “all 12 months” boxOffers for a month only if coverage for every dayTerminated EE, coverage for the month if would have been covered every day if stayedCodes in Figure 11.7, page 439

▪ Lowest cost self-only employee premium ▪ Applicable safe harbor code

Part III 62

pp. 439-440

Form 1095-C

Part II, Line 15: Entry only if code 1B, 1C, 1D or 1E in line 14Lowest cost monthly premium for self-only – including centsIf no employee cost for self-only, enter 0.00

Part II, Line 16Codes for eligibility for safe harbors/other reliefFigure 11.8, page 441Entry not required but in the ER’s best interest

63

pp. 440-441

Form 1095-C

Part IIIEmployer sponsored self-insured coverage

▪ List any employee and/or family members▪ List nonemployee and/or family members (1G)▪ Date of birth entered only if SSN unknown▪ Check any month with at least 1 day coverage

64

pp. 442-443

Form 1095-C

Example 11.15 – New EmployeeJoyce employed 5/1/2015 through 12/31/20153 month waiting periodEnrolled in coverage August 1, 2015Form 1095-C on page 443

(insert $100 in line 15 for Aug through Dec)

Note: If Joyce had Marketplace coverage with PTC, she could continue it until the end of July.

65

pp. 443-444

Form 1095-C

Example 11.16 – Terminated EmployeeBob employed 1/1/2015 through 9/30/2015Offered MEC with MV but declinedForm 1095-C on page 444

Note: Employer’s affordability safe harbor eligibility does not affect Bob’s possible PTC if 9.56% of his actual household income is < the self-only premiums

66

pp. 444-445

Simplified Reporting Methods

Qualifying Offer Method (N/A is self-insured plan)

Qualifying offer for all 12 months to the FT EEForm 1095-C to IRS - Simplified statement to EE

Qualifying Offer Method Transition Relief for 2015Qualifying offer for ≥ 1 month to 95% of FT EEsForm 1095-C to IRS - Simplified statement to EE

98% Offer MethodSafe harbor affordable, MV to 98% EE’s & dep.

67

pp. 445-448

Form 1094-C

Transmittal of Forms 1095-C Summarizes Form 1095-C information If filing one for each division, one must be

designated as “authoritative transmittal” Each member of ALE group files it owns

▪ Identifies other member in Part IV Part II, #22 – Eligibility certifications Part III – monthly information or “all 12 months”

68

pp. 448-449

Form 1095-C Penalties

Information return penalties - § 6721, § 6722

▪ Increased penalties after 12/31/2015▪ 2015 penalty relief if incomplete or incorrect

• Can show good faith effort to comply and• Form timely filed (IRS) or furnished (EE)

Can avoid if reasonable cause met under § 6724

69

pp. 449-451

Form 1095-B

Filed by health insurance issuer▪ Individual marketplace policies▪ Employer sponsored insured plans ▪ SHOP plans

Filed by small employer sponsoring self-insured Filed for Government-sponsored plan coverage Filed for other coverage as designated by HHS Filing/furnishing dates same as 1095-C / W-2

70

pp. 452-456

Failure to Comply w/ Market Reforms

$100 per day per person excise tax if employer’s plan fails to meet market reforms

N/A to excepted benefits if separate policy Notice 2013-54

▪ Employer payment plan – Subject to tax• Reimburses individual policy premiums

▪ HRA – Not subject if integrated with group plan▪ FSA – Subject if not an excepted benefit▪ EAP – Not subject if excepted benefit

71

Notice 2015-17 pp. 456-459

Excise Tax Transition Relief

Employer Payment Plan – no excise tax▪ If employer not an ALE▪ Applies January 1, 2014 thru June 30, 2015▪ NOT: stand-alone HRAs/other reimbursement

arrangements Healthcare arrangements for 2% S corp S/H-EEs

▪ No excise tax until the later of the end of 2015 or when additional guidance issued

72

Notice 2015-17 pp. 456-459


Medicare Premium Reimbursement Arrangements▪ Cannot be integrated with Medicare coverage▪ May be integrated with another employer plan▪ If plan for < 2 current EEs, not subject to reform

TRICARE-Related HRAs▪ Cannot be integrated with TRICARE▪ May be integrated with another employer plan

73

Notice 2015-17 pp. 456-459


Increase in compensation not tied to purchase of health coverage is not an employer payment plan

Reimbursements of insurance premiums cannot be on an after-tax basis▪ Rev. Rul. 61-146 holds nontaxable

Note: Only way after 6/30/2015 to help employees pay premiums is no-strings-attached compensation

74

Excise Tax pp. 459-461

Nondiscrimination Rules PHS § 2716 bars fully insured plans from

favoring the highly paid IRS will not enforce penalty until it issues

guidance for plan sponsors I.R.C. § 105(h) tests both eligibility and

benefits actually provided Shareholder plans are vulnerable

75

p. 461

Expatriate Health Plans

Granted relief from market reforms▪ Temporary relief through 12/31/2016▪ 2014 EHCCA made relief permanent for certain

contracts on or after July 1, 2015▪ EHCCA extended relief to self-insured plans

Exempt from PICORI fee, transitional reinsurance fee, health insurance provider fee

Subject to reporting requirements May be subject to Cadillac Tax in 2018

76

pp. 462-463

SHOP Marketplace If ≤ 50 FTEs can use SHOP Bronze, silver, gold, platinum plans Employer chooses plan or plans Employer determines contribution Must offer to all FT employees (30 hours/week) 70% FT EEs enrollment needed to apply outside

11/15-12/15 periodNOTE: 2015 PACE Act allows states to determine if SHOP

eligibility to be up to 100 FTEs in 2016

77

Questions?

78

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