IRS Penalties Are Being Issued

healthThe Internal Revenue Service is finally issuing penalty letters to employers who failed to provide health coverage, in compliance with the employer shared responsibility provisions of the ACA, for the 2015 tax year. Some letters may describe a no coverage excise tax while others may assess an excise tax for failure to provide “adequate or affordable” coverage. The notices are catching many employers off guard because issuance of these letters was delayed several times.

Those who receive a letter describing the specific violation, could be liable for penalties ranging from $2,080 to $3,480 per affected employee, depending on the violation and the plan year involved. Regulatory experts recommend that employers refer to the data submitted on forms 1094-C and 1095-C and respond to the IRS on time, even if they don’t believe the tax is owed.

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2016 ACA Transitional Reinsurance Program Contributions Form Due by November 15

paperwork-1Employers sponsoring certain self-insured plans that use a third-party administrator in connection with claims processing, claims adjudication, and enrollment functions (“contributing entities”) must submit their 2016 Annual Enrollment and Contributions Submission Form and schedule a payment for the 2016 benefit year no later than November 15.

Reinsurance Contribution Process
To successfully complete the reinsurance contribution process, contributing entities (or third-party administrators or administrative services-only contractors on their behalf) must register on Pay.gov (or confirm a password if such entities registered for the previous benefit years of the program) and submit their annual enrollment counts of the number of covered lives of reinsurance contribution enrollees for the 2016 benefit year using the 2016 form.

2016 Contribution Amounts
The 2016 reinsurance contribution rate is $27.00 per covered life. For the 2016 benefit year, contributing entities have the option to pay:

  • The entire 2016 benefit year contribution in one payment, no later than January 17, 2017 reflecting $27.00 per covered life; or
  • In two separate payments for the 2016 benefit year, with the first remittance due by January 17, 2017 reflecting $21.60 per covered life, and the second remittance due by November 15, 2017 reflecting $5.40 per covered life.

Our Transitional Reinsurance Program section features additional information on the reinsurance contribution process.

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ACA Information Reporting Reminder: First Employee Statements Due by End of March

health-care-reform-road-sign-1As a reminder, employers subject to the new Affordable Care Act (ACA) information reporting requirements must furnish the first statements for the 2015 calendar year to employees on or before March 31, 2016.

Information Reporting Requirements
The ACA requires applicable large employers (ALEs)–generally those with 50 or more full-time employees, including full-time equivalents–to report information to the IRS and to their employees about their compliance with the “pay or play” provisions and the health care coverage they have offered, using Forms 1094-C and 1095-C.

Self-insuring employers that are not considered ALEs, and other parties that provide minimum essential health coverage, also must report information on this coverage to the IRS and to covered individuals, using Forms 1094-B and 1095-B.

Compliance Deadlines
The deadlines for calendar year 2015 are as follows:

  • ALEs must furnish employee statements (Form 1095-C) to employees no later than March 31, 2016. The first IRS information returns (Forms 1094-C and 1095-C) must be filed no later than May 31, 2016 (or June 30, 2016 if filing electronically).
    • ALEs with fully insured plans must furnish the Form 1095-C to each employee who was a full-time employee for any month of the calendar year (and who was not in a limited non-penalty period).
    • ALEs with self-insured plans must furnish the Form 1095-C to any employee who enrolls in the health coverage, whether or not the employee was a full-time employee for any month of the calendar year.
  • Small self-insuring employers that are not considered ALEs must furnish statements (Form 1095-B) to covered individuals no later than March 31, 2016. The first IRS information returns (Forms 1094-B and 1095-B) must be filed no later than May 31, 2016 (or June 30, 2016 if filing electronically).

Be sure to review our Information Reporting section for additional information, guidance, and Q&As.

Obamacare Continues to Trigger Greater Interest in Self-Funded Healthcare Plans

The Affordable Care Act (ACA) has sparked a renewed interest and growth in self-funding as more organizations look for ways to continue to offer quality healthcare benefits to their employees, but also create opportunities for savings. Self-insured plans are not new. In fact, they have been around for decades. However, many businesses have simply been unaware of their advantages and the differences between self-funded and fully insured plan options.

Organizations of many sizes have turned to third party administrators, such as Self Insured Plans, to help design, administer and manage a self-funded plan that manages risk and promotes wellness while keeping costs in line.

As Obamacare gives employers even more reason to identify and manage plan costs, TPAs can provide greater access to health plan data and work closely with you and your plan participants to build individualized programs that manage both cost and quality.

In this FREE whitepaper we examine 5 reasons why it’s time to consider self-funding your employee healthcare plan.

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Still trying to get a handle on the differences between a self-funded and fully-insured plan? Click to watch our short video, “Discover the Benefits of Self-Funding,” and in less than 2 minutes we will explore those differences, give you the advantages of self insured health benefit plans and help you understand how self-funding works.

Further Guidance on ACA Compliance for HRAs and Employer Payment Plans

doctor-02IRS Notice 2015-87 provides further guidance on the application of key market reforms of the Affordable Care Act (including the preventive services requirements and annual dollar limit prohibition) to certain health care arrangements, including employer payment plans and health reimbursement arrangements (HRAs). Under prior agency guidance, employer payment plans and most stand-alone HRAs do not comply with the ACA and therefore may be subject to a $100/day excise tax per applicable employee.

Employer Payment Plans
An “employer payment plan” is an arrangement under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy, or uses its funds to directly pay the premium for an individual health insurance policy covering the employee.

Among other things, the IRS notice provides that an employer arrangement reimbursing the cost of individual market coverage offered under a cafeteria plan is an employer payment plan (whether or not funded solely by salary reduction or also including other employer contributions, such as flex credits), and cannot be integrated with the individual market coverage. Accordingly, such an arrangement will generally fail to satisfy the ACA market reforms applicable to group health plans.

Health Reimbursement Arrangements
An HRA that is “integrated” with a group health plan—under either of two integration methods described in prior agency guidance—will comply with the ACA if the group health plan with which the HRA is integrated is compliant. Stand-alone HRAs (except for retiree-only HRAs and HRAs consisting solely of excepted benefits), and HRAs used to purchase coverage on the individual market do not comply with the ACA market reforms.

The IRS notice provides further guidance related to HRAs and integration, including clarifying that, subject to transition relief, an HRA is permitted to be integrated with an employer’s group health plan only as to the individuals who are enrolled in both the HRA and the employer’s group health plan. If an employee’s spouse and/or dependents are not enrolled in the group health plan, the coverage of these individuals under the HRA cannot be integrated with the group health plan, and the HRA coverage generally will fail to meet the ACA market reform requirements.

Review our section on Cash for Premium Payments & Other Employer Payment Plans for more.

Affordability and Penalty Thresholds Adjusted Under ‘Pay or Play’

pay-or-playNew IRS guidance clarifies certain aspects of the Affordable Care Act’s “pay or play” provisions related to determining affordability of employer-provided coverage and calculating penalty amounts for calendar years 2015 and 2016.

Adjusted Affordability Threshold
Under the new guidance, the 9.5% threshold for determining whether employer-provided health coverage is affordable for purposes of “pay or play” (including for use of the affordability safe harbors) is adjusted to 9.56% for plan years beginning in 2015, and 9.66% for plan years beginning in 2016. Coverage will be considered affordable if the portion of the annual premium an employee must pay for self-only coverage does not exceed the applicable percentage of his or her household income.

The guidance also addresses how certain HRA contributions, flex credits, or opt-out payments are taken into account for purposes of determining whether an employer has made an offer of affordable minimum value coverage under an eligible employer-sponsored plan.

Adjusted Penalty Amounts
In addition, the new guidance confirms that for calendar year 2015, the adjusted $2,000 dollar amount used to calculate the penalty (for employers not offering coverage) is $2,080, and the adjusted $3,000 dollar amount (for employers offering coverage that is not affordable or does not provide minimum value) is $3,120. For calendar year 2016, the adjusted $2,000 dollar amount is $2,160, and the adjusted $3,000 dollar amount is $3,240.

Our Pay or Play Affordability and Penalty Calculators can help employers determine their potential liability.

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Get Updates On The ACA: Repeals, Delays & More

Article is from Zack Pace, from Employee Benefit News (EBN)

Commentary: As you’ve no doubt noticed, the federal government made sweeping legislative and regulatory changes to the Affordable Care Act during the fourth quarter of 2015. During the last two weeks of December, I felt like I was drinking from a six-inch fire hose. How about you?

For 2016 planning purposes, I began making a list of the key items that have been repealed or delayed and those that we should continue to keep a keen eye on. With this list now complete, I thought I’d share.

Repealed provisions

  1. Free-choice vouchers. Remember those? They were repealed back in 2011.
  2. Form 1099 reporting. Remember how much added administrative work this provision would have created?
  3. The $2,000-deductible ceiling. This provision coupled with Repealed Provision No. 5 (below) was scheduled to create a perfect storm this year for employers with 51 to 100 employees.
  4. The automatic enrollment mandate. Reportedly, our elected representatives pressed for this provision’s repeal not because of its administrative infeasibility but because of the projected loss in tax revenue from increased salary reductions via Section 125 plans. Seriously.
  5. The mandatory expansion of small group to 100 employees. I wish I had a quarter from everyone that joked, “Hey, Zack – they named an ACA after you!” How thrilling.

Delayed provisions

  1. ACA nondiscrimination requirements. While these TBD rules were delayed indefinitely some time ago, some insiders expect finalization relatively soon. Sections 125 and 105(h) nondiscrimination rules remain alive and well.
  2. The Cadillac tax. This excise tax is delayed until 2020. Per industry insiders, it seems awfully likely that this tax will be repealed before then. We’ll see. For those employers that began a multiple-year incremental mitigation strategy (aka glide path), they’ll need to decide if that strategy ought to be put in moth balls for a couple of years. Keep in mind that many employers can likely keep this excise tax at bay until 2022 by simply ending the flexible spending account, making health savings account contributions post-tax and eliminating their richest medical plan. 2022 is six years from now. Who knows where we’ll be by then. When it comes to increased taxation on employer- sponsored health plans, the more immediate concern, apparently, is that Section 125 becomes a bargaining chip during the budget negotiations next year between Congress and the new administration.

Lingering provisions of keen importance

  1. Annually determining large-employer status. To determine status for 2016, ask your accountant to run Treasury’s formula to determine how many full-time employees plus full-time equivalents your firm averaged in the previous calendar year. Employers with 50 or more are generally subject to shared responsibility. Employers in most states with 51 or more are generally not subject to the fair health insurance premium rules (only fully insured plans are subject to these latter rules). Can anyone explain to me why they didn’t simply select 50 or 51 for both definitions?
  2. Employer shared responsibility. Didn’t we make this topic a little more complicated than it needed to be? It turns out that it’s relatively easy to eliminate this penalty risk by offering to all employees that work 30 hours or more a week a low-cost plan (relatively speaking) that meets minimum value and that has an employee contribution rate for single coverage that meets the federal poverty-level safe harbor (i.e., less than around $93 per month). We can offer this “ACA easy button” plan, continue offering the normative health plans employees prefer and call it a day. Of course, for those employers with seasonal and/or variable-hour employees, tracking complications remain.
  3. Eliminating opt-out credits. Under pending regulations, employers that offer cash to those employees that waive the health plan will find it harder to satisfy the affordability requirements of employer shared responsibility. See No. 5 in the below further reading list for more detail.
  4. ACA reporting. Also known as Form 1095-C/1094-C reporting. The topic du jour.
  5. The market reform rules. For example: elimination of pre-existing condition limitations, age 26 expansion, out-of-pocket limit ceiling, 100% coverage for preventive services (grandfathered plans are exempt from these latter three). If your health plan is fully insured, the insurer should have made these changes. If your plan is self-funded, the TPA should have. Either way, double-check.

To read this article on EBN.BENEFITNEWS.COM click here.

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Deadlines Extended for 2015 ACA Information Reporting Requirements (Forms 1094 and 1095)

IRS Notice 2016-4 extends the due dates, both furnishing to individuals and filing with the IRS, for the 2015 ACA information reporting requirements that apply to self-insuring employers (and other providers of minimum essential coverage) and applicable large employers under sections 6055 and 6056 of the Internal Revenue Code.

2015 Deadline Extensions
Specifically, the notice extends the following due date:

  • For furnishing to individuals the 2015 Forms 1095-B and 1095-C, from February 1, 2016 to March 31, 2016, and
  • For filing with the IRS the 2015 Forms 1094-B, 1095-B, 1094-C, and 1095-C, from February 29, 2016 to May 31, 2016 (if not filing electronically), and from March 31, 2016 to June 30, 2016 (if filing electronically).

As a reminder, Forms 1094-B and 1095-B will be used by self-insuring employers that are not considered applicable large employers, and other parties that provide minimum essential health coverage, to report information on this coverage to the IRS and to covered individuals. Applicable large employers—generally those with 50 or more full-time employees, including full-time equivalents or FTEs—will use Forms 1094-C and 1095-C to report information to the IRS and to their employees about their compliance with “pay or play” and the health care coverage they have offered.

Note: Employers subject to both reporting provisions (generally self-insured employers with 50 or more full-time employees, including FTEs) will satisfy their reporting obligations using Forms 1094-C and 1095-C. Form 1095-C includes separate sections for reporting under each provision.

Extensions Apply for 2015 Calendar Year Only
The extensions for the ACA information reporting requirements apply for calendar year 2015 only and have no effect on the requirements for other years or on the effective dates or application of the ACA “pay or play” provisions. In view of these extensions, the IRS rules regarding automatic and permissive extensions of time for filing information returns and permissive extensions of time for furnishing statements will not apply to the extended due dates. Employers or other coverage providers that do not comply with these extended due dates will be subject to penalties.

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New Law Provides Two-Year Delay of ‘Cadillac Tax,’ Imposes Moratorium on Medical Device Excise Tax

President Obama recently signed the Consolidated Appropriations Act of 2016, which (among other things) provides a two-year delay of the Affordable Care Act’s excise tax on high-cost employer-sponsored health coverage (commonly referred to as the “cadillac tax” and governed by Internal Revenue Code section 4980I) and imposes a moratorium on the medical device excise tax.

Cadillac Tax Delay
Prior to the delay, the 40% tax was set to take effect in 2018 and would generally be imposed on plans that cost more than $10,200 (for self-only coverage) and $27,500 (for family coverage). As a result of the new law, this tax will not be effective until 2020.

Medical Device Excise Tax Moratorium
The 2.3% medical device excise tax that manufacturers and importers pay on sales of certain medical devices has generally been effective since January 1, 2013. As a result of the new law, this tax will not apply to sales during calendar years 2016 and 2017.

For more details, please review the new law in its entirety.

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Guidance Also Addresses How Certain Employer HRA Contributions, Flex Credits, or Opt-Out Payments Affect Affordability

Newly released IRS Notice 2015-87 clarifies certain aspects of the Affordable Care Act’s pay or play provisions, including the application of the adjusted 9.5% threshold to the affordability safe harbors and adjusted penalty amounts for calendar years 2015 and 2016.

Adjusted Affordability Threshold
Under previously released guidance, for plan years beginning in 2015 employer insurance is considered affordable for purposes of qualifying for the premium tax credit if the portion of the annual premium an employee must pay for self-only coverage is 9.56% (up from 9.5%) or less of his or her household income. For plan years beginning in 2016, this percentage is increased to 9.66%. However, references to 9.5% in the pay or play regulations regarding penalties for failing to offer health coverage and use of the affordability safe harbors were not previously updated to reflect the increases.

Accordingly, the new guidance provides that the references to 9.5% are adjusted to 9.56% for plan years beginning in 2015, and 9.66% for plan years beginning in 2016. The Treasury and IRS intend to amend the applicable regulations under pay or play and under section 6056 (regarding information reporting) to reflect that the applicable percentage in the affordability safe harbors should be adjusted consistent with the premium tax credit, so that employers may rely upon the 9.56% for plan years beginning in 2015 and 9.66% for plan years beginning in 2016.

Adjusted Penalty Amounts
While the pay or play provisions provide that penalty amounts are adjusted for inflation, the IRS did not release the specific dollar amounts used to calculate the penalties that apply for 2015 or 2016. Instead, the 2015 and 2016 amounts could be derived from statutory formulas using the premium adjustment percentages previously announced by the U.S. Department of Health and Human Services.

However, the new guidance confirms that for calendar year 2015, the adjusted $2,000 dollar amount (for employers not offering coverage) is $2,080 and the adjusted $3,000 dollar amount (for employers offering coverage that is not affordable or does not provide minimum value) is $3,120. For calendar year 2016, the adjusted $2,000 dollar amount is $2,160, and the adjusted $3,000 dollar amount is $3,240. The Treasury and IRS anticipate that adjustments for future years will be posted on the IRS.gov website.

Effect of Certain Employer HRA Contributions, Flex Credits, or Opt-Out Payments on Affordability
The guidance also addresses how certain HRA contributions, flex credits, or opt-out payments are taken into account for purposes of determining whether an employer has made an offer of affordable minimum value coverage under an eligible employer-sponsored plan. In some cases, transition relief is provided for employers that treat these amounts differently for purposes of reporting their employees’ required contributions under section 6056.

For additional details, please review IRS Notice 2015-87 in its entirety and consult a knowledgeable benefits attorney or tax specialist for specific guidance.