New Template Generally Expected to Apply to Plan Years Beginning On or After April 1, 2017

A new Affordable Care Act (ACA) Implementation FAQ regarding the applicable date for using the new proposed summary of benefits and coverage (SBC) template and associated documents is now available.

Background
Under the ACA, group health plans and health insurance issuers are generally required to provide a written SBC to plan participants and beneficiaries at specified times during the enrollment process and upon request.

While final regulations to amend the existing rules related to the SBC notice requirements were previously released in June of 2015, at that time federal agencies announced that a new SBC template and associated documents would be finalized separately. On February 26, 2016, the new proposed SBC template and instructions, an updated uniform glossary, and other associated materials were released.

New FAQ
The intended implementation date for SBCs using the new proposed template and associated documents is as follows:

  • Health plans and issuers that maintain an annual open enrollment period will be required to use the new SBC template and associated documents beginning on the first day of the first open enrollment period that begins on or after April 1, 2017 with respect to coverage for plan years beginning on or after that date.
  • For health plans and issuers that do not use an annual open enrollment period, the new proposed SBC template and associated documents would be required beginning on the first day of the first plan year that begins on or after April 1, 2017.

Visit the U.S. Department of Labor’s webpage on the SBC and Uniform Glossary for the latest updates and to access all available templates.

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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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.

Can a MEC Plan Help Your Company?

Business-MeetingUnder the Affordable Care Act (ACA), Applicable Large Employers (ALEs) can avoid paying the $2,000 per employee penalty for failing to offer qualifying health coverage by offering full-time employees a Minimum Essential Coverage (MEC) plan.

Offering the most basic benefits – MEC plans offer only the most basic level of benefits required under ERISA and while some may view them unfavorably, others view MECs as a viable alternative to paying costly penalties and sending employees to public Marketplaces.

MECs are extremely affordable – Since MEC plans cover only certain wellness and preventive services, many employers fund the entire cost even though this is not required. Simply offering a MEC satisfies the ALE’s obligation to offer coverage, as well as the individual mandate that can penalize employees who do not have coverage.

Some prefer a combined approach – Employers wishing to furnish more coverage may supplement a MEC with a Limited Medical Benefit plan. This can provide additional, restricted coverage for routine doctor visits and hospitalization, while still costing far less than a traditional health plan. Since employers can also be assessed $3,000 for each employee qualifying for a federal subsidy, some may pursue a combined option to keep workers from accessing a public Marketplace.

As we help companies weigh their options, MEC or a combination MEC/Limited Medical Benefit plan should be considered. If the costs associated with ACA present challenges to your organization, let us help you determine the best way to proceed

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What is Minimum Essential Coverage?

mec2Employers with 50 or more employees are required to provide their full-time workers with access to Minimal Essential Coverage under the Affordable Care Act (ACA). The mandate is intended to ensure that employees have the opportunity to enroll in an employer-sponsored plan that is both affordable AND comprehensive.

The government has established two tests to determine if MEC requirements are met:

Test One: Minimum Value – To pass this test, at least 60% of medical costs must be paid by the plan, based on the average costs for the standard population. This calculation can be tricky when applied to complex self-funded plans, and a safe harbor checklist is available for plans to use to aid the process. In most self-funded cases, however, this test is easily passed.

Test Two: Affordability – Affordability is determined by examining each unique employee and comparing coverage payments against employee wages earned. Employee premiums cannot exceed 9.5% of their household income or the plan is deemed not affordable. For employees offered multiple plan options by the employer, the calculation is based on the least costly plan option available and not the option selected by the employee, as they may elect higher cost coverage.

Many of the benefits typically included in MEC plans are as follows:

  • Doctor visits
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Prescription drugs
  • Laboratory services
  • Preventive and wellness services
  • Mental health services
  • Habilitative services (to help a person keep, learn or improve skills needed in daily living)
  • Dental care

A number of Minimum Essential Coverage (MEC) plans are now available. Contact us for more information as you begin your 2016 business planning.

2015 Draft Forms Available to Help Employers Prepare for ACA Information Reporting

employee-puzzleThe IRS has released draft forms for 2015 to help employers who are subject to the new information reporting requirements under the Affordable Care Act (ACA) prepare for compliance. Affected employers are required to report for the first time in early 2016 for calendar year 2015. In general:

  • Forms 1094-C and 1095-C will be used by large employers (generally those with at least 50 full-time employees, including full-time equivalents) 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.
  • Forms 1094-B and 1095-B will be used by insurers, self-insuring employers (regardless of size), and other parties that provide minimum essential health coverage to report information on this coverage to the IRS and to covered individuals.

Changes to 2015 Draft Form 1095-C
The new draft forms include certain changes from the 2014 forms (which were previously finalized for those employers that chose to voluntarily comply with the information reporting requirements for the 2014 calendar year). While the 2015 Draft Form 1095-C is generally unchanged from the 2014 Form 1095-C, a new field has been added for “Plan Start Month,” which is optional for 2015 (for 2016 and beyond, this field will be required). In addition, the 2015 Draft Form 1095-C includes a continuation sheet that filers use if they need to report coverage for more than six individuals.

Additional details on the information reporting requirements for providers of minimum essential coverage, including self-insured employers, are available in IRS Questions and Answers. More guidance regarding the information reporting requirements for large employers subject to “pay or play” is available in separate IRS Questions and Answers.

Health Care Reform Update

balance-scalePremium Tax Credits Available to Individuals Enrolled in Federal or State-Based Exchanges

The U.S. Supreme Court has ruled that the Affordable Care Act’s premium tax credits are available to eligible individuals who enroll in qualified health plans through any Health Insurance Exchange (Marketplace), regardless of whether it is a state-based Exchange or a federally-facilitated Exchange.

The ruling comes in response to conflicting July 2014 court rulings in the District of Columbia Circuit Court of Appeals and the Fourth Circuit Court of Appeals, after each court considered whether the premium tax credits are limited under the law only to individuals who enroll in qualified health plans through state-based Exchanges.

The IRS is expected to provide updates regarding this matter on IRS.gov/aca.

Stay tuned for more on the premium tax credit. For general information regarding the credit, visit our Premium Tax Credit for Individuals section.