Beginning a New Year: Compliance Responsibilities and Opportunities

The ending of a calendar year and beginning of a new one brings many compliance responsibilities to employers. Utilizing these responsibilities as opportunities will help position yourself for success as you set your current clients at ease for 2018, and as you prospect for new ones. Compliance is a door opener and a sales closer; employers want to hear about compliance – and want a trustworthy broker they can rely on to keep them in compliance. Use this opportunity to your advantage as you begin the new year on the right foot.

Group size should be calculated (or re-calculated) annually on January 1st to determine employers’ responsibilities under the Affordable Care Act (ACA), and COBRA. It’s also an ideal time to re-count group size for Medicare primary/secondary status. Refer to Word & Brown’s Employee Count Group Size Reference for California Employers and/or Word & Brown’s Employee Count Group Size Reference for Nevada Employers for help counting employees in each of these scenarios, which are explained more in detail below.

ACA Applicable Large Employer (ALE) Count and First-Time ALE Transition Relief

Applicable Large Employers (ALEs) are subject to the ACA’s employer mandate and reporting responsibilities. 2018 ALEs average 50 or more Full Time (FT) plus Full Time Equivalent (FTE) employees for the twelve months of 2017, even if its size drops below 50 during the 2018 calendar year. ALE determinations are made at the beginning of the year and do not change for the duration of the new year. Reference Word & Brown’s ACA Group Size Calculator and Full Time Equivalent Calculator (California versionsNevada versions) for extra help calculating these determinations. First-timeALEs are provided transition relief by the IRS, which allows eligible employers up to a three-month window (by April 1st annually) to comply with the ACA’s employer mandate. In order to be eligible for this transition relief, the first-time ALE must also have never offered any coverage before, and must have new coverage in place by 4/1. This transition relief is helpful for many employers who realize they’re subject to the ACA’s mandates for the whole year, at the beginning of the year.

COBRA determination: Federal and Cal-COBRA

A group count must also be made at the beginning of the year with regard to an employer’s COBRA status. An employer that has employed at least 20 employees on 50% or more of the typical working days in the preceding calendar year is subject to Federal COBRA. Employers that have employed fewer than 20 employees on 50% or more of the typical working days in the preceding calendar year are subject to Cal-COBRA, if the group is domiciled in California – generally speaking. A group could be subject to Cal-COBRA even if its master policy is not issued in California. In this case, the employer must employ 51% or more of its employees in California and have its principal place of business in California, in order for their California employees to take advantage of Cal-COBRA. State “mini” COBRA does not exist in Nevada, but Federal COBRA always applies for all states. Both Full Time (FT) and Part Time (PT) employees are counted in this COBRA group-size calculation. Once the determination has been made, the employer remains in the Federal COBRA or Cal-COBRA category (if applicable by state) for the entire calendar year, regardless of any increases or decreases in size throughout the year. An employer must generally notify its carriers and applicable COBRA TPAs of any changes to COBRA status as soon as the determination has been made.

Medicare Primary vs. Secondary Payer on Claims

Medicare primary/secondary payer status is made by evaluating employment size across each of 20+ calendar weeks in the current year or preceding calendar year, and the 20 weeks do not have to be consecutive. While the turn of the new year is a great time to make this calculation, the employer may change from “Medicare Primary” to “Medicare Secondary” (or vice versa) throughout the year. Make sure to keep an eye on this changing count, as making the correct “Medicare Primary” or “Medicare Secondary” determination is critical so that Medicare can be elected by those who require it, and so that expectations can be set regarding payer status for group claims. There are also CMS notification requirements to follow when an employer changes Medicare primary/secondary status.

Reminder! IRS Forms 1094-C and 1095-C for Tax Year 2017 are Due Soon!

ALEs must report on the fully-insured health coverage offered (or not offered) to FT employees and their dependents in 2017. Reporting is made using IRS Forms 1095-C and 1094-C. Employers are required to give employees a copy of the information reported for them on 1095-C on or before March 2nd, and are required to give copies to the IRS beginning in February. As a reminder, W-2 Forms are due to employees on or before January 31st.

Reference Word & Brown’s 2017 Employer Reporting Requirements and Deadlines reference piece for help understanding the ALE reporting requirements and due dates.

Remember – compliance is a door opener and a sales closer. Use these responsibilities to your advantages as you check in with your current group employers and as you prospect new ones.

How Much Can You Earn as an Insurance Broker?

Find out what you can be earning as an insurance agent in our handy, up-to-date salary guide. Produced by our in-house experts, this resource is bound to help you in advancing your career.

Word & Brown Salary Guide