While the Trump administration and Republicans in Congress have made no secret of their dislike for the employer mandate and other provisions of the Affordable Care Act (ACA), until details are worked out on “repair” or “repeal” of the federal health reform law, Word & Brown and other experts recommend employers stay the course and continue to comply with current ACA reporting requirements.
Below are some useful tips you can share with your groups to help them stay in compliance with the ACA and avoid potential fines or an audit.
Determine Applicable Large Employer (ALE) Status
Some ACA provisions apply only to Applicable Large Employers; that’s those with 50 or more full-time employees, including full-time equivalents, during the prior calendar year.
A full-time employee is defined as one who averages at least 30 hours of service per week or 130 hours per month.
Word & Brown’s Compliance Resource Center includes an ACA Group Size and FTE Calculator, to help you and your clients determine their ALE status; California brokers can link to it here, while Nevada brokers can get to it here.
Word & Brown’s “What Does My Employee Count Mean?” piece is another useful tool for employers; it can help calculate group size for the ACA, COBRA, and Medicare Primary/Secondary coverage. The California version is available here, while the Nevada edition can be found here.
Organizations with 50 or more full-time employees or full-time equivalents must offer affordable coverage to “all” full-time employees – that is, the greater of 95 percent of full-time employees (and their dependents) or five full-time employees. Businesses that averaged fewer than 50 full-time equivalents in 2016 are exempt from this employer mandate in 2017.
Follow ACA Employer Reporting Rules
ALEs must report to the Internal Revenue Service (IRS) on the offer (or lack of offer) of health insurance to full-time employees and their dependents. The forms used to report employer-provided health insurance are listed below.
• IRS Form 1094-C: This is the transmittal form used by ALEs to report the aggregate sum of coverage offered to employees.
• IRS Form 1094-B: This form is used by non-ALE groups sponsoring self-insured coverage with the similar reporting purpose of Form 1094-C.
• IRS Form 1095-C: This is the reporting form for employer-offered health insurance used for each individual employee. It contains information on the coverage offered, or not offered, to any full-time employee who averaged full-time hours for at least one month of the previous calendar year.
• IRS Form 1095-B: This form is used by non-ALE groups sponsoring self-insured coverage with the similar reporting purpose of Form 1095-C.
Word & Brown has developed an “IRS Section 6056 Employer Reporting Checklist for Completion of Forms 1095-C,” which recommends the best sequence to follow when completing Form 1095-C. It is available here.
The ACA and IRS also require employers to report the cost of employer-sponsored group health coverage on employee W-2 forms if the employer files 250+ W-2 statements. (Reporting on the W-2 does not mean the coverage is taxable. The value of the employer’s contribution to health coverage, generally, continues to be excludable from an employee’s income and is not taxable.) Link here to read the IRS guidelines on reporting employer-sponsored coverage.
Test for Minimum Value and “Affordability”
An ALE’s employer-sponsored group health plan must adhere to the ACA’s minimum value standards, meaning it must cover 60 percent of the total costs of medical services, in network – a Bronze metal tier plan. It must also be “affordable” for the employee, so his or her cost does not exceed 9.69 percent of 2017 W-2 income, rate of pay, or mainland federal poverty level for the lowest-cost self-only plan. If a plan is not affordable, the employee could be eligible for a premium tax credit (PTC) to purchase coverage through a public exchange – in California, through Covered California, or in Nevada, through the Nevada Health Link.
Include Essential Health Benefits (EHBs)
All ACA-compliant health plans must cover essential health benefits that include doctors’ services, inpatient and outpatient hospital care, prescription drug coverage, pregnancy and childbirth, mental health services, and other benefits. Most group plans meet this requirement; if they didn’t, they would lack widespread appeal and an employee could go elsewhere for his or her health coverage, triggering a penalty for the employer. (See below)
Avoid Potential Penalties
ALEs that do not offer ACA-compliant coverage eligible full-time employees face a penalty of $2,260 times the total number of full-time employees (minus 30), if at least one full-time employee receives a premium tax credit/subsidy to purchase coverage through an ACA health insurance exchange in 2017. The penalty is one-twelfth of $2,260, or $188.33 for each applicable month.
If coverage offered is deemed unaffordable or does not provide minimal essential coverage with minimum value, the employer faces a penalty of $3,390 times the number of FT employees receiving a premium tax credit/subsidy for exchange coverage. Either of the penalties may apply, but not both.
A summary of Internal Revenue Code Section 4980H (a) and (b), Employer Mandate Penalties, is available here.
Word & Brown’s “Employer Reporting Responsibilities: Penalty Amounts” summary is another useful tool for your clients; you can access it here.
If you have any questions about Affordable Care Act compliance, talk with your Word & Brown representative or send an email to the WBCompliance team at ComplianceSupport@wordandbrown.com. They are available to assist, at no cost to you or your clients.