How are your retirement health care savings stacking up?

Are you properly investing in your health saving account? Take a look at the this article from Benefits Pro about the importance of saving money for your healthcare by Reese Feuerman.

For all ages, it's imperative to balance near-term and long-term savings goals, but the makeup of those savings goals has changed dramatically over the past 10 years.

With the continued rise in health care costs, and increased cost sharing between employers and employees, more employees and employers have been migrating to consumer-driven health care (CDH) to provide lower-cost alternatives.

With the increased adoption in these plans for employee cost savings purposes, employers have likewise realized similar cost savings to their bottom line. But what role does CDH play in the long term?

Republicans trying to find a way to repeal the ACA are turning to health savings accounts -- new ones, called...

The Greatest Generation was able to rely on their pensions, Social Security, Medicaid, and the like as a means to support them in retirement for both medical and living expenses. However, as the Baby Boomers continue their journey towards retirement, reliance upon future proof retirement funds are fading into the sunset for coming generations. According to a 2015 study from the Government Accountability Office (GAO), 29% of American’s 55 and older do not have money set aside in a pension plan or alternative retirement plan.

To make matters worse, some experts are forecasting Social Security funding will be depleted by 2034, leaving even more retirees potentially without a plan. As such, Generation X and beyond must look for more creatives measures for savings to make up the difference.

In 1978, 401(k) plans were introduced to provide the workforce with a secondary means for retirement savings while also providing significant tax benefits. However, even when actively funded, with rising health care costs and a depleted Social Security system—the solution this workforce has paid into for their entire career—will not be enough.

According to Healthview Services, the average retiree couple will spend $288,000 for just health care expenses during retirement. This sum could easily consume one-third of total retiree savings. This is a contributing factor to the rise and rapid adoption of tax-advantage health accounts to supplement retirement savings. Introduced to the market in 2003, Health Savings Accounts (HSA) have provided employees with an option to set aside pre-tax funds to either cover current year health care expenses, like the familiar Flexible Spending Account (FSA), or carry over the funds year-over-year to pay for medical expenses later or during retirement. The pretax money employees are able to set aside in these accounts to cover health care expenses, will over time, be on par with retirement savings contributions, such as a 401(k) and 403(b), because of increasing costs and triple-tax savings.

It is important for consumers to understand these retirement options and how they could be leveraged for greater financial wealth. As a result, the Health Care Stack, an analysis authored by ConnectYourCare, acts as a life savings model and illustrates the amount of pretax money consumers can contribute for both their lifestyle and health expenses in retirement.

For illustrative purposes, according to current IRS guidelines, the average American under the age of 50 could set aside up to $24,750 each year pre-tax for retirement to cover their health care and living expenses. In this example, if a worker in his or her 30s starts to set aside the maximum contributions (based on IRS guidelines) for HSA contributions, assuming a rate of return of 3%, they would have $330,000 saved in their HSA to cover health care expenses once they reach the retirement age of 65. This number could be even greater if President Trump’s administration passes any number of proposed bills to increase the HSA contribution limits to match the maximum out-of-pocket expenses included in high deductible health plans. This allocation would not only cover average medical expenses, but also provide a triple-tax advantage for consumers from now through retirement.

In addition to the long-term retirement goals, the yearly pre-tax savings may be even greater if notional accounts are factored in, with approved IRS limits of a $2,600 per year maximum for Flexible Spending Accounts, $5,000 per year maximum for Dependent Care FSA, and $6,120 per year maximum for commuter plans. This equals $38,470 (or $44,820 if HSA contributions increase) of pre-tax contributions that consumers could save by offsetting the tax burden and could invest towards retirement.

For those consumers over the age of 50, the savings potential is even greater as they can contribute to a post retirement catch-up for their 401K plans equaling a total of $24,000, plus they may take advantage of the $6,750 HSA savings, as well as the additional $1,000 catch up. If certain proposed bills are passed, the increase could be $38,100 a year that they could set aside, in pre-tax assets, for retirement.

Not only will an individual’s expenses be covered, but there are other benefits brought forth by proper planning, including the potential to reach ones retirement savings goals early. Let’s say that after meeting with a licensed financial investor it was determined that an individual needed $1.8 million in order to retire, and according to national averages, close to $288,000 to cover health care costs.

Given the proper investment strategy around contributions to both retirement and  HSA plans, an individual could - theoretically -save enough to meet their retirement investment needs by the age of 60 for both lifestyle and health care expense coverage, if they started making careful investments in their 20s (assuming the worker is making $50,000 per year with a 3% annual increase).

In comparison, under current proposals, which include the increased HSA limits, retirement savings could be achieved even earlier with the coverage threshold being at 57 for the average worker. This is a tremendous opportunity to transform retirement investment programs for all American workers who would otherwise be left on their own. Talk about the American dream!

While there is not a one-size fits all strategy, it is important for everyone to understand their options and see how these pretax accounts outlined in the Health Care Stack play an important consideration in ones future retirement planning.

Taking the time now to fully understand tax-favored benefit accounts will provide him or her with the appropriate coverage to enjoy life well into their golden years. Retirement is just around the corner, are you ready?

See the original article Here.

Source:

Feuerman (2017 March 02). How are your retirement health care savings stacking up?[Web blog post]. Retrieved from address http://www.benefitspro.com/2017/03/02/how-are-your-retirement-health-care-savings-stacki?ref=hp-in-depth


Cafeteria Plans: Qualifying Events and Changing Employee Elections

Have any questions about cafeteria plans and how they work? Check out this great article from our partner, United Benefit Advisors (UBA) about which events qualify and what changes can happen to any employee's cafeteria plan by Danielle Capilla

Cafeteria plans, or plans governed by IRS Code Section 125, allow employers to help employees pay for expenses such as health insurance with pre-tax dollars. Employees are given a choice between a taxable benefit (cash) and two or more specified pre-tax qualified benefits, for example, health insurance. Employees are given the opportunity to select the benefits they want, just like an individual standing in the cafeteria line at lunch.

Only certain benefits can be offered through a cafeteria plan:

  • Coverage under an accident or health plan (which can include traditional health insurance, health maintenance organizations (HMOs), self-insured medical reimbursement plans, dental, vision, and more);
  • Dependent care assistance benefits or DCAPs
  • Group term life insurance
  • Paid time off, which allows employees the opportunity to buy or sell paid time off days
  • 401(k) contributions
  • Adoption assistance benefits
  • Health savings accounts or HSAs under IRS Code Section 223

Some employers want to offer other benefits through a cafeteria plan, but this is prohibited. Benefits that you cannot offer through a cafeteria plan include scholarships, group term life insurance for non-employees, transportation and other fringe benefits, long-term care, and health reimbursement arrangements (unless very specific rules are met by providing one in conjunction with a high deductible health plan). Benefits that defer compensation are also prohibited under cafeteria plan rules.

Cafeteria plans as a whole are not subject to ERISA, but all or some of the underlying benefits or components under the plan can be. The Patient Protection and Affordable Care Act (ACA) has also affected aspects of cafeteria plan administration.

Employees are allowed to choose the benefits they want by making elections. Only the employee can make elections, but they can make choices that cover other individuals such as spouses or dependents. Employees must be considered eligible by the plan to make elections. Elections, with an exception for new hires, must be prospective. Cafeteria plan selections are considered irrevocable and cannot be changed during the plan year, unless a permitted change in status occurs. There is an exception for mandatory two-year elections relating to dental or vision plans that meet certain requirements.

Plans may allow participants to change elections based on the following changes in status:

  • Change in marital status
  • Change in the number of dependents
  • Change in employment status
  • A dependent satisfying or ceasing to satisfy dependent eligibility requirements
  • Change in residence
  • Commencement or termination of adoption proceedings

Plans may also allow participants to change elections based on the following changes that are not a change in status but nonetheless can trigger an election change:

  • Significant cost changes
  • Significant curtailment (or reduction) of coverage
  • Addition or improvement of benefit package option
  • Change in coverage of spouse or dependent under another employer plan
  • Loss of certain other health coverage (such as government provided coverage, such as Medicaid)
  • Changes in 401(k) contributions (employees are free to change their 401(k) contributions whenever they wish, in accordance with the administrator’s change process)
  • HIPAA special enrollment rights (contains requirements for HIPAA subject plans)
  • COBRA qualifying event
  • Judgment, decrees, or orders
  • Entitlement to Medicare or Medicaid
  • Family Medical Leave Act (FMLA) leave
  • Pre-tax health savings account (HSA) contributions (employees are free to change their HSA contributions whenever they wish, in accordance with the their payroll/accounting department process)
  • Reduction of hours (new under the ACA)
  • Exchange/Marketplace enrollment (new under the ACA)

Together, the change in status events and other recognized changes are considered “permitted election change events.”

Common changes that do not constitute a permitted election change event are: a provider leaving a network (unless, based on very narrow circumstances, it resulted in a significant reduction of coverage), a legal separation (unless the separation leads to a loss of eligibility under the plan), commencement of a domestic partner relationship, or a change in financial condition.

There are some events not in the regulations that could allow an individual to make a mid-year election change, such as a mistake by the employer or employee, or needing to change elections in order to pass nondiscrimination tests. To make a change due to a mistake, there must be clear and convincing evidence that the mistake has been made. For instance, an individual might accidentally sign up for family coverage when they are single with no children, or an employer might withhold $100 dollars per pay period for a flexible spending arrangement (FSA) when the individual elected to withhold $50.

Plans are permitted to make automatic payroll election increases or decreases for insignificant amounts in the middle of the plan year, so long as automatic election language is in the plan documents. An “insignificant” amount is considered one percent or less.

Plans should consider which change in status events to allow, how to track change in status requests, and the time limit to impose on employees who wish to make an election.

See the original article Here.

Source:

Capilla D. (2017 February 07). Cafeteria plans: qualifying events and changing employee elections  [Web blog post]. http://blog.ubabenefits.com/cafeteria-plans-qualifying-events-and-changing-employee-elections


Implications of the 21st Century Cures Act

Great article from our partner, United Benefit Advisors (UBA) about the impact of the 21st Century Cures Act by Danielle Capilla,

On December 13, 2016, former President Obama signed the 21st Century Cures Act into law. The Cures Act has numerous components, but employers should be aware of the impact the Act will have on the Mental Health Parity and Addiction Equity Act, as well as provisions that will impact how small employers can use health reimbursement arrangements (HRAs). There will also be new guidance for permitted uses and disclosures of protected health information (PHI) under the Health Insurance Portability and Accountability Act (HIPAA). We review the implications with HRAs below; for a discussion of all the implications, view UBA’s Compliance Advisor, “21st Century Cares Act”.

The Cures Act provides a method for certain small employers to reimburse individual health coverage premiums up to a dollar limit through HRAs called "Qualified Small Employer Health Reimbursement Arrangements" (QSE HRAs). This provision will go into effect on January 1, 2017.

Previously, the Internal Revenue Service (IRS) issued Notice 2015-17 addressing employer payment or reimbursement of individual premiums in light of the requirements of the Patient Protection and Affordable Care Act (ACA). For many years, employers had been permitted to reimburse premiums paid for individual coverage on a tax-favored basis, and many smaller employers adopted this type of an arrangement instead of sponsoring a group health plan. However, these "employer payment plans" are often unable to meet all of the ACA requirements that took effect in 2014, and in a series of Notices and frequently asked questions (FAQs) the IRS made it clear that an employer may not either directly pay premiums for individual policies or reimburse employees for individual premiums on either an after-tax or pre-tax basis. This was the case whether payment or reimbursement is done through an HRA, a Section 125 plan, a Section 105 plan, or another mechanism.

The Cures Act now allows employers with less than 50 full-time employees (under ACA counting methods) who do not offer group health plans to use QSE HRAs that are fully employer funded to reimburse employees for the purchase of individual health care, so long as the reimbursement does not exceed $4,950 annually for single coverage, and $10,000 annually for family coverage. The amount is prorated by month for individuals who are not covered by the arrangement for the entire year. Practically speaking, the monthly limit for single coverage reimbursement is $412, and the monthly limit for family coverage reimbursement is $833. The limits will be updated annually.

Impact on Subsidy Eligibility. For any month an individual is covered by a QSE HRA/individual policy arrangement, their subsidy eligibility would be reduced by the dollar amount provided for the month through the QSE HRA if the QSE HRA provides "unaffordable" coverage under ACA standards. If the QSE HRA provides affordable coverage, individuals would lose subsidy eligibility entirely. Caution should be taken to fully education employees on this impact.

COBRA and ERISA Implications. QSE HRAs are not subject to COBRA or ERISA.

Annual Notice Requirement. The new QSE HRA benefit has an annual notice requirement for employers who wish to implement it. Written notice must be provided to eligible employees no later than 90 days prior to the beginning of the benefit year that contains the following:

  • The dollar figure the individual is eligible to receive through the QSE HRA
  • A statement that the eligible employee should provide information about the QSE HRA to the Marketplace or Exchange if they have applied for an advance premium tax credit
  • A statement that employees who are not covered by minimum essential coverage (MEC) for any month may be subject to penalty

Recordkeeping, IRS Reporting. Because QSE HRAs can only provide reimbursement for documented healthcare expense, employers with QSE HRAs should have a method in place to obtain and retain receipts or confirmation for the premiums that are paid with the account. Employers sponsoring QSE HRAs would be subject to ACA related reporting with Form 1095-B as the sponsor of MEC. Money provided through a QSE HRA must be reported on an employee's W-2 under the aggregate cost of employer-sponsored coverage. It is unclear if the existing safe harbor on reporting the aggregate cost of employer-sponsored coverage for employers with fewer than 250 W-2s would apply, as arguably many of the small employers eligible to offer QSE HRAs would have fewer than 250 W-2s.

Individual Premium Reimbursement, Generally. Outside of the exception for small employers using QSE HRAs for reimbursement of individual premiums, all of the prior prohibitions from IRS Notice 2015-17 remain. There is no method for an employer with 50 or more full time employees to reimburse individual premiums, or for small employers with a group health plan to reimburse individual premiums. There is no mechanism for employers of any size to allow employees to use pre-tax dollars to purchase individual premiums. Reimbursing individual premiums in a non-compliant manner will subject an employer to a penalty of $100 a day per individual they provide reimbursement to, with the potential for other penalties based on the mechanism of the non-compliant reimbursement.

See the original article Here.

Source:

Capilla D. (2017 February 01). Implications of the 21st century cures act [Web blog post]. Retrieved from address http://blog.ubabenefits.com/implications-of-the-21st-century-cures-act


Compliance Recap January 2017

Make sure you stay up to date on January's compliances thanks to our partners United Benefits Advisors (UBA),

January was a significant month in the employee benefits world because the new U.S. administration issued an Executive Order announcing its intent to repeal the Patient Protection and Affordable Care Act (ACA). However, January was a relatively inactive month for new laws and administrative rulemaking because the new administration placed a freeze on rulemaking until presidential nominations of agency heads are confirmed.

The Department of Health and Human Services (HHS) released the 2017 poverty guidelines. The Department of Labor (DOL) released its inflation-adjusted civil monetary penalty amounts and an FAQ regarding the contraceptive services objection accommodation. The DOL, HHS, and the Treasury Department released FAQs about family HRA integration with a non-HRA group health plan. The IRS released its 2017 version of the Employer’s Tax Guide to Fringe Benefits and a memo on fixed indemnity health plan benefits tax treatment.

President Trump Signs Executive Order

On January 20, 2017, President Trump signed Executive Order: Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal.

The Executive Order directs the Department of Health and Human Services’ Secretary and the heads of all other executive departments and agencies with authority or responsibility under the Patient Protection and Affordable Care Act (ACA) to exercise all authority and discretion to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the ACA that would impose a fiscal burden on any state, or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.

The Executive Order indicates that the Administrative Procedure Act and its rulemaking process still apply to regulatory revisions. Because confirmation proceedings are not concluded for the heads of the Departments of Health and Human Services, Labor, or the Treasury, the agencies are in a rule promulgation freeze until presidential nominations are confirmed.

HHS Releases 2017 Federal Poverty Guidelines

The 2017 poverty guidelines (also referred to as the FPL) were released by the Department of Health and Human Services (HHS). For a family/household of 1 in the contiguous United States, the FPL is $12,060. In Alaska, the FPL is $15,060 and in Hawaii the FPL is $13,860. Applicable large employers that wish to use the FPL affordability safe harbor under the employer shared responsibility/play or pay rules should ensure that their lowest employee-only premium is equal to or less than $97.38 a month, which is 9.69 percent of the FPL.

DOL Releases Inflation-Adjusted Federal Civil Penalty Amounts

On January 18, 2017, the Department of Labor issued the Federal Civil Penalties Inflation Adjustment Act Annual Adjustments for 2017 which is its first annual adjustment of federal civil monetary penalties. Here are some of the adjustments:

  • Form 5500: For failure to file, the maximum penalty increases from $2,063 to $2,097 daily for every day that the Form 5500 is late.
  • Summary of Benefits and Coverage: For failure to provide, the maximum penalty increases from $1,087 to $1,105 per failure.
  • Genetic Information Nondiscrimination Act: For violations, the maximum penalty increases from $110 per participant per day to $112.

The adjustments are effective for penalties assessed after January 13, 2017, for violations occurring after November 2, 2015.

DOL Releases FAQ Regarding Contraceptive Services Objection Accommodation

As part of implementing the Patient Protection and Affordable Care Act (ACA), the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) issued regulations to require coverage or women’s preventive services, which essentially includes all FDA-approved contraceptives, sterilization procedures, and patient education and counseling for women with reproductive capacity, as prescribed by the health care provider (collectively, contraceptive services).

The regulations exempt group health plans of “religious employers” (specifically defined in the law) from the requirement to provide contraceptive coverage. Later, amended regulations provide an accommodation for eligible organizations – which are not eligible for the religious employer exemption – that object on religious grounds to providing coverage for contraceptive services. Because of litigation, the Departments extended the accommodation to closely held for-profit entities.

Under the accommodation, an eligible organization that objects to providing contraceptive coverage for religious reasons may either:

  1. self-certify its objection to its health insurance issuer (to the extent it has an insured plan) or third party administrator (to the extent it has a self-insured plan) using a form provided by the Department of Labor (EBSA Form 700); or
  2. self-certify its objection and provide certain information to HHS without using any particular form.

Most recently, in 2016, the U.S. Supreme Court considered claims by several employers that, even with the accommodation provided in the regulations, the contraceptive coverage requirement violates the Religious Freedom Restoration Act (RFRA). The Court heard oral arguments and ultimately remanded the case (and parallel RFRA cases) to the lower courts to give the parties “an opportunity to arrive at an approach going forward that accommodates [the objecting employers’] religious exercise while at the same time ensuring that women covered by [the employers’] health plans ‘receive full and equal health coverage, including contraceptive coverage.’”

To address the Court’s statement, the Departments published their request for information (RFI) regarding the Court’s statement and received more than 54,000 public comments. Based on the comments submitted, the Departments released FAQs About Affordable Care Act Implementation Part 36 to indicate that they not making changes to the accommodation for the following reasons:

  • No feasible approach has been identified that would resolve the religious objectors’ concerns, while still ensuring that the affected women receive full and equal health coverage, including contraceptive coverage.
  • The process described in the Court’s supplemental briefing order would not be acceptable to those with religious objections to the contraceptive coverage requirements.
  • There are administrative and operational changes to a process like the one described in the Court’s order that are more significant than the Departments had previously understood and that would potentially undermine women’s access to full and equal coverage.

Agencies Release FAQs About Family HRA Integration with Non-HRA Group Health Plan

The Departments of Labor, Health and Human Services, and the Treasury (collectively, the Departments) released FAQs About Affordable Care Implementation Part 37 to address health reimbursement arrangement (HRA) integration with group health plans.

The Departments indicate that, for purposes of determining whether a family HRA is “integrated” with a non-HRA group health plan, an employer may rely on an employee’s reasonable representation that the employee and other individuals covered by the family HRA are also covered by another qualifying non-HRA group health plan.

Also, a family HRA is permitted to be integrated with a combination of coverage under other qualifying non-HRA group health plans if all individuals who are covered under the family HRA are also covered under other qualifying non-HRA group health plan coverage.

For example, a family HRA covering an employee, spouse, and one dependent child may be integrated with the combination of (1) the employee’s self-only coverage under the non-HRA group health plan of the employee’s employer, and (2) the spouse and dependent child’s coverage under the non-HRA group health plan of the spouse’s employer, if both non-HRA group health plans are qualifying nonHRA group health plans.

IRS Releases 2017 Version of the Employer’s Tax Guide to Fringe Benefits

The IRS released its 2017 Version of Publication 15-B which provides information on the employment tax treatment of various fringe benefits. Fringe benefits are taxable unless an exclusion applies. The publication lists the qualified benefits that a cafeteria plan may include and examples of benefits that a cafeteria plan is not permitted to include. It also provides the 2017 dollar limits for various benefits.

IRS Issues Memo on Fixed-Indemnity Health Plan Benefits Tax Treatment

On January 20, 2017, the IRS released a Memorandum on the tax treatment of benefits paid by fixedindemnity health plans that addresses: (1) whether payments to an employee under an employerprovided fixed-indemnity health plan are excludible from the employee’s income under Internal Revenue Code §105, and (2) whether payments to an employee under an employer-provided fixedindemnity health plan are excludible from the employee’s income under Internal Revenue Code §105 if the payments are made by salary reduction through a §125 cafeteria plan.

Some examples of fixed indemnity health plans are AFLAC or similar coverage, or cancer insurance policies.

Generally, the Internal Revenue Code imposes taxes on wages paid with respect to employment. For federal income tax withholding, the Internal Revenue Code generally requires every employer who pays wages to deduct and withhold taxes on those wages.

The IRS concluded that an employer may not exclude payments under an employer-provided fixedindemnity health plan from an employee’s gross income if the coverage’s value was excluded from the employee’s gross income and wages. Further, an employer may not exclude payments under an employer-provided fixed-indemnity health plan if the plan’s premiums were made by salary reduction through a §125 cafeteria plan.

In the context of an employer-provided fixed-indemnity health plan, when the employer’s payment for coverage by the fixed-indemnity plan is excluded from the employee’s gross income, then the payments by the plan are not excluded from the employee’s gross income

In contrast, when the premiums are paid with after-tax dollars, the payments by the plan are excluded from the employee’s gross income.

To download the full compliance recap click Here.


IRS may have big ACA employer tax woes, advocate says

IRS may play a big part in your company's ACA tax filing. Checkout this article from Benefits Pro about what the IRS will be looking for in companies ACA filings this year by Allison Bell

An official who serves as a voice for taxpayers at the Internal Revenue Service says the IRS may be poorly prepared to handle the wave of employer health coverage offer reports now flooding in.

The Affordable Care Act requires "applicable large employers" to use Form 1095-C to tell their workers, former workers and the IRS what, if any, major medical coverage the workers and former workers received. Most employers started filing the forms in early 2016, for the 2015 coverage year.

This year, the IRS is supposed to start imposing penalties on some employers who failed to offer what the government classifies as solid coverage to enough workers.

If Donald Trump's promise holds true, the Affordable Care Act could be on its way out. Along with it may...

Nina Olson, the national taxpayer advocate, says the IRS was not equipped to test the accuracy of ACA health coverage information reporting data before the 2016 filing season, for the 2015 coverage year. The IRS expected to receive just 77 million 1095-C forms for 2015, but it has actually received 104 million 1095-C's, and it has rejected 5.4 percent of the forms, Olson reports.

"Reasons for rejected returns include faulty transmission validation, missing (or multiple) attachments, error reading the file, or duplicate files," Olson says.

Meanwhile, the IRS has had to develop a training program for the IRS employees working on employer-related ACA issues on the fly, and it was hoping in November to provide the training this month, Olson says.

"The training materials are currently under development," Olson says. She says her office did not have a chance to see how complete the training materials are, or how well they protect taxpayer reports.

Olson discusses those concerns about IRS efforts to administer ACA tax provisions and many other tax administration concerns in a new report on IRS performance. The Taxpayer Advocate Service prepares the reports every year, to tell Congress how the IRS is doing at meeting taxpayers' needs.

In the same report, Olson talks about other ACA-related problems, such as headaches for ACA exchange plan premium tax credit subsidy users who are also Social Security Disability Insurance program users, and she gives general ACA tax provision administration data.

APTC subsidy

The ACA premium tax credit subsidy program helps low-income and moderate-income exchange plan users pay for their coverage.

Exchange plan buyers who qualify can get the tax credit the ordinary way, by applying for it when they file their income tax returns for the previous year. But about 94 percent of tax credit users receive the subsidy in the form of an "advanced premium tax credit."

When an exchange plan user gets an APTC subsidy, the IRS sends the subsidy money to the health coverage issuer while the coverage year is still under way, to help cut how much cash the user actually has to pay for coverage.

When an APTC user files a tax return for a coverage year, in the spring after the end of the coverage year, the user is supposed to figure out whether the IRS provided too little or too much APTC help. The IRS is supposed to send cash to consumers who got too little help. If an APTC user got too much help, the IRS can take some or all of the extra help out of the user's tax refund.

Another ACA provision, the "individual shared responsibility" provision, or individual coverage mandate provision, requires many people to obtain what the government classifies as solid major medical coverage or else pay a penalty.

Individual taxpayers first began filing ACA-related tax forms in early 2015, for the 2014 coverage year. Early last year, individual taxpayers filed ACA-related forms for the second time, for the 2015 coverage year.

Only 6.1 million taxpayers told the IRS they owed individual mandate penalty payments for 2015, down from 7.6 million who owed the penalty for 2014.

But, in part because the ACA designed the mandate penalty to get bigger each year for the first few years, the average penalty payment owed increased to $452 for 2015, from $204 for 2014.

The number of households claiming some kind of exemption from the penalty program increased to 8.6 million, from 8.4 million.

The number of filers who said they had received APTC help increased to 5.3 million for 2015, up from 3.1 million for 2014. And the amount of APTC help reported increased to $18.9 billion for 2015, from $11.3 billion in APTC subsidy help for 2014.

That means the 2015 recipients were averaging about $3,566 in reported subsidy help in 2015, down from $3,645 in reported help for 2014.

Olson says her office helped 10,910 taxpayers with ACA premium tax credit issues in the 12-month period ending Sept. 30, 2016, up from 3,318 in the previous 12-month period.

One of her concerns is how the Social Security Disability Insurance program, which is supposed to serve people with severe disabilities, interacts with the ACA provision that requires people who guess wrong about their income during the coverage year to pay back excess APTC subsidy help.

SSDI lump-sum payment headaches

Some Social Security Disability Insurance recipients have to fight with the Social Security Administration for years to qualify for benefits. Once the SSDI recipients win their fights to get benefits, the SSA may pay them all of the back benefits owed in one big lump sum.

The big, lump-sum disability benefits payments may increase the SSDI recipients' income for a previous year so much they end up earning too much for that year to qualify for ACA premium tax credit help, Olson says in the new report.

The SSDI recipients may then have to pay all of the ACA premium tax credit help they received back to the IRS, Olson says.

So far, IRS lawyers have not figured out any law they can use to protect the SSDI recipients from having to pay large amounts of premium tax credit help back to the government, Olson says.

For now, she says, her office is just trying to work on a project to warn consumers about how accepting any lump-sum payment, including an SSDI lump-sum benefits payment, might lead to premium tax credit headaches.

See the original article Here.

Source:

Bell A. (2017 January 16). IRS may have big ACA employer tax woes, advocate says [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/01/16/irs-may-have-big-aca-employer-tax-woes-advocate-sa?page_all=1


DOL and IRS want a closer look at your retirement plan

Are you worried that your company's retirement plan is not up to government standards? If so take a look at this article from HR Morning about what the DOL and IRS are looking for in retirement plans by Jared Bilski

Two of the most-feared government agencies for employers — the DOL and IRS — have decided there’s a real problem with the way retirement plans are being run, and they’re ramping up their audits to find out why that is.

In response to the many mistakes the agencies are seeing from retirement plan sponsors, the IRS and DOL will be increasing the frequency of their audits.

What does that mean for you? According to experts, plan sponsors can expect the feds to dig deep into the minute operations of plans. That means the unfortunate employers who find themselves in the midst of an audit can expect to be asked for heaps of plan info.

Linda Canafax, a senior retirement consultant with Willis Towers Watson, put it like this:

“The DOL and IRS are truly diving deep into the operations of the plans. We have seen a deeper dive into the operations of plans, particularly with data. Plans may be asked for a full census file on the transactions for each participant. Expect the DOL and IRS to do a lot of data mining.”

What to watch for

Ultimately, it’s impossible to completely prevent an audit. But employers can — and should — do certain things to safeguard themselves in the event the feds come knocking.

First, a self-audit is always a good idea. It’s always better for you to discover any problems before the feds do. Next, you’ll want to be on the lookout for the types of errors that can lead the feds to your workplace in the first place.

The most common errors the IRS and the DOL are looking for:

  • Untimely remittance of employee deferrals (i.e., contributions)
  • Incorrect compensation definition (plan documents dictate which types of comp employees are eligible to contribute from)
  • Not following the plan’s own directives, and
  • Not having a good long-term system (20-30 years out) for tracking and paying benefits to vested participants.

See the original article Here.

Source:

Bilski J. (2017 January 6). DOL and IRS want a closer look at your retirement plan[Web blog post]. Retrieved from address http://www.hrmorning.com/dol-and-irs-want-to-take-a-closer-look-at-your-retirement-plan/


Compliance Recap December 2016

Make sure you stay up-to-date with the most recent alerts thanks to our partners at United Benefit Advisors (UBA).

December was a relatively busy month for new laws and administrative rulemaking in the employee benefits world. President Obama signed the 21st Century Cures Act into law. The IRS issued a reporting deadline reminder, two information reporting summaries, and Q&As on information reporting. A U.S. District Court issued a nationwide preliminary injunction regarding a portion of the Section 1557 regulations. The Centers for Medicare & Medicaid Services issued FAQs on broker compensation and discriminatory marketing practices. The Departments of Labor, Health and Human Services, and the Treasury issued FAQs on HIPAA special enrollment, women’s preventive services, and qualifying small employer health reimbursement arrangements. The Equal Employment Opportunity Commission issued an informal discussion letter regarding wellness programs under the ADA and GINA. The IRS issued final regulations about the premium tax credit and deferred finalizing the opt-out arrangement proposed rules to a later time.

UBA Updates

UBA released three new advisors in December:

  •  21st Century Cures Act
  •  Qualifying Small Employer Health Reimbursement Accounts
  •  FAQ on HIPAA Special Enrollment; QSE HRAs Released

UBA also updated existing guidance:

  • Cafeteria Plans: Qualifying Events and Changing Employee Elections (previously called Cafeteria Plans: Change in Status and Changing Employee Elections)
  • HRAs, HSAs, and HFSAs under the ACA

21st Century Cures Act
On December 13, 2016, President Obama signed the 21st Century Cures Act into law. Of the Act’s many components, employers should be aware of the impact the Act will have on the Mental Health Parity and Addiction Equity Act, as well as provisions that will affect the way certain small employers can use health reimbursement arrangements to reimburse individual premiums. There will also be new guidance for permitted uses and disclosures of protected health information under the Health Insurance Portability and Accountability Act (HIPAA).

IRS Reminder and Summaries
In December 2016, the IRS issued a reminder about its extension of the 2017 due date for employers and coverage providers to furnish information statements to individuals. The due dates to file those returns with the IRS are not extended. This IRS chart describes the upcoming deadlines. The IRS also issued two summaries: Information Reporting by Providers of Minimum Essential Coverage and Information Reporting by Applicable Large Employers.

IRS Q&As about Information Reporting by Employers on Form 1094-C and Form 1095-C
In December 2016, the IRS updated its longstanding Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C that provides information about

  • Basics of Employer Reporting
  • Reporting Offers of Coverage and other Enrollment Information
  • Reporting for Governmental Units
  • Reporting Offers of COBRA Continuation Coverage and Post-Employment Coverage
  • Reporting Coverage under Health Reimbursement Arrangements

The Q&A describes when and how an employer reports its offers of coverage and provides examples to illustrate the codes that employers should use. The updated Q&A provides information on COBRA reporting that had been left pending in earlier versions of the Q&A for the past year.

U.S. District Court Issues Nationwide Preliminary Injunction – No Impact on Employee Benefit Plan Requirements
On December 31, 2016, the U.S. District Court for the Northern District of Texas granted a preliminary injunction sought by several states and private health care providers. The court issued a nationwide injunction that prevents the U.S. Department of Health and Human Services (HHS) and HHS’ Secretary from enforcing the Patient Protection and Affordable Care Act’s Section 1557 regulations that prohibit discrimination based on gender identity or pregnancy termination.

Practically speaking, until this litigation is resolved, healthcare providers and states will not face enforcement by HHS if they do not comply with the regulations that prohibit discrimination based on gender identity or pregnancy termination.

Healthcare providers and states should continue to comply with all other provisions of the Section 1557 regulations. This would include compliance with any portion of the Section 1557 regulations that impact employee benefit plans. On January 3, 2017, HHS released the following statement: “HHS’s Office for Civil Rights will continue to enforce the law – including its important protections against discrimination on the basis of race, color, national origin, age, or disability and its provisions aimed at enhancing language assistance for people with limited English proficiency, as well as other sex discrimination provisions – to the full extent consistent with the Court's order.”

CMS Frequently Asked Questions on Agent/Broker Compensation and Discriminatory Marketing Practices
In December 2016, the Centers for Medicare & Medicaid Services (CMS) issued a Q&A to address issuers’ attempts to discourage insurance offers to higher risk individuals by reducing or eliminating commissions to brokers for sales to higher risk individuals.

Federal regulations prohibit marketing practices that discourage higher risk individuals’ health insurance coverage enrollment, both inside and outside of the Marketplaces. In its Q&A, CMS concludes that a commission arrangement or other agent/broker compensation that is structured to discourage agents and brokers from marketing to and enrolling consumers with significant health needs constitutes a discriminatory market practice prohibited by federal regulations.

CMS provides the following example. If an issuer pays agents or brokers less through all forms of compensation for higher metal level plans (such as platinum and gold level plans), which are associated with higher utilization, than the issuer pays for lower metal level plans (such as bronze and silver level plans), then the payment arrangement is a failure to comply with the federal guaranteed availability provisions and qualified health plan marketing standards.

CMS will enforce this guidance for policy years beginning on January 1, 2018, in an individual or merged market, and plan years beginning after April 1, 2017, in a small group market in a state that permits quarterly rate updates. For non-grandfathered coverage offered with a plan or policy year beginning on or after such dates, issuer agent/broker compensation arrangements and accompanying marketing and distribution practices must comply with CMS’ guidance, regardless of whether coverage is offered through or outside of the Marketplaces.

FAQs on HIPAA Special Enrollment; QSE HRAs Released
On December 20, 2016, the Department of Labor (DOL), Department of Health and Human Services (HHS), and the Department of the Treasury (collectively, the Departments) issued FAQs About Affordable Care Act Implementation Part 35. The FAQs cover a new HIPAA special enrollment period, an update on women’s preventive services that must be covered, and clarifying information on qualifying small employer health reimbursement arrangements (QSE HRAs).

EEOC Informal Discussion Letter
In December 2016, the Equal Employment Opportunity Commission (EEOC) released one informal discussion letter to address wellness programs under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). These letters are customarily released to the public within a few months of being provided to the initial addressee.

The letter confirmed that the ADA wellness rules apply only to wellness programs that require a medical exam or answers to disability-related questions, or both. The ADA wellness program rules does not apply if the same incentive can be earned with or without a medical exam or answering disability- related questions. Further, employers may offer incentives only to employees who enroll in the employer-sponsored group health plan and complete wellness activities; if the incentive is the same across all the employer’s group health plans, then the employer must use the lowest-cost option to calculate the applicable incentive limit.

IRS Premium Tax Credit Regulation VI
On December 19, 2016, the IRS issued final regulations relating to the health insurance premium tax credit.
If an individual declines enrollment in affordable, minimum value employer-sponsored coverage for a year, and the individual is not given an opportunity to enroll in employer-sponsored coverage for one or more succeeding years, the individual is not disqualified from premium tax credits for the succeeding years. For purposes of the employer shared responsibility penalty, a large employer may be treated as not having offered coverage for those succeeding years.

On a separate issue, although the proposed rule addressed the effect of payments made available under opt-out arrangements on an employee’s required contribution for purposes of premium tax credit eligibility and an exemption from the section 5000A individual shared responsibility provision, the final regulations do not finalize regulations on the effect of opt-out arrangements on an employee’s requirement contribution.

Per the final regulations, the Treasury Department and the IRS continue to examine the issues raised by opt-out arrangements and expect to finalize regulations later. Until final regulations are applicable, individuals and employers can continue to rely on the proposed rule and the guidance provided in Notice 2015–87.

Question of the Month

Q. Under the ACA, which employers must report information on Form W-2 and what information must be reported?

A. The Affordable Care Act requires employers to report the cost of coverage under an employer- sponsored group health plan.

Reporting the cost of health care coverage on Form W-2 does not mean that the coverage is taxable.

Employers that provide "applicable employer-sponsored coverage" under a group health plan are subject to the reporting requirement. This includes businesses, tax-exempt organizations, and federal, state and local government entities (except with respect to plans maintained primarily for members of the military and their families). Federally recognized Indian tribal governments are not subject to this requirement.

Employers that are subject to this requirement should report the value of the health care coverage in Box 12 of Form W-2, with Code DD to identify the amount. There is no reporting on Form W-3 of the total of these amounts for all the employer’s employees.

In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. See the chart below from the IRS’ web page and its questions and answers for more information.

Download the compliance recap here.


IRS Releases 2016 Forms and Instructions for 6055/6056 Reporting

Updated January 4, 2017

Make sure you are up-to-date with the IRS new rules on 6055/6056 from our partners at United Benefits Advisor (UBA).

Background
Under the Patient Protection and Affordable Care Act (ACA), individuals are required to have health insurance while applicable large employers (ALEs) are required to offer health benefits to their full-time employees. In order for the Internal Revenue Service (IRS) to verify that (1) individuals have the required minimum essential coverage, (2) individuals who request premium tax credits are entitled to them, and (3) ALEs are meeting their shared responsibility (play or pay) obligations, employers with 50 or more full-time or full-time equivalent employees and insurers are required to report on the health coverage they offer.

Final instructions for both the 1094-B and 1095-B and the 1094-C and 1095-C were released in September 2016, as were the final forms for 1094-B, 1095-B, 1094-C, and 1095-C. In December 2016, the IRS updated its longstanding Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C.

When? Which Employers?
Reporting will be due early in 2017, based on coverage in 2016. All reporting will be for the calendar year, even for non-calendar year plans. The reporting requirements are in Sections 6055 and 6056 of the ACA. Draft instructions for both the 1094-B and 1095-B, and the 1094-C and 1095-C were released in August 2016. The final instructions are substantially similar to the draft instructions.

6055 Requirements: Forms 1094-B and 1095-B
IRS Form 1095-B is used to meet the Section 6055 reporting requirement. Section 6055 reporting relates to having coverage to meet the individual shared responsibility requirement. Form 1095-B is used by insurers, plan sponsors of self-funded multiemployer plans, and plan sponsors of self-funded plans that have fewer than 50 employees to report on coverage that was actually in effect for the employee, union member, retiree or COBRA participant, and their covered dependents, on a month-by-month basis. Filers use Form 1094-B as the transmittal to submit the 1095-B returns.

6056 Requirements: Forms 1094-C and 1095-C
IRS Form 1095-C is primarily used to meet the Section 6056 reporting requirement. The Section 6056 reporting requirement relates to the employer shared responsibility / play or pay requirement. Information from Form 1095-C is also used to determine whether an individual is eligible for a premium tax credit. Employers with 50 or more full-time or full-time equivalent employees complete much of Form 1095-C to report on coverage that was offered to the employee and eligible dependents. In addition, to save large employers that sponsor self-funded plans from having to complete two forms, a Part III has been included in Form 1095-C. Large employers with self-funded plans use that part of the form to report information about actual coverage that otherwise would be reported on Form 1095-B. Employers with 50 or more full- time or full-time equivalent employees with fully insured plans will skip section III, and their carrier will complete a separate B series form to report that information for them.

Form 1094-C is used in combination with Form 1095-C to determine employer shared responsibility penalties.
Employers with 50 or more full-time or full-time equivalent employees must provide Form 1095-C to virtually all employees who were full time (averaged 30 hours per week) during any month during the year, even if coverage was not offered to the employee or the employee declined coverage. (If the full- time employee never became eligible during the year, most likely because the employee is a variable- hours employee in an initial measurement period, the form does not need to be provided).

2016 Updates
The 2016 instructions for Forms 1094-C and 1095-C include some form revisions and code changes. The Qualifying Offer Method Transition Relief is not applicable for 2016. Clarification language was added to remind filers of the definition of “full-time employee” and to inform recipients that the form should not be submitted with their returns. New codes 1J and 1K were added to address conditional offers of spousal coverage.

For the 1094-B and 1095-B forms, there are a few form revisions. Clarification language was added to remind recipients that the form should not be submitted with their returns. Also, the form is updated to reflect the rule that a taxpayer identification number (TIN) may be entered.

1094-C and 1095-C Highlights

  • Who Must File
  • Extensions and Waivers
  • Full-Time Employee Count
  • Correcting Forms 1094-C and 1095-C
  • Extensions to Furnish Statements to Employees
  • Penalties
  • 98 Percent Offer Method
  • Qualifying Offer Method
  • Plan Start Month Box
  • Multiemployer Plan Relief
  • Reporting Offer of Coverage for the Month in Which an Employee is Hired
  • Reporting Offer of Coverage for the Month in Which an Employee Terminates Employment
  • COBRA Coverage
  • Post-Employment (Non-COBRA) Coverage
  • Line 15 Calculations
  • Break in Service
  • HRA Reporting
  • Conditional Offer of Spousal Coverage

1094-B and 1095-B Highlights

  • Who Must File
  • Correcting Forms 1094-B and 1095-B
  • Coverage in More than One Type of Minimum Essential Coverage
  • Reporting

Download the release here.


3 things NAHU told the IRS about ACA premium tax credits

The National Association of Health Underwriters has tried to show Affordable Care Act program managers that it can take a practical, apolitical approach to thinking about ACA issues.

Some of the Washington-based agent group's members strongly supported passage of the Patient Protection and Affordable Care Act of 2010 and its sister, the Health Care and Education Reconciliation Act of 2010. Many loathe the ACA package.

But NAHU itself has tried to focus mainly on efforts to improve how the ACA, ACA regulations and ACA programs work for consumers, employer plan sponsors and agents. In Washington, for example, NAHU has helped the District of Columbia reach out to local agents. NAHU also offers an exchange agent certification course for HealthCare.gov agents.

Now NAHU is investing some of the credit it has earned for ACA fairness in an effort to shape draft eligibility screening regulations proposed this summer by the Internal Revenue Service, an arm of the U.S. Treasury Department.

Janet Stokes Trautwein, NAHU's executive vice president and chief executive officer, says she and colleagues at NAHU talked to many agents and brokers about the draft regulations.

For a look at just a little of what she wrote in her comment letter, read on:

1. Exchanges have to communicate better

The IRS included many ideas in the draft regulations about ways to keep consumers honest when they apply for Affordable Care Act exchange premium tax credit subsidies.

ACA drafters wanted people to be able to use the subsidies to reduce out-of-pocket coverage costs as the year went on, to reduce those costs to about what the employee's share of the payments for solid group health coverage might be.

To do that, the drafters and implementers at the U.S. Department of Health and Human Services and the IRS came up with a system that requires consumers to predict in advance what their incoming will be in the coming year.

Consumers who predict their income will be too low and get too much tax credit money are supposed to true up with the IRS when the file their taxes the following spring. The IRS has an easy time getting the money when consumers are supposed to get refunds. It can then deduct the payments from the refunds. When consumers are not getting refunds, or simply fail to file tax returns, the IRS has no easy way to get the cash back.

The exchanges and the IRS also face the problem that some people earn too little to qualify for tax credits but too much to qualify for Medicaid. Those people have an incentive to lie and say their income will be higher than it is likely to be.

Trautwein writes in her letter that the ACA exchange system could help by doing more to educate consumers when the consumers are applying for exchange coverage.

"The health insurance exchange marketplaces [should] be required to clearly notify consumers of the consequences of potential income-based eligibility fraud at the time of application, in order to help discourage it from ever happening," Trautwein writes.

2. Federal health and tax systems have to work smoothly together

Trautwein notes in her letter that the ACA exchange system has an exchange eligibility determination process, and that the IRS has another set of standards for determining, based on a consumer's access, or lack of access, to employer-sponsored health coverage, who is eligible for premium tax credit subsidies.

NAHU is worried about the possibility that a lack of coordination between the IRS and the HHS could lead to incorrect decisions about whether exchange applicants have access to the kind of affordable employer-sponsored coverage with a minimum value required by the ACA laws and regulations, Trautwein writes.

"We believe that it is fairly easy for consumers to mistakenly apply for and then receive advanced payments of a premium tax credit for which they are not eligible" based on wrong ideas about affordability, she says.

Consumers could easily end up owing thousands of dollars in credit repayments because of those kinds of errors, she says.

In the long run, employers should be reporting on the coverage they expect to offer in the coming year, rather than trying to figure out what kind of coverage they offered in the past year, Trautwein says.

In the meantime, the IRS and HHS have to work together to improve the employer verification process, she says.

3. Employees do not and cannot speak ACA

Trautwein says NAHU members also worry about exchange efforts to depend on information from workers to verify what kind of coverage the workers had.

"Based on our membership's extensive work with employee participants in employer-sponsored group benefit plans, we can say with confidence that the vast majority of employees do not readily understand the various ACA-related labeling nuances of their employer-sponsored health insurance coverage offerings," she says.

"Terms that are now commonplace to health policy professionals, like minimum essential coverage and excepted benefits, are meaningless to mainstream consumers," she says.

NAHU does not see how an exchange will know what kind of coverage a worker really had access to until after employer reporting is reconciled with information from the exchanges and from individual tax returns, which might not happen until more than a year after the consumer received the tax credit subsidies, Trautwein says.

"This weakness on the part of the exchanges could leave consumers potentially liable for thousands of dollars of tax credit repayments, all because of confusing terms and requirements and inadequate eligibility verification mechanisms," she says.

See the Original Article Here.

Source:

Bell, A. (2016, September 30). 3 things NAHA told the IRS about ACA premium tax credits [Web log post]. Retreived from http://www.lifehealthpro.com/2016/09/30/3-things-nahu-told-the-irs-about-aca-premium-tax-c?page_all=1


New ACA Reporting Guidance

Just as employers are settling down after a hectic and often frustrating year of Affordable Care Act (ACA) reporting compliance, the IRS is gearing up for next year, and just released the 2016 draft forms and instructions. Employers should spend a few moments becoming familiar with the proposed changes and clarifications since early preparation is key to successful (and less stressful) reporting.

As background, applicable large employers (ALEs) must self-report information relevant to IRS assessment of employer shared responsibility penalties on Forms 1094-C and 1095-C, including whether full-time employees were offered (or not offered) minimum value and affordable health coverage. Small employers who offer self-insured plans are considered coverage providers and must also report coverage information for employees and dependents relevant to assessing the individual shared responsibility mandate by filing Forms 1094- B and 1095-B. An ALE that is self-insured is also considered a coverage provider, but reports information relevant to the individual mandate for employees and dependents on Part III of Forms 1094-C and 1095-C. (Note: Health reimbursement arrangements (HRAs) are considered minimum essential coverage for reporting purposes and may require an employer sponsoring an HRA integrated with an insured plan to report coverage as a selfinsured employer.)

The more notable updates for employers relate to Forms 1094-C and 1095-C. ALEs reporting on those forms should note the following changes and clarifications.

  • Transition Relief. In 2015, the IRS provided various transition relief from the Section 4980H requirements to provide affordable and minimum value coverage (ALEs with 50 to 99 full-time equivalent employees (FTEs) were generally exempt, and ALEs with 100 or more FTEs were afforded reduced compliance obligations and penalties). The 2016 Form 1095-C and instructions reflect the expiration of this relief for plan years beginning on or after January 1, 2016, but cautions those employers with non-calendar year plans that may rely on the transition through the last day of the plan year ending in 2016 that reporting is still required for all 12 months. Presumably, this is aimed at small ALEs that mistakenly assumed the transition relief from penalties included transition relief from reporting. The IRS also eliminated the “Qualifying Offer Method Transition Relief” for 2016 reporting, and ALEs may use the Qualifying Offer Method for simplified 1095-C compliance if an employee received a “qualifying offer” for all 12 calendar months.
  • Authoritative Transmittal Clarification. When an ALE submits more than one transmittal of Forms 1095-C to the IRS, the ALE must file an “authoritative transmittal” that includes data on all of the Forms 1095-C filed for that ALE. This requirement generated a lot of confusion in 2015 for employers that are part of an aggregated ALE (a group of employers under common control) – especially when the ALE members all participated in a common plan with a single ALE member responsible for the reporting. The draft instructions clarify that the “authoritative transmittal” requirement applies on an Employer Identification Number (EIN) basis and should not be used for submitting Forms 1095-C on behalf of more © 2016 Fisher & Phillips, LLP, and United Benefit Advisors, LLC. All rights reserved. 8 than one ALE member of a controlled group of employers. Thus, each employer with a separate EIN should have a separate Form 1094-C designated as the authoritative transmittal for submitting Forms 1095-C to the IRS. The instructions also clarify how to report employees that transfer between or are shared by ALE members in an aggregated group.
  • Full-Time Employee Definition. The draft instructions emphasize to employers that when reporting “full-time employees,” employers must use the definition of full-time employees in Section 4980H and related regulations regardless, of the employer’s classifications of employees under its personnel policies or plan eligibility. Remember that the ACA definition of “fulltime” is not always consistent with an employer’s eligibility policies for full-time employee benefits.
  • Form 1095-C Coding Changes. Clarifications and changes to the codes on Form 1095-C have been made, including the addition of Codes 1J and 1K for Line 14 to reflect “conditional offers of spousal coverage,” which are offers subject to one or more reasonable, objective conditions such as an offer to make spousal coverage available only if the spouse is not eligible for other coverage.
  • Employee Required Contribution. A new term, “employee required contribution,” is added for Line 15 affordability reporting and generally means the employee’s share of the monthly cost for the lowest-cost, self-only minimum essential coverage providing minimum value that is offered to the employee by the ALE member. In determining the employee required contribution, employers need to incorporate IRS guidance regarding the impact of flex credits and opt-out payments that may increase the employee required contribution for affordability purposes.
  • Continuation Coverage. New COBRA reporting instructions are included for employees who terminated employment. In addition, the instructions clarify that offers of post-employment coverage other than COBRA to a former employee should not be reported as an offer of coverage.

Stay tuned for future updates and issuance of the final forms and instructions for 2016. In the meantime, copies of the proposed 2016 Forms and Instructions are available from the IRS website.

Content included in the Summer 2016 Benefits and Employment Briefing provided by our partner, United Benefit Advisors.