For the second time in three years, the U. S. Supreme Court has upheld a key provision of the Affordable Care Act. The Supreme Court ruled last week in King v. Burwell that premium tax credits are available to lower-income individuals who buy health insurance on a federal exchange, as well as to those who buy insurance on a state exchange. The ruling means that the Affordable Care Act will persist in its current form, at least for now, and employers must continue to grapple with its restrictions, mandates, and reporting requirements.
Continue Reading Supreme Court Saves Affordable Care Act Again

Starting in 2015, the Affordable Care Act imposes burdensome new reporting requirements on employers and insurers that provide group health coverage.  We described the reporting requirements in earlier posts, here and here.

Employers and other reporting entities have anxiously awaited the IRS forms on which these reports will be made, so that they can program and test their computer systems, develop administrative procedures, coordinate reporting responsibility with their affiliates, and make arrangements with their business partners to collect and report the necessary information.  The IRS posted drafts of the reporting forms on its website yesterday.  Unfortunately, however, the instructions to the forms—which are expected to provide much of the detail programmers will need—will not be available until August.
Continue Reading IRS Releases ACA Reporting Forms

Many employers will face two significant new reporting requirements for employee health coverage starting next year:

  • Section 6055 Return:  Employers and insurers that provide minimum essential coverage must report information to the IRS about each covered individual for each month, and provide a copy of the report to covered employees and retirees.
  • Section 6056 Return:  Employers with at least 50 full-time employees must report additional information to the IRS (with a copy to the employee) to confirm that the employer offers health coverage that is affordable and provides minimum value to full-time employees and their dependents.

Final regulations (available here and here) adopt the reporting requirements proposed last fall, with only modest changes.  (We described the proposed requirements in our earlier post: Health Coverage Reporting Rules Create New Burdens for Employers.)  These are some of the challenges employers will confront as they prepare to comply with the new requirements:

No Further Extension of the Reporting Deadline

The IRS announced last year that it would waive the reporting penalties for coverage provided in 2014.  The final regulations do not provide any further extension of the reporting deadline.  Accordingly, the first reports will be due early in 2016 for health coverage provided in 2015.

Employers will have to develop administrative systems and procedures to collect the required information, and many employers will wish to engage outside vendors to help them comply with the new reporting requirements.  These arrangements generally must be in place by January 1, 2015, when the new requirements take effect.

No Electronic Statements Unless the Employee Consents 

An employer must provide individual statements to employees showing the health coverage information reported to the IRS for the employee and the employee’s family.  Although employers had requested rules that would allow them to furnish these statements electronically, the final regulations continue to provide that an employer may furnish an electronic statement only if the individual consents.  The consent rules will make electronic delivery impractical for many employers.

The employer’s request for consent must refer to the specific forms that the employer wishes to provide electronically.  Accordingly, even if an employer has previously received the employee’s consent to furnish other forms (such as Form W-2) electronically, or has received a general consent to furnish all forms electronically, these consents will not extend to the new health coverage statements.
Continue Reading Final Health Coverage Reporting Rules Offer Employers Little Relief

The final shared responsibility regulations under the Affordable Care Act, issued earlier this month, in large part maintain the rules set forth in the proposed regulations.  However, there are several ways in which the final regulations modify or clarify these rules.  Below is a top ten list (which we’re sure David Letterman would use if he were a benefits lawyer) of things to know about the final regulations.

The rules govern the requirement that employers with at least 50 full-time employees could owe a “shared responsibility” excise tax if they fail to offer group health coverage.  One penalty (known as the “A” penalty) applies if an employer fails to offer group health coverage to 95% of its employees on every day of a month and at least one employee purchases coverage through an exchange with a federal subsidy; the “A” penalty each month is an excise tax of 1/12 of $2,000 for each full-time employee in excess of 30.  Even if the employer meets the 95% test, a separate penalty (known as the “B” penalty) applies if the employer fails to offer affordable health coverage to an employee, and the employee purchases coverage through an exchange with a federal subsidy; the “B” penalty each month is an excise tax of 1/12 of $3,000 per each such employee who actually purchases coverage through an exchange with a federal subsidy.  A “full-time employee” is a common-law employee who works an average of at least 30 hours per week. (You will find a more detailed description of the shared responsibility rules here and here.)

Below are our top 10 highlights of the final regulations:
Continue Reading Top Ten Things to Know about the Final Shared Responsibility Regulations

Starting in 2014, most individuals must maintain minimum essential health coverage or pay a penalty.  (Please see our post here for a description of the health coverage mandates that apply to individuals and their families.)  The Internal Revenue Service recently issued a proposed regulation clarifying the minimum essential coverage rules and other aspects of the individual mandate.  Several points addressed in the proposed regulation will be of interest to employers that offer group health coverage to their employees.

Excepted Benefits Are Not Minimum Essential Coverage

Employers might wish to structure programs providing limited health benefits—such as dental and vision coverage or employee assistance—as “excepted benefits” so that these programs will avoid the group health plan requirements.  Final regulations issued last year explained that minimum essential coverage does not include “health insurance coverage” consisting only of excepted benefits.  The proposed regulation clarifies that no coverage (whether insured or self-insured) consisting solely of excepted benefits will qualify as minimum essential coverage.

This clarification confirms that coverage consisting solely of excepted benefits will not satisfy the employer’s obligation to offer minimum essential coverage to at least 95% of its full-time employees or the individual’s obligation to maintain minimum essential coverage.  Employers must offer, and individuals must maintain, other group health coverage in order to satisfy these shared-responsibility mandates.

On the positive side, however, a lower-income employee who is covered by a plan that offers only excepted benefits will not be prevented from receiving premium tax credits.  The tax credits help lower-income individuals purchase individual health coverage on an exchange.  An employee who has minimum essential coverage from an employer health plan is not eligible for premium tax credits; but employer coverage consisting solely of excepted benefits will not affect the employee’s eligibility.
Continue Reading New Guidance Clarifies Minimum Essential Coverage Rules

The IRS has released proposed regulations that implement two significant new reporting requirements for employer group health plans.  Employers and insurers that provide minimum essential health coverage must report information to the IRS about the coverage provided to each individual for each month, with a copy of the statement to the individual.  Employers with at least 50 full-time employees must report additional information to the IRS, with a copy to each full-time employee, to indicate whether the coverage they offer (if any) is affordable and provides minimum value.  Both reporting requirements will become effective in 2015.  Reporting entities must develop administrative systems and procedures before the effective date so that they will be able to begin collecting the required information in 2015.

Below is summary of the requirements for private employers sponsoring single-employer plans followed by a discussion of the reporting requirements.

Section 6055 Returns Section 6056 Returns
Who Must File Insurer, for insured plans. Employer, for self-insured plans Employers with 50 or more full-time employees (regardless of whether or how coverage is   provided)
Form 1095-B 1095-C
Content
  • name, address, and EIN of employer
  • name, address, and TIN of insurer (for insured plans)
  • name, address, TIN of each employee or retiree and each covered spouse and/or dependent
  • for each covered individual, the months of the year for which coverage was provided
  • other information required by IRS in later guidance
  • name, address, and EIN of employer
  • name and phone number of employer’s contact person
  • whether the employer offered minimum essential coverage to its full-time employees each month of the year
  • the number of full-time employees each month, and the name, address, and TIN of each employee
  • for each full-time employee, the months when coverage was available and the months when coverage was provided
  • for each full-time employee, the employee’s share of the monthly premium for self-only coverage under the lowest-cost option (if any) that provides minimum value
  • other information required by IRS (see list below for information the IRS expects to require)
Additional   Content for Notice to Individual
  • contact phone number for entity required to file statement
  • policy number (for insured plans)
none
Due Date for Returns To the IRS: February 28 (or by March 31, if filing electronically).

To the individual: January 31


Continue Reading Health Coverage Reporting Rules Create New Burdens for Employers

Earlier this year we described the IRS’s Voluntary Classification Settlement Program (VCSP), which substantially reduces an employer’s liability for back taxes when the employer voluntarily reclassifies employees who have been treated as independent contractors.  Through June 30, the relief program is available even if the employer did not file Forms 1099 reporting the compensation paid to the workers.  Starting in July, however, an employer will be eligible for the program only if the employer filed all required Forms 1099 for the previous three years with respect to the workers it wishes to reclassify.

What does worker classification have to do with health reform?  Quite a lot, as it turns out.  Starting in 2014, employers with more than 50 full-time employees will owe a “shared responsibility” excise tax if they fail to offer group health coverage on every day of the month to at least 95% of their full-time employees and the employees’ dependent children.  A “full-time employee” is a common-law employee who works an average of at least 30 hours per week.  (You will find a more detailed description of the shared responsibility rules here and here.)
Continue Reading Misclassified Workers Create Penalty Risks Under Health Reform

The Affordable Care Act requires an employee to have a minimum amount of health coverage starting in 2014, and requires an employer to offer affordable health coverage to its employees.  But how do these health mandates apply to the employee’s spouse and dependents?  Recent IRS regulations fill in several pieces of this puzzle.

Several provisions of the Affordable Care Act work together to expand health coverage.  An individual mandate requires most individuals to maintain minimum essential health coverage or pay a penalty.  In order to encourage employers to offer health coverage to their employees, an employer mandate imposes an excise tax on large employers that fail to offer affordable, minimum value coverage to their full-time employees.  If a lower-income individual is not eligible for affordable coverage from another source and purchases individual health insurance, the individual receives a refundable premium tax credit that helps make the coverage affordable.  Although these provisions are related, each provision applies in a different way to an employee’s family members.  The family coverage rules have important implications for the design and administration of employer group health plans.


Continue Reading IRS Clarifies Family Health Coverage Mandates

Starting in 2014, large employers will have to pay a “shared responsibility” excise tax up to $3,000 per employee if they fail to provide affordable health coverage to full-time employees and their dependents.  The Treasury Department and IRS have published a proposed regulation and frequently-asked questions that make important changes in prior guidance. 
Continue Reading IRS Proposes Shared Responsibility Tax Rules for Employers