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ACA Reporting Costs Increase for Noncompliance

July 16, 2015 by admin

The Trade Promotion Authority bill signed into law the beginning of this month included provisions which increase the penalties related to employers’ Affordable Care Act (ACA) reporting (e.g., Forms 1094-C and 1095-C). The bill also reinstated the trade-related Health Coverage Tax Credit (the HCTC), which had expired on December 31, 2013.

The trade bill made increases in the penalties for IRS reporting failures. These increased penalties also apply to other information returns and filings, such as W-2s, and are effective for reporting required to be filed or furnished after 2015. So the increased penalties would apply to the first year’s filings under the ACA, which relate to 2015, but are due in early 2016.

The general penalty for failure to file a required information return with the IRS (which is subject to reduction, waiver or increase for various reasons) will increase from $100 per return to $250 per return.
The cap on the total amount of penalties for such failures during a calendar year will increase from $1,500,000 to $3,000,000.
If a failure relates to both an information return (e.g., a Form 1095-C required to be filed with the IRS) and a payee statement (e.g., that same Form 1095-C required to be furnished to the individual), these penalties are doubled.
If a failure is caused by intentional disregard, the new $250 penalty noted above is doubled to $500 for each failure, and no cap applies to limit the amount of penalties that can be applied with respect to that calendar year.

When looking at these increases, you should remember that these increases don’t affect the IRS’s enforcement policy for the first year of ACA filing. Specifically, the IRS won’t penalize employers that can show they make good faith efforts to comply with the ACA reporting requirements.

So, the “good faith efforts” standard is still in effect, but the penalties that will apply if that standard is not met are much more severe. If the employer attempts to complete the forms, but the information reported is incorrect or incomplete, that reporting failure would be considered a good faith effort and may be excused under the IRS enforcement policy. If, however, the employer does not file or provide a required form by the deadline, it seems that the good faith standard would not apply.

Filed Under: Home Page Middle Section, News and Compliance Tagged With: ACA, benefit review process, benefits renewal, group insurance benefits, insurance benefits, Obamacare, prescription benefits

New IRS Guidance on Forms 1094 and 1095

June 17, 2015 by admin

The IRS has provided both new and updated Q&A guidance on the reporting requirements for applicable large employers under the federal tax code. As background, beginning in 2016, applicable large employers must file Forms 1094 and 1095 to provide information to the IRS and plan participants about health coverage provided in the prior year.

The forms are used by the IRS to enforce employer penalties according to the federal tax code, as well as individual mandate and tax credit eligibility rules. The latest guidance consists of an updated Q&A document covering basic reporting requirements and a new Q&A document addressing more specific issues that may arise while completing Forms 1094 and 1095.

Here are some highlights:

Clarifications on who must report. The guidance clarifies that an applicable large employer with no full-time employees for any month of the year is not obligated to report unless the employer sponsors a self-insured health plan in which any employee, spouse, or dependent is actually enrolled. In that case, it must still file Forms 1094-C and 1095-C even if it has no full-time employees. The guidance also confirms that an applicable large employer must file and provide Form 1095-C to all full-time employees regardless of whether they were offered coverage during the year.

Controlled groups. Examples show how reporting differs where an applicable large employer reports for separate divisions and where applicable large employers are part of a controlled group. In the former situation, employees working for multiple divisions must receive aggregated information on a single Form 1095-C. In the latter situation, employees will receive a separate Form 1095-C for full-time employment with each applicable large employer in the controlled group.

Qualifying offer method of reporting. The updated Q&As now address reporting under the qualifying offer method, which allows applicable large employers to furnish a simplified employee statement to employees receiving qualifying offers for all 12 months of the year. The Q&As emphasize that use of simplified statements is not available for employees who actually enroll in an applicable large employer’s self-insured health plan.

Note: No mention is made of the qualifying offer method transition relief available in 2015, which allows an applicable large employer to use a different simplified statement provided that it makes qualifying offers to at least 95% of its full-time employees.

Delivery to employees. The guidance confirms that a Form 1095-C may be delivered to employees in any manner permitted for delivery of Form W-2, including hand-delivery. However, unlike Form W-2, employers need not furnish a midyear Form 1095-C upon an employee’s request following termination of employment.

New hires and terminating employees. When reporting offers of coverage on Part II of Form 1095-C, applicable large employers may indicate that an offer of coverage was made for a month only if the offer would have provided coverage for every day of the month. Therefore, applicable large employers should report on Form 1095-C that no coverage was offered in the month an employee was hired (unless an offer of coverage extended to every day of that month). Similarly, if a terminating employee’s coverage ends before the end of the month of termination, the applicable large employer must report that no coverage was offered for the month. (In each case, the applicable large employer may be able to avoid liability for employer penalties under the federal code, even though coverage was not offered for the full month.) In contrast, when reporting coverage information under Part III of Form 1095-C, an employee should be reported as having coverage if the employee is enrolled on any day of the month.

Note: The disparate treatment of partial months of coverage highlights the multiple purposes of Form 1095-C. Under the federal tax code, applicable large employers generally get credit for offering coverage for a month only if the offer applies to the full month — but an individual avoids the individual mandate penalty for a month by having coverage on any day of the month.
Third-party reporting. The guidance verifies that applicable large employers may designate third parties to perform reporting on their behalf. The new Q&As confirm that a governmental applicable large employer may designate another governmental entity to accept reporting responsibility on its behalf; they also explain the allocation of responsibilities under various combinations of self-insured and fully insured coverage options.

Reporting offers of COBRA coverage. New Q&As illustrate reporting under various COBRA scenarios. The guidance explains how sponsors of self-insured plans should report enrollment information for non-employee COBRA beneficiaries, such as former spouses. Qualified beneficiaries electing COBRA independently from the employee must receive separate forms, while those who have COBRA due to an employee’s election should be included on the same form that is provided to the employee. (As previously noted in the instructions to the final forms, reporting may be made on either Form 1095-B or 1095-C for individuals who were not employees at any time during the year.)

Several examples illustrate how an applicable large employer should complete Form 1095-C for full-time employees who receive a COBRA offer due to termination of employment or a reduction of hours. In general, a COBRA offer made due to termination of employment is reported as an offer of coverage only if the former employee enrolls in COBRA coverage and the employee’s cost of coverage reflects the COBRA premium for the lowest-cost, self-only coverage providing minimum value. In contrast, a COBRA offer made to an active employee due to a reduction of hours would be reported as an offer of coverage on Form 1095-C even if the employee declines COBRA coverage.

Note: Unfortunately, the example used to illustrate this final point does not extend more than 60 days after the loss of eligibility, so it is unclear whether the applicable large employer would still report that coverage is offered after the employee’s COBRA election period has ended.

With mandatory reporting starting in early 2016 (for 2015 coverage), understanding the complexities of the reporting requirements is critical. While some of the Q&As contained in this IRS guidance were previously addressed in the instructions to Forms 1094 and 1095, others provide helpful clarifications and new information. Employers subject to the reporting requirements should give careful attention to this and future guidance as the reporting deadline draws nearer.

Filed Under: Home Page Middle Section, News and Compliance Tagged With: ACA, benefit review process, benefits renewal, group insurance benefits, insurance benefits, Obamacare

New FAQs Address Summary of Benefits and Coverage Template and Other Affordable Care Act Topics

June 10, 2014 by admin Leave a Comment

New FAQs Address Summary of Benefits and Coverage Template and Other Affordable Care Act Topics

The U.S. Department of Labor has released its latest set of FAQs regarding implementation of various provisions of the Affordable Care Act. Highlights of the FAQs are presented below.

Summary of Benefits and Coverage (SBC)
Group health plans are required to provide, without charge, a standard SBC form explaining plan coverage and costs to employees at specified times during the enrollment process and upon request. (For insured group health plans, the notice requirement may be satisfied if the issuer furnishes recipients with a timely and complete SBC.)

The new FAQs provide that the updated SBC template (and sample completed SBC) made available in April 2013 continues to be authorized until further guidance is issued. The FAQs also confirm that certain safe harbors and other enforcement relief with respect to providing the SBC continue to apply.

Effect of Health FSA Carryovers on ‘Excepted Benefits’ Status
Excepted benefits provided under a group health plan generally are exempt from the Affordable Care Act’s market reforms. Health FSAs may constitute excepted benefits if, among other requirements, the arrangement is structured so that the maximum benefit payable to any employee participant in the class cannot exceed a certain amount.

The latest set of FAQs explains that unused carryover amounts remaining at the end of a plan year in a health FSA (permitted under the modified “use-or-lose” rule) should not be taken into account when determining if the health FSA satisfies the maximum benefit payable limit to constitute excepted benefits.

Other topics addressed in the FAQs include the application of cost-sharing limits to out-of-network items and services, and preventive coverage related to tobacco cessation interventions. For more on the Affordable Care Act, including previously released questions and answers, please visit our Health Care Reform section.

Filed Under: News and Compliance Tagged With: ACA, benefit review process, benefits renewal, group insurance benefits, insurance benefits, Obamacare, prescription benefits

Employers Face Significant Penalties for Reimbursing Employees’ Individual Health Insurance Policy Premiums

June 10, 2014 by admin Leave a Comment

Employers Face Significant Penalties for Reimbursing Employees’ Individual Health Insurance Policy Premiums

New guidance from the IRS explains the consequences when an employer does not establish a health insurance plan for its own employees, but instead chooses to reimburse those employees for some or all of the premiums they pay for individual health insurance, either inside or outside the Health Insurance Marketplace (Exchange).

Such arrangements are described as “employer payment plans,” which are considered group health plans subject to the Affordable Care Act’s market reforms (including the annual dollar limit prohibition and preventive services requirements). Employer payment plans also include arrangements under which an employer uses its funds to directly pay the premium for an individual health insurance policy covering an employee. The term generally does not include arrangements under which an employee may choose either cash or an after-tax amount to be applied toward health coverage.

Consistent with prior FAQs, the new guidance confirms that employer payment plans cannot be integrated with individual policies to satisfy the Affordable Care Act market reforms. Accordingly, such arrangements fail to satisfy the market reforms and may be subject to a $100 per day excise tax per applicable employee ($36,500 per year, per employee) under the federal tax code.

Visit our section on HSAs, FSAs, & Other Tax-Favored Accounts to learn about how these types of programs are affected by the Affordable Care Act.

Filed Under: News and Compliance Tagged With: ACA, benefit review process, benefits renewal, group insurance benefits, Individual Health Insurance, insurance benefits, Obamacare, prescription benefits

Updated COBRA and CHIP Model Notices for Employers

June 10, 2014 by admin Leave a Comment

Reminder: Updated COBRA and CHIP     Model Notices for Employers

Employers and group health plan     administrators who have not done so already will want to download the U.S.     Department of Labor’s revised COBRA Model General Notice, COBRA Model Election Notice, and CHIP     Model Notice. The updated model notices reflect that coverage is     now available through the Health Insurance Marketplace (Exchange) and     provide information on special enrollment rights.

COBRA Notice Requirements
Federal COBRA generally requires group health plans sponsored by employers     with 20 or more employees in the prior year to     offer employees, spouses, and dependents a temporary extension of health     coverage when group coverage would otherwise end due to certain qualifying events.

Plan administrators are required to distribute a number of specific notices     to comply with COBRA, including:

  • A general notice describing COBRA rights,          to be provided to an employee and his or her spouse who become covered          under the plan within 90 days after the date group health plan          coverage begins; and
  • An election notice informing eligible          employees, spouses, and dependents of the right to continue coverage          and how to elect COBRA, to be provided within 14 days after          receiving notice of a qualifying event.

                                                                         Required   CHIP Notice
Employers that provide coverage in states with premium assistance through   Medicaid or the Children’s Health Insurance Program (CHIP) must inform   employees of potential opportunities for assistance in obtaining health   coverage annually before the start of each plan year. The notice   may generally be provided concurrent with the furnishing of:

  • Materials notifying employees of health plan        eligibility;
  • Materials given to employees in connection with        an open season or election process conducted under the plan; or
  • The summary plan description (SPD).

For information on other federal   notice requirements, and to download additional model notices available for   employers and group health plans, check out our Benefits Notices Calendar.

Filed Under: News and Compliance Tagged With: ACA, benefit review process, benefits renewal, group insurance benefits, insurance benefits, Obamacare, prescription benefits

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