aca tracking aca penalties aca affordability & reporting budgeting for the aca affordable care...
TRANSCRIPT
• ACA TRACKING
• ACA PENALTIES
• ACA AFFORDABILITY & REPORTING
• BUDGETING FOR THE ACA
Affordable Care ActHow It Affects Your Day-To-Day Admin &
Year-End Reporting Processes
Please Note…
The purpose of this presentation is to bring to your attention elements of the ACA that could impact your company (or may have already). Please keep in mind that this is a general description of major provisions that affect companies, not a specific list of how health care reform will affect your company. Some of the provisions of the ACA have already been implemented, while there are still many regulations to be written that will impact and change this summary. According to our understanding & interpretation of the ACA, we believe the information contained in this presentation to be accurate. We are not attorneys and we do not intend to give legal advice and do recommend that you consult your attorney or tax advisor for advice on specific issues.
ACA Tracking Measurement Period Terms
Initial Period – New Hires Can begin upon date-of-hire or any subsequent day in
the calendar monthStandard Period – Existing Employees
Set measurement dates for every yearAdmin Period – Open Enrollment
Must be completed within 90 daysStability Period – Length of Coverage
Mirrors the length of the measurement periods Minimum Stability Period is 6 months
I Qualify As An ALE, How Do I Determine Who Is Eligible?
Employees who are hired as designated “full time” employees must be offered coverage within 90 days of hiring.
The ACA allows employers to use a “look back” measurement period of 3-12 months or live monthly measurement. A “look back” period is either an Initial or Standard measurement period. Most Common: 12 months - Turnover
Variable-hour or part-time employees who average at or over 30 hours per week during their measurement period are eligible for coverage.
Common Standard Period Tracking for a 1/1 Benefits Plan Start Date
If using a 12 month “look back”, the standard period would begin & end early or mid-October Allows for an Admin period of less than 90 days
Common Issues with ACA Tracking
Re-Hire Rules 13 Week Rule
If break in service > 13 weeks, employee is treated as New Hire
If break in service < 13 weeks, mark zeros for pay periods missed
Parity Rule (Sub-Rule of 13 Week Rule) Only applicable if break in service < 13 weeks If employee works longer than break in service, mark zeros
for pay periods missed. Vice Versa, treat as New Hire I.E. John works for 8 weeks & gone for 6 weeks: mark
zero John works for 6 weeks & gone for 8 weeks: treated
as New Hire
Re-Hire RulesOverlapping Measurement Periods
Overlapping Measurement Periods Overlapping measurement periods occur for almost every new hire – each employee
must be measured in their Initial (new hire) Measurement Period, and then also in their Standard (existing employee) Measurement Period once the Standard Measurement Period restarts for all current employees.
2014 Average Weekly Hours Report with ACA Modifications
After Accurately Determining Eligible Employees, What Comes Next And Why Is It Important?
The Affordable Care Act states that not only do employers need to offer coverage to eligible employees, but also, that coverage extended must be “affordable” for each employee.
Each eligible employee’s “affordable” amounts must be reported to the IRS in the form of the 1095-c Report (details will be reviewed later)
3 Types of ACA Penalties – not mutually exclusive & not tax deductible
ACA PenaltiesPenalty A – If employer does not offer insurance, and if at
least one FT receives federal insurance subsidies in the exchange. 2015 - $2,000 x (FT – 80) 2016 - $2,000 x (FT – 30) 2017… - $2,000 x FT
Penalty B - If employer offers insurance that is “unaffordable” or “inadequate” and at least one FT receives insurance subsidies. “Unaffordable” is determined by payroll deductions “Inadequate” is determined by benefits plan structure Lesser Amount of $3,000 x Subsidized FT OR Penalty A
Penalty C - If employer does not submit an annual IRS return or provide individual statements to all full-time employees. $100 per return + 2 returns (1094/1095) per employee = $200
per employee
Potential ACA Penalties for 350 employee company with 160 full-time (benefits eligible) employees
Affordable Care Act – “Affordability”/ Reporting
You’ve concluded that you are an ALE, you have accurately measured your employees and determined your benefits-eligible employees, now you have to determine what “affordable” coverage is for each of your employees.
How do you determine what that “affordable” amount is?
ACA “Affordability” Safe Harbors
A safe harbor is an approved method of calculation to determine each employee’s “affordable” deduction amount.
Safe harbors may not be changed once selected and are used to measure “affordability” for all employees
3 Safe Harbors Federal Poverty Level Rate Of Pay W2 Safe Harbor
Safe Harbors
Federal Poverty Line: 2014 FPL = $11,670 (FPL x .095) / 12 = $92.39 per month Biweekly payroll = $42.64 per payroll
Rate of Pay: (RoP x 130) x .095 Example: $10/hr - (10 x 130) x .095 = $123.50 per
month Biweekly payroll = $57 per payroll
W2 Safe Harbor 9.5% of Box 1 W2 Wages (Net Wages)
W2 Safe Harbor
9.5% of Box 1 W2 Wages (Net wages)
Example: Employee earns $1,000 in gross wages
$1,000 x 9.5% (Pre-Tax Health Ins. Deduction) = $95 $1,000 - $95 = $905 Box 1 W2 Wages
$905 x 9.5% = $85.98 $85.98 is the “affordable” amount for this employee
Thoughts When Choosing Safe Harbor
Federal Poverty Level is easiest to calculate, because it is the same for all employees. However, FPL will constitute the employees paying their minimum contribution amount.
Rate of Pay is calculated as if the employee works 130 hours each and every month. Using RoP, if an employee works more than 130 hrs/mth, the employee will not contribute their maximum possible amount.
W2 Safe Harbor is the most difficult to calculate, but in most cases it will result in employees paying their maximum possible contribution amount.
I’ve picked my Safe Harbor, but how do I calculate and report on “Affordability”?
You need to determine & track what the lowest cost plan is available to each class of employees
You need to know what the employee’s monthly premium per month
You use your Safe Harbor to calculate or test the “employee only” portion of the monthly premium (excludes spouses or dependents)
Example Corporation’s Bronze Plan
Bronze plan is the lowest cost plan available to the employee, John Doe
Employer chooses W2 Safe HarborBronze Plan Premium = $300 per month
“Premium Cap” How premiums used to be deducted in payroll
Employer contributes a flat $100 per month Employee contributes a flat $200 per month
How premiums are now deducted in payroll Employer contributes at least $100 per month Employee contributes up to $200 per month
(premium cap)
When “Affordable” Amounts Are Lower Than The “Premium Cap”
Premium Amount
$154.76
$45.24
$100.00
$300 Bronze Plan
EE Contrib.Addtnl ER Contrib. ER Contrib.
John Doe’s De-duction: $154.76
Employer Con-tribution: $145.24
• In this scenario, John Doe has earned $1,800 in gross wages
• $1,800 x 9.5% = $171
• $1,800- $171= $1,629
• $1,629 x 9.5% = $154.76
• John Doe’s “affordable” amount is $154.76, leaving an additional $45.24 that the employer must pay to cover the $300 premium
What About Buy-Ups?
Under the ACA, employees are 100% responsible for the cost of plan buy-ups which can be spouses, dependents, or higher levels of coverage
Even though employers are required to offer plans that cover dependents up to 26 years of age, the employer is not required to pay for the buy-up of adding the dependent.
Example Corporation’s Silver Plan
John Doe chooses to buy up to the Silver plan instead of choosing the Bronze plan
Employer has chosen the W2 Safe Harbor
Silver plan premium = $400 (Bronze was $300) Employer contribution = at least $100 Employee deduction = “Affordability” amount plus
Buy-Up amount ($100)
Silver Plan Buy-Up
Premium Amount$0.00
$50.00
$100.00
$150.00
$200.00
$250.00
$300.00
$350.00
$400.00
$154.76
$45.24
$100.00
$100.00Addtnl EE Contrib
ER Contrib
Addtnl ER Contrib
EE Contrib.
John Doe’s De-duction: $254.76
Employer Con-tribution: $145.24
• John Doe earns $1,800 in gross wages
• $1,800 x 9.5% = $171
• $1,800- $171= $1,629
• $1,629 x 9.5% = $154.76
• John Doe’s “affordable” amount is $154.76, leaving an additional $45.24 that the employer must pay to cover the $300 premium
• Employee is responsible for additional $100 for Silver Plan Buy-Up
ACA Reporting
Two sets of reports, 1094 & 1095 1094 = Transmittal statement to IRS (Company or
Insurer) 1095 = Individual return
Two types of reports for businesses, B & C B reports Insurers & Non-ALE with self-insured
health plans C reports All ALE
ACA Reporting
First filings required in early 2016 for 2015 coverage
For returns, deadline is Feb. 28 of following year (March 31 if filed electronically)
For statements, deadline is Jan. 31 of following year
Smaller ALEs (50-99 FT + FTE), qualifying for transition relief must still file ALE reports in 2016
1094-C
1094-C will report the following information Employer information (name, address, etc.) Total number of 1095-C forms filed Monthly certification that employer offered FT (&
dependents) minimum essential health coverage Number of FT employees for each calendar month Total number of employees for each month Whether special rules or transition relief applies to
the employer Names & FEIN’s of other affiliated companies
1094-C – pg. 1
1094-C – pg. 2
1094-C – pg. 3
1095-C
1095-C will report the following information Employee’s name, address & SSN Employer’s name, address & FEIN Whether employee & family members were offered
health coverage each month that met the minimum value standard
Employee’s monthly “affordable” amounts Whether employee was FT each month Whether employee was enrolled in health plan SELF INSURED ONLY: Name & SSN of each
employee and family member covered each month
1095-C: Month by Month “Affordability”
1o95-c Terms
MV – coverage that meets “minimum value” standard
MEC – coverage that meets “minimum essential coverage” standard
FPL – federal poverty levelSIHP – self insured health planCY – calendar yearE – employeeFT – full-timeS – spouseD – dependent
Line 14 Codes
Line 14 “Offer of Coverage (enter required code)” 1A – MV MEC to FT employees, affordability based on
9.5% of FPL plus MEC to S and Ds 1B – MV MEC to E only 1C – MV MEC to E plus MEC to D children 1D – MV MEC to E plus MEC to S but not Ds 1E – MV MEC to E plus MEC to S and Ds 1F – Non-MV MEC offered to E; or E plus; or E, S, and Ds 1G – Offer to E not FT for any month who enrolled in
SIHP for any month (enter in “all 12 months” box only”) 1H – No offer of coverage or no offer of MEC
Line 16 Codes
Line 16 “Applicable Section 4980H Safe Harbor” 2A – E not employed during month 2B – E not FT employee 2C – E enrolled in coverage offered 2D – E in limited non-assessment period (LNP) Next
Slide 2E – Multiemployer interim rule relief 2F – Form W2 affordability safe harbor 2G – FPL affordability safe harbor 2H – Rate of pay affordability safe harbor 2I – Non-CY transition relief applies to E
LNPs – Limited Non-Assessment Periods
Specific periods of time when employers will not be subject to fines for failure to offer MEC coverage to a full-time employee.
First three calendar months of employment for FT
First three calendar months for first time ALEs
First three months after an employee’s status changes to FT during the initial measurement period.
How Can I Control These New Costs Moving Forward?
Like other costs associated with your business, proper planning and a well crafted strategy are important in controlling your ACA-related costs. A scheduling/cost projection method or system can help you plan for the future. A projection method or system can provide you with information resulting from projecting multiple scenarios and helps you craft & implement your strategies moving forward. ACA compliance involves looking backwards, but ACA planning & budgeting involves looking forward.
Important Disclaimer
The purpose of a scheduling/cost projection system is to help businesses with financial planning and enable employers to project multiple scenarios to better plan for & anticipate their future expenses.
Scheduling/cost projection systems should not be used discriminately to “cap” employees’ average weekly hours to under 30 for the distinct purpose of not offering coverage and saving money on their employee benefits. Strictly following this practice could be in violation of various labor & employee benefits laws.
Definitive, nondiscriminatory & legally viable scheduling strategies should always to be in place and well documented to ensure compliance with labor & employee benefits laws.
In Summation: Necessary Steps
Determine if you are an ALE
Accurately track employees
Offer MEC plans to benefits-eligible employees
Calculate & report “affordability” Payroll deductions 1095-c report
