Affordable Care Act HURDLES FOR EMPLOYERS

BIGGESTTHE

Now that the Affordable Care Act (ACA) has survived a Supreme Court challenge, employers need to ramp up to meet deadlines in early 2016 and beyond.

Nonhourly employees

WHAT TO REPORTThe form shows whether the employee was covered for a month, the coverage level (employee only, dependents, spouse, etc.) and whether coverage satisfied one of the affordability safe harbors for the month. If coverage wasn’t offered to the employee for a month, the form must indicate why. The form must also indicate whether the employee had coverage even though he or she wasn’t full-time for the month.

WHY IT’S A BIG DEALFines are $500 for each Form 1095-C, or each employee, for failure to file with the IRS, failure to include all required information or submission of incorrect information. The penalty cap is $6 million for the year.

WHAT TO DO NOW• Address common law employee issues.

• Identify full-time employees for each month.

• Calculate whether the thresholds of ACA requirements (70% for 2015 and 95% for 2016 and thereafter) are satisfied.

• Determine which affordability safe harbor to use. (The employee portion of the premium for the lowest-cost self-only coverage must meet one of three affordability safe harbors, regardless of whether the employee enrolled in the lowest-cost self-only plan. IRS regulations provide safe harbors that allow an employer to use an employee’s compensation in lieu of household income.)

• Determine a contact telephone number for employees’ Forms 1095-C.

• For self-insured plans, identify covered individuals (employee, spouse and dependents) and their Social Security numbers.

• Identify related employers and their number of full-time employees.

Meet the Feb. 1, 2016, deadline for furnishing Forms 1095-C to employees.

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WHAT’S REQUIREDEmployers will owe an excise tax if they don’t offer coverage to 95% or more of full-time employees (those working an average of 30 or more hours per week) and just one employee gets coverage through a government exchange and has income low enough to qualify for the premium tax credit. To calculate the tax, multiply the number of full-time employees minus the first 30 employees by $2,000 (indexed) per year.

WHY IT’S A BIG DEALThe rules governing the excise taxes were only partially in effect in 2015. In 2016, they are fully in effect. A company with 1,000 full-time employees that offers coverage to 949 employees instead of 950 employees would have made a seemingly small error but would still owe an excise tax of $1.94 million.

WHAT TO DO NOWMake sure you’ve correctly identified and documented your process for identifying full-time employees and common law employees based on the IRS definition, including full-time contractors and workers from staffing agencies.

WHAT IT ISA 40% excise tax will be imposed on insurers or employers for the cost of coverage for health plans that exceed an annual threshold ($10,200 for individual coverage and $27,500 for self and spouse or family coverage), beginning in 2018.

WHY IT’S A BIG DEALIssuers of health insurance and sponsors of self-funded group health plans (employers) must pay the 40% nondeductible tax on any dollar amount beyond the annual thresholds. The tax also applies to health savings accounts and flexible spending accounts.

WHAT TO DO NOWConsider reducing health benefit offerings or increasing workers’ cost-sharing (such as co-insurance, deductibles and copayments) to lower the value of the plan.

Prepare to satisfy the 95% offer-of-coverage requirement starting Jan. 1, 2016.

Manage exposure to the Cadillac tax.

1095-C1095-C

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Need help? Contact Eddie Adkins, Partner, Washington National Tax Office, at +1 202 521 1565 or eddie.adkins@us.gt.com.