ACA Employer Reporting -...

Topics for Today

• Minimum essential coverage (“MEC”) filing overview

• Applicable large employer (“ALE”) filing overview

• Who does what?

• Details of forms

• Examples of completed forms

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MEC Reporting: Overview

• “Minimum essential coverage” (“MEC”) is coverage that most U.S. citizens must have in order to avoid tax under Affordable Care Act (“ACA”)

• Penalty taxes for not having MEC (or an exception) generally start at 1% of income but rise thereafter

• Government desired method to verify that individuals really had MEC• Government desired method to verify that individuals really had MEC

• So, new rule requires that any person providing MEC to another person must report that to the federal government

• Originally supposed to have applied in 2014

– Delayed July 2013

• Now first report due in early 2016, relating to 2015 coverage

• In general, someone must file with IRS and furnish to covered individual

– Electronic furnishing to individuals possible but complicated rules

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ALE Reporting: Overview

• “Employer shared responsibility” rules (aka “Pay or Play Rule”) requires “large” employers to offer “good enough” health plan coverage or risk tax penalty

– “Large” generally means having 50 or more full-time and full-time-equivalent employees

• Again, government needed method to verify• Again, government needed method to verify

• New rules require employer to report to federal government whether it offered this “affordable”, “minimum value” health plan coverage

• Also was delayed from 2014 to 2015

– So, first report due early 2016, relating to 2015 coverage

– Note: Pay or Play Rule delayed to 2016, generally, for employers with 50-99 employees

– But, NO delay for these employers from ALE reporting

• If you are not “large” then you do not have to do an ALE filing

– But if you offer health plan coverage someone must do the MEC filing

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Due Dates

• Similar to Form W-2

– January 31 of following year for furnishing statements to individuals

– February 28 for filing transmittals with IRS (but have until March 31 if filed electronically)

– All reporting done based on calendar year, even if plan itself operates on a non-calendar year (e.g., July 1 – June 30 plan year)

• For 2016, delay of one day (because January 31 and February 28 are Sundays)

• In order to report by early 2016, need to be tracking data here in 2015

– Need to report how many “full-time” employees have in 2015

– If using “look-back measurement method”, status of an employee as “full-time” is often based on 2014 hours

– Possible to also use the “monthly measurement method”

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Who is Responsible?

• MEC Report:

– If fully-insured, health insurers responsible

– If self-insured, plan sponsor responsible

– Note: Typical controlled group rules do not apply – each employer reports on their own (even if part of controlled group)

– For governmental entities, one governmental unit can designate another as – For governmental entities, one governmental unit can designate another as its “Designated Governmental Entity” (“DGE”)

• A DGE assumes legal liability for the filing

• E.g., County is an ALE with ALE members School District, Police District and County General Office. School District designates the state (which accepts it) to report on teachers and reports for itself on non-teachers

– Special rules for third party offers of coverage (e.g., staffing firms and multiemployer coverage)

• ALE Report:

– Plan sponsor responsible

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Filing with IRS

• Mechanics of how to file with IRS still “in process”

• If file less than 250 forms of same type can file on paper with IRS (but can file through AIR if you like)

– If file 250 or more forms of the same type, MUST file through AIR

– Not combined

• E.g., if file 130 1095-Bs and 130 1095-Cs, need not use AIR• E.g., if file 130 1095-Bs and 130 1095-Cs, need not use AIR

– If you will be filing through AIR, need to follow this guidance

• Tutorial for ACA Application for Transmitter Control Code (“TCC”) (we call this the “ACA Tutorial”)

• Publication 5164 (Nov. 2015)

• Publication 5165 (Nov. 2015)

• AIR Submission Composition and Reference Guide (Nov. 2015)

• Submitter / Software Developer AATS and Production Filing Transmission Checklist

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Filing with IRS

• All can be found at:

– https://www.irs.gov/for-Tax-Pros/Software-Developers/Information-Returns/Affordable-Care-Act-Information-Returns-AIR-Program-Did-You-Know%3F

• If you need instructions or forms, go to:

– 1094-C: https://www.irs.gov/uac/About-Form-1094-C

– 1095-C: https://www.irs.gov/uac/About-Form-1095-C

– 1094-B: https://www.irs.gov/uac/About-Form-1094-B

– 1095-B: https://www.irs.gov/uac/About-Form-1095-B

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Ties Into Employer Shared Responsibility Rule

• Don’t forget to identify the various choices under the ESR Rule:

– Look-back or monthly measurement method

– How to treat leaves of absence

– Rehire choices

– How to calculate affordability

– Whether someone is eligible under the major medical plan if they are “full-– Whether someone is eligible under the major medical plan if they are “full-time”

• If so, will that definition carry through to other benefit plans?

– May require plan amendment / memo to file

• Still some tricky issues

– E.g., if select look-back method, but then fail to make an offer in the following year, what happens?

– Track new, full-time employees using monthly method, even if use look-back for everyone else?

What Coverage is Reported (MEC)?

• In general, major medical coverage of an employer

– Are additional categories unrelated to employer coverage (e.g., Medicaid and Exchange coverage)

• MEC generally must be a “group health plan”

– Can be grandfathered or non-grandfathered; self-funded or fully-insured

• Excepted benefits are NOT MEC• Excepted benefits are NOT MEC

– E.g., most dental, vision, health FSAs, EAPs avoid this reporting rule

• Health reimbursement arrangements usually exempt but somewhat unclear if spouse / child has HRA coverage but not on major medical

• Health savings accounts (“HSAs”) are not group health plans and no reporting required for them

• Generally includes retiree coverage

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MEC Report: COBRA and Retirees

• COBRA / other mandated continuation: If made to former employee upon termination of employment, DO NOT report as an offer

– Use Code 1H (“No offer of coverage”) on line 14; line 15 is blank

– Line 16 in general use Code 2A (employee not employed), not 2C

• If lose coverage mid-month, not clear what Code to use (maybe 2B?)

• If active employee (e.g., reduced hours) report as other actives• If active employee (e.g., reduced hours) report as other actives

– If using look-back measurement method, though, reduction in hours now may not lead to loss of eligibility

– Line 14: Same offer code as for other active employees

– Line 15: Lowest-cost minimum value COBRA premium for employee only

– Line 16: Same as for other active employees

• Report employee and family on same form

– Unless qualified beneficiary elects COBRA independently (e.g., divorce)

• For “non-employees” (e.g., director; retiree; terminated last year on COBRA still) still report – usually Code 1G in line 14 of 1095-C

– “C series” if large, self-funded; “B series” otherwise

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How is MEC Report Made?

• Transmittal form is a single form filed with IRS

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• “Responsible Individual” is generally policyholder (if fully-insured) or employee through whom coverage was selected

• Most employers will have “responsible individual’s” SSN

• Small, self-funded group would typically use this

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• Note detail – covered person by covered person, month-by-month

• Social Security numbers for each covered person

– Is a process where date of birth can be used after a few documented attempts to obtain the SSN

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How is ALE Report Made?

• Form 1094-C (transmittal)

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• Note that one transmittal must be “authoritative”

• Note that “controlled group” rules should be considered

• Special certification rules can apply

– If you are claiming relief per “50-99” rule, check box C and use Code A on Part III of 1094-C

– If you are claiming “minus 80” relief instead of “minus 30” relief, check box – If you are claiming “minus 80” relief instead of “minus 30” relief, check box C and use Code B on Part III of 1094-C

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• Part III: Note total employee count

• Instructions provide transitional relief “indicators”

– E.g., for 50-99 size employers

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• Details of “controlled group” must be listed

– Note that rules can be complicated; difficult to apply

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• 1095-C is the return

• Contact telephone number

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• Complete for all full-time employees (even if full-time for short period such as one month)

• Various “codes” for each line; e.g., for Line 14:

– Code “1A” = Affordable, minimum value, full-time E’ee

– E.g., Code “1H” = No offer of coverage

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• Line 16 Codes include:

– 2A = Employee not employed in that month

– 2C = Employee enrolled in minimum essential coverage

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• Even though this is primarily an ALE form, relates to MEC reporting

– Describe who had coverage (full-time or not)

– Similar to Form 1095-B

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Strategy: Identify Your Scenarios and Plan in Advance• One strategy to help ensure compliance is to plan out the possible

scenarios you could face

• If you know you will face them in January 2016, plan for them now

• Especially if completing forms yourself

• If using software vendor, still may want to plan scenarios to compare with software vendor’s results with software vendor’s results

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Scenario #1

• Generous Co. offers good health plan coverage to all employees who are scheduled to work 20 hours per week. The plan provides “minimum value”, is “minimum essential coverage” and is self-funded. Generous Co. has 500 total employees and is a “large” (100+ employer). The coverage is affordable for most employees, using the 9.5% of federal poverty level limit.

• Amy is a full-time employee of Generous Co. (40 hours per week). She is eligible for coverage every day in 2015 and took the coverage every day. Amy has no spouse or children. What would Amy’s 1095-C look like?

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Scenario #2

• Bob is also a full-time employee of Generous Co. Like Amy, he was offered and took coverage for all of 2015, although he had family coverage for each day of 2015.

• What does Bob’s 1095-C look like?

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Scenario #3

• Cathy is similar to Amy and Bob – she is full-time and works for Generous Co. However, Cathy waived coverage from Generous Co.

• How will Cathy be reported?

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Scenario #4

• Doug is hired as a new full-time employee on April 15, 2015. His waiting period runs from April 15 – May 30. He is enrolled June –December 2015.

• How is Doug reported on the 1095-C?

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Scenario #5

• Claudine starts with Generous Co. on January 10, 2015 as a variable hour employee. She becomes a full-time employee on August 1, 2015, at which point she is eligible for health plan coverage. She takes the offer of coverage and is covered as of August 1, 2015.

• How should Claudine be reported?

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Scenario #6

• OK Co. is a large employer, but is not as generous as Generous Co.. For example, it does not subsidize the cost of health plan coverage as much and it therefore cannot always use code 1A in Form 1095-C (which is based on the federal poverty level safe harbor definition of “affordable” health plan coverage)

• Zack is a full-time employee of OK Co., working 30 hours per week. • Zack is a full-time employee of OK Co., working 30 hours per week. He receives an offer of self-funded health plan coverage. The cost is $300 per month for self-only coverage. Family coverage costs $500 per month. Zack makes $10 per hour, which roughly works out to $300 per week and $1,200 per month.

• The plan operates on a July 1 renewal. Zack did not take coverage from July 1, 2014 – June 30, 2015 because it was too expensive. But Zack decides that he needs coverage and so signs up for it effective July 1, 2015. The offer was for single or family coverage.

• How is Zack reported?

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Scenario #7• Rock Co. has 200 full-time employees and has a fully-insured health plan

through BCBS. Rock Co. offers coverage to eligible employees. It uses the W-2 method for determining whether coverage is affordable. (Thus, it cannot ever use Code 1A in line 14, which is based on the federal poverty level.)

• Rock Co. offers “good” coverage to Tess and her family, a full-time employee, who takes single coverage for all of 2015 ($200 / month)

• The Form 1095-C for Tess is below. BCBS will complete a Form 1095-B for • The Form 1095-C for Tess is below. BCBS will complete a Form 1095-B for Tess to report her MEC

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Scenario #8

• Leafy Co. has at least 50 full-time and full-time equivalent employees and employs Alexandra, who has been a full-time employee for several years. Alexandra was covered in 2015, but quits on August 10. Her coverage continues until the end of August. As of September 1 she does not elect COBRA. (If her coverage terminated on the same date her employment terminated, August 10, it is not clear whether Code 2A or 2B would be used for August.)or 2B would be used for August.)

• Assume Leafy Co. is an ALE and has a self-funded option. Assume that coverage is minimum value but not necessarily affordable (it is not a “1A” offer of coverage) as it costs $120 / month for self-only coverage.

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Scenario #9

• Leafy Co. has employed Nikki as a part-time employee for several years. She has always worked 10 hours per week. The Co. uses the look-back measurement method and determines that Nikki is not "full-time" during the stability period beginning January 1, 2015 and ending December 31, 2015. However, on June 15, 2015, she was promoted to a full-time position. She was offered coverage, which became effective on August 1, 2015. Nikki elected coverage for herself for August 1, on August 1, 2015. Nikki elected coverage for herself for August 1, 2015 through December 31, 2015. How is Nikki reported? (Note that the reporting would be different if Nikki was in her initial measurement period when her change in employment occurred.)

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Scenario #10

• Small Co. has fewer than 50 full-time and full-time equivalent employees and has a self-funded health plan. Small Co. employs Milo, who has coverage for himself and his spouse for all of 2015. How is Milo’s coverage reported?

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Scenario #11

• ABC Co. has between 50 and 99 full-time and full-time equivalent employees. It has determined that 35 of its employees were “full-time” for part or all of 2015 (although 34 were full-time for four months). Its number of other employees varied, from a low of 67 to a high of 213. Assume it is not part of a controlled group.

• What will ABC Co.’s Form 1094-C look like?• What will ABC Co.’s Form 1094-C look like?

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Scenario #12

• XYZ Co. has 100 or more full-time and full-time equivalent employees. It has determined that 56 of its employees were “full-time” for part or all of 2015. Due to turnover and new hires the exact number varied by month (in fact, the maximum was 55 in any one month). Its non-full-time employee workforce varied during the year. Assume it is not part of a controlled group.

• What will XYZ Co.’s Form 1094-C look like?

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Strategies for Reporting

• This is a lot to track!

• Examine internal resources, software, budget

• Determine if must (or want) to use AIR system (electronic filing) v. paper system

• If using AIR system, work through technical documents / become registered and receive TCCregistered and receive TCC

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Questions

Thank you!

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ACA Employer Reporting -...

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