ASSOCIATION OF COUNTY ADMINISTRATORS OF ALABAMA

ANNUAL CONFERENCE MAY 13 - 14, 2015

PERDIDO BEACH RESORT

Revisiting the Affordable Care Act

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What are the Employer Shared Responsibility provisions?

Effective in 2015 certain employers must provide health insurance coverage that:

• provides minimum essential benefits;• is affordable; and• provides a minimum level of coverage.

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Which employers are subject to the Employer Shared Responsibility

provisions?Employers who employ at least 50 full-time employees or a combination of full-time and part-time employees that equals at least 50 during the previous calendar year.

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Transitional Relief for 2015No Employer Shared Responsibility payment will apply for any calendar month during 2015 for employers with fewer than 100 full-time employees (including FTEs) in 2014 if the employer certifies to the IRS that:

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Transitional Relief for 20151. It employed on average at least 50 full-time

employees, but fewer than 100 full-time employees (including FTEs) on business days during 2014.

2. It did not reduce the size of its workforce or the overall hours of service of its employees in order to qualify for the transition relief.

3. It did not eliminate or materially reduce the health coverage it offered as of Feb. 9, 2014.

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County CommissionCovered Employees

• 52 County Commissions in the LGHIP• 1 with over 1,000• 1 between 900 and 1,000• 1 between 500 and 600• 3 between 300 and 400• 6 between 200 and 300• 18 between 100 and 200• 22 less than 100 (one less than 50)

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Minimum Essential Coverage Requirement & Minimum Value

Standard• The Local Government Health Insurance Board has determined that the LGHIP meets the minimum essential coverage (MEC) requirement and minimum value (MV) standard.

• Each unit will be required to determine the percentage of its full-time employees and their dependent children that are offered coverage through the LGHIP and whether this coverage is affordable under the ACA.

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What is a full-time employee under the Employer Shared Responsibility

provisions?

• an employee is a full-time employee for a calendar month if he or she averages at least 30 hours of service per week. 

• 130 hours of service in a calendar month is treated as the monthly equivalent of at least 30 hours of service per week.

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How does an employer identify full-time employees?

Monthly Measurement Method

employer determines each employee’s status as a full-time employee by counting the employee’s hours of service for each month. 

Look-back Measurement Method

employer determines the status of an employee as a full-time employee during a future period (referred to as the stability period), based upon the hours of service of the employee in a prior period (referred to as the measurement period). 

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What is an hour of service?Generally, an hour of service means each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer.

Also includes each hour for which an employee is paid, or entitled to payment, for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence.

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How does an employer determine if the coverage it

offers is affordable?If an employee’s share of the lowest cost individual premium for employer-provided coverage would cost the employee more than 9.5% of that employee’s annual household income, the coverage is not considered affordable for that employee. 

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Affordability Safe Harbors

•Form W-2 wages safe harbor•Rate of pay safe harbor, and •Federal poverty line safe harbor.

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Which Safe Harbor Method to Use

An employer may choose to use one or more of the safe harbors for all of its employees or for any reasonable category of employees, provided it does so on a uniform and consistent basis for all employees in a category.

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Form W-2 WagesSafe Harbor

This safe harbor is generally based on the amount of wages paid to the employee that are reported in Box 1 of that employee’s Form W-2.

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Rate of Pay Safe Harbor

This safe harbor is generally based on the employee’s rate of pay at the beginning of the coverage period.

Adjustments are permitted if the rate of pay is decreased (but not if the rate of pay is increased).

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Federal Poverty LineSafe Harbor

This safe harbor generally treats coverage as affordable if the employee contribution for the year does not exceed 9.5% of the federal poverty line for a single individual for the applicable calendar year (approximately $1,100 for the full year 2015).

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Under what circumstances will an employer owe an Employer Shared

Responsibility payment? There are two circumstances under which an applicable large employer (ALE) will be liable for an Employer Shared Responsibility payment under IRC §4980H:

• failure to offer MEC (the “A” penalty) and

• failure to offer affordable MEC that provides Minimum Value (the “B” penalty)

An ALE may be subject to only one (and not both) of the two potential employer shared responsibility payments.

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2015 Transition Relief• The transition relief allows an ALE with at least 100 full-time

employees (including FTEs) to reduce its number of FT employees by 80 instead of 30 when calculating the §4980H(a) penalty. 

• As a result of the §4980H(a) transition relief any ALE with at least 100 FT employees (including FTEs) in 2014, but 80 or fewer FT employees for each month in 2015, will not have to worry about the penalties under §4980H(a) or §4980H(b). 

• If an employer has 80 or fewer FT employees for each month in 2015, the employer’s §4980H(a) penalty in 2015 will be $0. 

• As a result of the §4980H(b) penalty being capped by the amount of the §4980H(a) penalty, the §4980H(b) penalty will also be $0.

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IRS Penalty NotificationThe IRS will contact employers to inform them of their potential liability and provide them an opportunity to respond before any liability is assessed. 

Contact will not occur until after:• due date for employees to file individual tax returns and

• due date for applicable large employers to file the information returns identifying their full-time employees and describing the coverage that was offered.

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Stages of ACA Knowledge

No Clue False Bravado Got it!

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ACA Reporting Responsibilities

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IRS Enforcement & AdministrationQuestions from IRS:• Who is enrolled in MEC?• Where was MEC obtained?• Did an ALE offer MEC that is:

• Affordable• MV to its FT employees & their dependents

Questions for Employers:• Did any FT employee get a premium tax credit?• Will a penalty be owed?

Questions from Employees• Do I have MEC or will I have to pay a tax?• Can I get a premium tax credit for exchange coverage?

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Exchange ReportingExchange must file Form 1095-A with IRS• Who is enrolled• Also provide a statement to individuals to claim premium tax credit

Taxpayer will file Form 8962• Claiming premium tax credit• Filed with annual federal tax return

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Code Section 6055 & 6056 Reports

The Affordable Care Act requires employers to file two reports under the Internal Revenue Code to establish compliance with employer shared responsibility rules.

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IRC § 6055Who Reports on What Form?

Forms 1094-B & 1095-B• Applies only to §6055 reporting

• Used by issuers of fully-insured plans• Used by plan sponsors for self-insured plans (excluding ALEs)

• ALEs with self-insured plans will report on Forms 1094-C & 1095-C.

• 2015 forms have not been released yet.

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IRC § 6056Who Reports on What Form?

Forms 1094-C & 1095-C

• Used by all ALEs for §6056 reporting on top half of Form 1095-C (parts I & II).

• ALEs with self-insured plans will report on bottom half of Form 1095-C (Part III) for §6055 reporting.

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Reporting on Behalf of ALEDesignating other party to report

• Special rules for Governmental Units• May designate another entity to report on its behalf if it is part

of, or related to, the same unit or agency• Designation must be in writing & signed by both parties• Designated entity assumes liability for failure to report

• Third Party• ALE can contract with 3rd party to report on its behalf (liability

will not transfer)

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Code Section 6056 Reporting Methods

•General Method•Alternative MethodsQualifying Offer MethodQualifying Offer Method Transition ReliefSection 4980H Transition Relief98% Offer Method

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Alternative Reporting Methods

• Employers can use one or more available Methods

•Employers may NOT know if they qualify under a particular “Simplified Method” until the end of their plan year.

•Employers should be prepared to report under the more detailed “General Method” for at least some employees.

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General Reporting Method

Required information:

• Employer Level (1094-C): Approximately 9 different data items identifying employer

and employees, describing coverage status and number of individuals offered coverage by month and other plan level information.

• Employee Level (1095-C): 8-10 data items identifying an employee, reporting months

employee was covered, and other information regarding an employee’s (and their dependents) coverage during the year.

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Qualified Offer MethodEmployer certifies that:

1. All employees in a class were offered coverage that met MV and MEC for all 12 months (employees only eligible a portion of the year would be reported under the general method)

2. Cost of lowest cost plan for “employee only” coverage was less than 9.5% of FPL (approximately $1,100 for the full year 2015)

3. MEC coverage was offered to spouse and dependents for each month the employee was eligible for coverage

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Benefits of Qualified Offer Method

Simplifies the reporting on Form 1095-C• Use Qualifying Offer code 1A on line 14 of Form

1095-C• No dollar amount for employee contribution on line 15 of Form 1095-C

May provide simplified statement to the employee

Information must include ALE contact info and a statement that a qualifying offer was made for all 12 months to the employee, spouse & dependents and not eligible for premium tax credit.

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Qualified Offer Method2015 Transition Relief

To be eligible to use the Qualifying Offer Method Transition Relief the employer must certify that it made a Qualifying Offer for one or more months of calendar year 2015 to at least 95% of its full-time employees.

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Benefits of Qualified Offer Method Transition Relief

Simplifies the reporting on Form 1095-C• Use Qualifying Offer code 1A or 1L on line 14 of Form 1095-C1A if employee received Qualified Offer1L if employee did not receive Qualified Offer

• No dollar amount for employee contribution on line 15 of Form 1095-C

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Benefits of Qualified Offer Method Transition Relief

May provide simplified statement to the employee – 2 versions• Employee received Qualified Offer for all 12 months

Statement information must include ALE contact info and a statement that a qualifying offer was made for all 12 months to the employee, spouse & dependents.

• Employee did not receive Qualified Offer for all 12 monthsStatement information must include ALE contact info and a

statement that the employee, spouse & dependents may be eligible for premium tax credit for one or months in 2015.

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Section 4980H2015 Transition Relief

Two types of Transition relief in 2015:

• ALEs with Fewer Than 100 FT Employees, Including FTEs (50-99 Transition Relief), or

• ALEs with 100 or More FT Employees, Including FTEs (100 or More Transition Relief).

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Benefit of Section 4980H2015 Transition Relief

No Employer Shared Responsibility payment under section 4980H(a) or (b) will apply for any calendar month during 2015. 

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2015 Section 4980H Transition Relief for ALEs with Fewer Than 100 Full-Time

To certify that an employer is eligible for this transition relief it must have met the following conditions:

1. ALE averaged 50 to 99 FT employees, including FTEs during 2014;

2. During the period of February 9, 2014, through December 31, 2014, the ALE did not reduce the size of its workforce or reduce the overall hours of service of its employees in order to qualify for the transition relief; and

3. During the period of February 9, 2014, through December 31, 2015, the ALE did not eliminate or materially reduce the health coverage it offered as of February 9, 2014.

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2015 Section 4980H Transition Relief for ALEs with More Than 100 Full-Time

• 70% threshold – if MEC is offered to at least 70% of FT employees & dependents, ALE not subject to “A” Penalty through 2015 plan year.

• Applies to:ALEs with 100+ FT employees, including FTEs.

ALEs with 50-99 FT employees who were not eligible for the prior transition relief.

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98% Offer Method

Employer must certify that it offered, for all months of the calendar year, affordable health coverage providing minimum value to at least 98% of its employees for whom it is filing a Form 1095-C employee statement, and offered minimum essential coverage to those employees’ dependents.

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Benefits of Using98% Offer Method

• No Employer Shared Responsibility payment under section 4980H(a) or (b) will apply for any calendar month during 2015.

• ALE not required to identify which of its employees are actually FT.

• ALE not required to provide total number of FT employees.

• But, ALE still required to file Forms 1095-C on behalf of all its employees.

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When to File with the IRS

IRS Forms are due by:

February 29, 2016 if filing by paper

orMarch 31, 2016 if filing electronically.

Note: Must file electronically if filing 250 or more forms.

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Reporting to Individuals/Employees

• Due no later than January 31, 2016 (same as W-2)

• Can furnish electronically if individual consents.

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Penalties for Failure to Report$100 for each failure up to max of $1.5 million.• IRS Reporting

• Failing to file• Failing to include all required info• Providing incorrect info

• Statements to individuals/employees• Failing to provide in timely manner• Failing to include all required info• Providing incorrect info

• Relief for employers that make a good faith effort.

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QUESTIONS