SMACNA—St. LouisAffordable Care Act Employer Mandate: Compliance and Reporting

October 13, 2015

AgendaIs the ACA going away?Employer Mandate

What is it? Does it apply? If so, when? What does it require? How is if affected by

multiemployer plan coverage?

What are the penalties?6055/6056 Reporting

1094 Forms 1095 Forms

Q&A

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ACA: Is It Going Away?

NO

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At least not any time soon…

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ACA: It’s Not Going Anywhere Judicial Challenges

Supreme Court has upheld individual mandate (2012) and federal exchange subsidies (2015)

ACA is here to stay (subject to any future legislative modifications).

ACA Repeal? Anything’s possible, but wholesale repeal is very unlikely. Kaiser Family Foundation: 28% of Americans favor full repeal, but

that faction is divided on a replacement plan (if any).

ACA Taxes – Repeal or Modification? House of Representatives Ways and Means Committee targeting

ACA tax provisions in Fall session.

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Employer Mandate: What is it? “Shared Responsibility”—ACA contains a dual

mandate for health insurance coverage Individual Employer (aka “pay or play”)

Applicable large employers must offer minimum essential health coverage to substantially all of their full-time employees

Such coverage must meet affordability and minimum value guidelines in order for employer to avoid all penalties

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Employer Mandate: Does it apply? Applicable Large Employer (ALE)— average of 50 or more full-time

and “full-time equivalent” employees (FTEs) during the prior year. Union employees; Seasonal employees; and Temporary employees you employ; but NOT sole proprietors, partners in a partnership or 2% S corporation

shareholders FTE Calculation:

1. Count all full-time employees by month (any employee paid for 120 hours during that month).

2. Add all hours worked by all remaining employees (all non-full time employees).

3. Divide hours worked by 120 to get the number of monthly equivalents.4. Add monthly full time employees to monthly equivalents to get monthly

FTEs.5. Add all monthly FTEs and divide by 12.

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Employer Mandate: When Does it apply?

Generally, January 1, 2015 Employers with 100+ FTEs

1st plan year or renewal during 2015 for non-calendar year plan if no plan year change after 12/27/2012

2016: 50-99 FTEs Cannot reduce workforce numbers and hours to avoid

mandate Have to maintain health plan coverage and eligibility in

effect as of 2/9/2014 1st day of 2016 plan year (if no change after 2/9/2014)

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Employer Mandate: What Does it Require? Two Levels of Employer Obligations under IRC §4980H:

Part (a)—offer minimum essential coverage to substantially all full-time employees and dependent children “Minimum essential coverage”—basically any employer-sponsored or

multiemployer plan medical coverage “Substantially all”=70% in 2015; 95% in 2016 and beyond

Part (b)--coverage must be affordable and meet minimum value standard “Affordable”—Employee share of cost for self-only coverage on the lowest

offered plan cannot exceed 9.5% of the employee’s household income 3 safe harbors are available allowing substitution for household income

Minimum Value—plan covers at least 60% of total allowed cost of benefits determined by use of calculator from HHS or actuarial certification

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Employer Mandate: Multiemployer Plans An offer of coverage is required by an employee’s

common law employer, so contractors are technically responsible for offering coverage to union employees who are employed on a full-time basis.

However, regulations clarify that if an employer is making contributions to a multiemployer plan for an employee, an offer of coverage from the multiemployer plan to that employee will be considered to satisfy the employer’s obligation.

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Employer Mandate: Penalties Only triggered if an employee goes to the exchange

(healthcare.gov) and receives a subsidy.

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2 Types of Penalties: Part (a)—Failure to offer minimum essential

coverage to full-time employees and dependent children (70% in 2015, 95% beginning in 2016)

$2,000* x each full-time employee minus 30 (minus 80 in 2015)

Part (b)—Failure to offer affordable and/or minimum value coverage

$3,000* per employee who received a subsidy.

*Indexed for inflation beginning in 2015

Employer Mandate: Penalties

Multiemployer plans—Under interim guidance, employer will not be subject to penalty for any employee for whom it is making contributions to a multiemployer plan that offers coverage to that employee as well as his/her dependents and meets affordability and minimum value requirements. However, employer could still be subject to

penalty for any non-CBA employees not offered coverage

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Employer Mandate: Penalty ExampleXYZ Contracting has 100 full-time employees, 95 of which are union members. XYZ is making contributions on those employees’ behalf to the union’s plan, which offers them coverage. XYZ does not offer coverage to the remaining 5 employees, who are not covered by a CBA.

Since coverage was offered to 95% of the XYZ’s full-time employees, XYZ will not be subject to the Part (a) penalty.

However, if two of the non-CBA employees go to healthcare.gov and qualify for subsidies, XYZ will be liable for the Part (b) penalty on those two employees.

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Employer Mandate: Penalties Penalties are calculated on a month-by-month basis.

Example: if employer fails to offer affordable coverage to employee who receives a subsidy on the exchange for 3 months, employer subject to $750 penalty. $3,000 / 12 = $250 per month 3 months = $750

Assessment based on returns (Form 1094 & 1095) filed with IRS Employer will be contacted by IRS following submission of Forms and

will have an opportunity to respond before demand for payment is due

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ACA Reporting: 6055 & 6056

2 reporting obligations: 6055 and 6056 (IRC sections). 6055—insurance companies and self-insured plans must

report of minimum essential coverage as proof of individual coverage

6056—applicable large employers must report coverage offers to full-time employees to satisfy employer mandate Any employer with 50+ FTEs in 2014. Employers with 50-99 FTEs must file for 2015 even if not

subject to the mandate until 2016.

Reported via IRS Forms 1094 and 1095 Each Form has “B” and “C” versions

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ACA Reporting: Deadlines & Filing When?

January 31, 2016: copies of 1095-C forms must be distributed to employees. Actually have until February 1, 2016 (January 31 is a Sunday). Consider distributing with W-2s.

February 29, 2016: deadline for filing return to IRS by mail. March 31, 2016: deadline for filing electronically with IRS.

Employers filing 250+ forms must file electronically.

What Should You Distribute to Employees and What Should You File? Each employer must file a 1094-C form with the IRS.

Transmittal / cover letter – information about the employer. Each employer must file a 1095-C for each full-time employee Each full-time employee should receive a copy of his or her 1095-C

(proof of insurance).

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ACA Reporting: B & C Forms B Forms – 1094-B / 1095-B

6055 Reporting Insurance Carriers Self-insured Plan Sponsor—Including Multiemployer Plans

C Forms – 1094-C / 1095-C 6056 Reporting Applicable Large Employers If employer has 50+ FTEs, it will use the C forms regardless of

self-funding / fully insured status.

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Did you offer coverage to 95% of full time employees?

2 types: 50-99 FTEs

(not subject to the mandate in 2015)

100+ FTEs (offered to 70% of full time employees or invoking phased-in penalty calculations)

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Complete 1 for every full-time employee

Only Completed by Self-Insured Employers

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Line 14 Asks “was an offer made,

and if so, what type?” Commonly-used codes:

1A: Qualifying Offer 1C: MEC to employee

and dependents 1E: MEC to employee,

spouse and dependents 1H: No offer 1I: Transition Relief

2015

Line 15 Asks for the lowest

employee share of premium that was offered.

If 2 plans (both MEC and minimum value) are offered, use the lower plan.

Leave blank if using codes 1A or 1H in line 14.

Line 16 Asks for an explanation of

line 14 response. Codes:

2A: Not employed during month

2B: Not a full-time employee

2C: Enrolled 2D: Limited Non-

Assessment Period 2E: Multiemployer Plan 2F-G: Offer affordable

under safe harbor

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For Union Employees: use 1H in line 14 and 2E in line 16

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Questions?

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Dawn KramerTeam Leader—Compliance Consulting J.W. Terrill, a Marsh & McLennan Agency LLC company314-549-2624dkramer@jwterrill.com

Please note that this presentation is for general informational purposes only and is not intended to constitute legal or tax advice or a recommended course of action in any given situation. Materials are not intended to be, and should not be, relied upon by the recipient in making decisions of a legal nature with respect to the issues discussed herein. The recipient is encouraged to consult independent counsel before making any decisions or taking any action concerning these matters.