Th 1pm-1 - Friede & Lacy-Wilson - MASBO Conference Slides ... · 6055/6056 Cheat Sheet 6055 1)...

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ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™

Alphabet Soup! Benefits & HR Compliance Update MASBO │ NOVEMBER 12, 2015

Kat Lacy-Wilson, JD, LLM Area Asst. Vice President, Compliance Counsel

Keith Friede Area Vice President, Talent & Organization Development


Compliance Update – Employee Benefits SECTIONS 6055 & 6056 REPORTING & SAME SEX MARRIAGE ISSUES

Kat Lacy-Wilson, JD, LLM Area Asst. Vice President, Compliance Counsel

November 12, 2015


Agenda:

•  Understanding 6055/6056 Employer Reporting

•  Same-Sex Marriage

© 2015 GALLAGHER BENEFIT SERVICES, INC. 2

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6055/6056 BIG PICTURE



6055/6056 Cheat Sheet 6055

1)  Individual mandate

2)  Enrolled (includes non-employees such as COBRA, dependents, and officers)

3)  Ends in B

4)  Ends in 4 = IRS; ends in 5 = EE statement

5)  1094-B (IRS), 1095-B (EE)

6)  If fully-insured, carrier handles

6056

1)  Employer mandate

2)  Eligible (can include COBRA and part-time employees)

3)  Ends in C

4)  Ends in 4 = IRS; ends in 5 = EE statement

5)  1094-C (IRS), 1095-C (EE)

6)  All employers with at least 50 full time equivalent employees must do these forms



Reporting and Penalties: WHY? IRS Reconciles All Information Reported

From Employee via Income Tax

Return

From Employer via Forms 1094-C and

1095-C

From Insurer via Forms 1094-B

and 1095-B


IRS

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Individual Mandate

Section 6055 (Coverage)

Individuals must have MEC

Report shows who has coverage (including non-

employees such as spouses,

dependents, COBRA, retirees)

Employer Mandate

Section 6056 (Offer)

Applicable Large Employers (50+) must make offers

of affordable, minimum value

coverage to 95% of FT employees

Report shows which FT

employees received

appropriate offers

Premium Tax Credit

Section 36B (Subsidies)

Individuals must not have received

an offer of affordable

minimum value coverage and must

meet certain income thresholds

Report shows which person is

entitled to a premium tax credit

based on information the employer has


WHAT is Enforced by Reporting?


Form Deadlines

Individual statements sent to employees

Annually by January 31

First statements = 2016 for 2015 calendar year

Reports submitted to

IRS

Annually by Feb 28 (paper)

or March 31 (electronic)

30 day extension Form 8809 Note: 2016 is a

leap year

First filing = 2016 for 2015 calendar year


6055/6056 REPORTING


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What Data is Needed and Who is Likely to Have it?

Employer Information

*Address, EIN * Contact * # FTs * Total # EEs * Con. Grp

Coverage/Enrollment

Employee or Other Individual

Information * Names * Addresses * SSNs * FT status * Coverage * Delivery info * Non-FT EEs * Non – EEs

Eligibility/Offer Information

* 95/70% FT * Min Value * Affordability (Ee Cost**) * Spouses * Dependents

Transitional Relief Information

* Claiming * Qualify * 50–99 FTEs * 80 freebies


You or Accountant

You, TPA, or Insurance Co.

You, Payroll, or Vendor You


Individual Mandate - 6055 Reporting:

Name, address, & EIN of

employer plan sponsor

Name, address, & EIN of

reporting entity

Name, address, & TIN for each

eligible employee enrolled in MEC

Name & TIN of covered spouses and dependents

Months covered



6055 Reporting: Form 1095-B


Individual Mandate

information goes here

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Employer Mandate - 6056 Reporting:

Name, address and EIN of ALE

Name and phone of contact

Year of the return

Certification of Offer Months of availability

Employee share of lowest cost monthly

premium for self-only minimum value

coverage

Number of FT for each month

Name, address and TIN For each full-time

employee Months covered

Indicator codes (i.e. minimum value,

spouse coverage, etc.)


Remember: IRS can discern Premium Tax Credit eligibility from Employer Mandate information.


6056 Reporting: Form 1095-C


Individual Mandate

information goes here

for self-insured plans

Fully insured plans

skip this Part III.

Carrier puts Individual

Mandate information

on Form 1095-B

Affordability, Minimum Value, and Premium Tax Credit Information go here


Challenges and Solutions: “How To” Steps 1.  Figure out what data you need 2.  Define who you need to analyze for each month 3.  Locate the data 4.  Assign responsibility to the data sources 5.  Determine if you will hire a vendor* for this function or handle it internally,

and understand exactly what a vendor will do for you 6.  Coordinate data sources for data flow to reporter (HIPAA Business

Associate Agreement needed?) 7.  Compile and analyze data 8.  Merge and test data 9.  Assign codes for lines 14 and 16 (could be very challenging) 10.  Complete forms 11.  Send to individuals 12.  Send to IRS 13.  Maintain data, and keep good records of data and forms * But, according to regulations, you will have ultimate liability


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Strategies: Working with Vendors Goal: No Surprises! •  Be sure you understand EXACTLY what the Vendor will do for you

and EXACTLY what the Vendor expects you to do. •  Define what data the Vendor has and where the remaining data is.

Does the Vendor expect you to chase down the remaining data? Or, will it?

•  Critical question: How will the Vendor handle Lines 14 and 16 of Form 1095-C? These questions require a code for every month for almost every employee. Will the Vendor require you to assign these codes and complete these questions, or will it?* Will the Vendor create an automated process? How much involvement will be required from you in subsequent years?

•  Will the Vendor send the forms to individuals and the IRS? How? Electronically, or, by paper via mail? Or, will you send?

•  Will the Vendor maintain your data and keep good records of the data and forms?

*Since you are ultimately liable, you should review the Vendor’s work, but the question is – who completes the first draft?


CRACK THE CODES: LINES 14 & 16

17 © 2015 GALLAGHER BENEFIT SERVICES, INC.


Solutions for Cracking the Codes (Even if a vendor completes the codes for you, you retain liability, so should be involved in the implementation of any automation, and a review of employee codes assigned)


FIND THE DATA

CROSS OUT N/A CODES

CREATE EMPLOYEE GROUPS

DO SAMPLES, THEN ACTUAL

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6056 Reporting – Crack the Codes


Line 14

1A. Qualifying Offer: Minimum essential coverage providing minimum value offered to full-time employee with employee contribution for self-only coverage ≤ 9.5% mainland single federal poverty line, MEC for family

1B. Minimum essential coverage providing minimum value offered to employee only

1C. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) (not spouse).

1D. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to spouse (not dependent(s)).

1E. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse.

1F. Minimum essential coverage NOT providing minimum value offered to employee, or employee and spouse or dependent(s), or employee, spouse and dependents.

1G. Offer of coverage to employee who was not a full-time employee for any month of the calendar year and who enrolled in self-insured coverage for one or more months of the calendar year.

1H. No offer of coverage (employee not offered any health coverage or employee offered coverage that is not minimum essential coverage).

1I. Qualifying Offer Transition Relief 2015: Employee (and spouse or dependents) received no offer of coverage, received an offer that is not a qualifying offer, or received a qualifying offer for less than 12 months.

Caution: This is a summary of the Codes. For complete information, see the IRS Instructions.


6056 Reporting – Crack the Codes


Line 16

2A. Employee not employed during the month. Enter code 2A if the employee was not employed on any day of the calendar month.

2B. Employee not a full-time employee. Enter code 2B if the employee is not a full-time employee for the month and did not enroll in minimum essential coverage, if offered for the month. Also use for FT employee whose coverage ends because the employee terminates mid-month

2C. Employee enrolled in coverage offered. Enter code 2C for any month in which the employee enrolled in health coverage offered by the employer for each day of the month, regardless of whether any other code in Code Series 2 might also apply

2D. Employee in a section 4980H(b) Limited Non-Assessment Period. Enter code 2D for any month during which an employee is in a Limited Non-Assessment Period for section 4980H(b). This includes initial measurement period, 90 day or less waiting period, or a first calendar month of employment if the first day of employment is not the first day of the calendar month

2E. Multiemployer interim rule relief. Enter code 2E for any month for which the multiemployer interim guidance applies for that employee.

2F. Section 4980H affordability Form W-2 safe harbor. Enter code 2F if the employer used the section 4980H Form W-2 safe harbor to determine affordability for purposes of section 4980H(b) for this employee for the year.

2G. Section 4980H affordability federal poverty line safe harbor. Enter code 2G if the employer used the section 4980H federal poverty line safe harbor to determine affordability for purposes of section 4980H(b) for this employee for any month(s).

2H. 4980H affordability rate of pay safe harbor. Enter code 2H if the employer used the section 4980H(b) rate of pay safe harbor to determine affordability for purposes of section 4980H(b) for this employee for any month(s).

2I. Non-calendar year transition relief applies to this employee. Enter code 2I if non-calendar year transition relief for section 4980H(b) applies to this employee for the month.

Caution: This is a summary of the Codes. For complete information, see the IRS Instructions.


Partial Months – Be Careful about Fine Distinctions! Examples: •  Line 14 Codes: An employer “offers” health coverage for a month only if it offers

coverage that would provide coverage for every day of that calendar month. •  Code 2A: Use if not employed on any day of the month

•  Code 2B: Use for FT employee whose coverage ends because of mid-month termination (Cheat sheet: “going”….leaving the employer)

•  Code 2C: Enrolled for each day of the month

•  Code 2D: One usage = if the first day of employment is not the first day of the calendar month (Cheat sheet: “coming”……newly hired by the employer)

•  Part III, Column (e): Check the coverage box for the months in which the individual was covered for at least one day in the month

Warning: See IRS Instructions and Q&As for more fine distinctions


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Cheat Sheet: Partial Months*


•  Individual Mandate (Coverage) •  Individual is considered to have

coverage if covered one day in a month!

Generous to

Individuals

•  Employer Mandate (Offer) •  Employer is considered to offer if it

offers coverage that would provide coverage for every day of the month! (See Instructions for exceptions such as terminating employees)

Harsher on Employers

*These are very general statements, just to help you remember in a big picture way. In all cases, see IRS instructions and Q&As for partial months


2015 Transitional Relief

• Delay compliance until first day of 2015 plan year

• Must offer coverage to employees on first day of 2015 plan year

FISCAL YEAR RELIEF

• Subject to ESR • ESR can start in 2016 if

eligible • Transitional relief

focuses on delay

MEDIUM GROUP (50-99) • Subject to ESR

• ESR starts in 2015 • Transitional relief

focuses on penalties

LARGE GROUP (100+)



Certification of Transitional Relief: Form 1094-C


Check box C to certify relief

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Certification of Transitional Relief: Form 1094-C


Use Code A (Under 100 FTEs ) or B (100+ FTEs)

6055/6056 REPORTING: SOME EXAMPLES



Assumptions


Full-time employee offered coverage for full year •  Employee, spouse, and dependent children eligible for

plan coverage •  Employee, spouse and children all enroll for all 12 months •  Coverage is affordable (based on rate of pay safe harbor

the lowest cost of employee coverage is $130.00)

Example 1

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Form 1095-C, Part I & II: Full Year Employee, Offered Coverage


Employer completes Part I, II and III: Part I & II shown below

Example 1

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Form 1095-C, Part III: Full Year Employee, Offered Coverage


Employer completes Part I and II. III if self-insured. Part III shown below

Example 1

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ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC. 30

Look Back Measurement Method •  Look back measurement period of 12 months for variable

hour employees starting on date of hire •  Administrative period is 1 month •  Rate of pay affordability safe harbor •  Employee, spouse and dependent are eligible •  Cost is $130 a month and is affordable (self-only

coverage)

Assumptions

Example 2

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ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ © 2015 GALLAGHER BENEFIT SERVICES, INC. 31

Look Back Measurement Method •  Joe Smith is hired on May 1, 2014 (variable) •  Employer tracks hours through April 30, 2015 •  Employer determines that Joe is full-time •  Employer makes Joe an offer of coverage effective June 1,

2015 •  Joe elects coverage •  His wife and child also enroll

Assumptions

Example 2

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Form 1095-C: Look Back Measurement Method, Then Enrolled


Employer completes Part I, II and III: Parts II & III shown below

Example 2

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More Information •  Fully-insured:

https://ajg.adobeconnect.com/_a815130238/hcr_032014d/

•  Self-funded: https://ajg.adobeconnect.com/_a815130238/hcr_032014e/

•  IRS Instructions: http://www.irs.gov/instructions/i109495c/ar01.html

•  IRS Electronic Filing – Publication 5165

© 2015 GALLAGHER BENEFIT SERVICES, INC. 33 59

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SAME-SEX MARRIAGE



SAME-SEX MARRIAGE


Now legal in every state

If offer spousal coverage,

cannot discriminate

Should have had special

enrollment for newly eligible

by now

Many carriers no longer

allow or will not allow in the

near future domestic

partner riders


SAME-SEX MARRIAGE


Pre-2015 decision: Same-sex marriage only valid in recognized states Caused state by state confusion

Post-2015 decision: Same-sex marriage recognized in every state Uniformity for fully-insured policies Self-funded policies and ERISA preemption may not allow prohibition

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SAME-SEX MARRIAGE


If plan offers spousal coverage = must offer same-sex

coverage

Keep in mind issues for self-funded plans and ERISA

If plan does not offer spousal coverage =

Only way to deny coverage for same-sex

marriage

Employee morale/

retention/attraction issues


SAME-SEX MARRIAGE


SCOTUS decision = qualifying event for fully-

insured plans

Special open enrollment for newly eligible spouses

and dependents

No language in decision as to when should have been done •  Administratively reasonable •  Best practice = within 90 days

of decision

If not done yet, probably prudent to do as soon as

possible


SAME-SEX MARRIAGE


Some clients choosing to terminate domestic partner

coverage

• Allowing “wind-down” period to get married or get removed

• Have seen periods up to six (6) months

Some insurers choosing to no longer cover

domestic partners

• Only allowed as courtesy for same-sex couples who could not get married

Court decision did not

address civil unions and domestic partners

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Questions?


The intent of this presentation is to provide you with general information regarding the status of, and/or potential concerns related to, your organization’s current employee benefits environment. It does not necessarily fully address all of your organization’s specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues should be addressed by your organization’s general counsel or an attorney who specializes in this practice area, as appropriate.

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