Tag Archives: IRS

IRS Letter 226J requesting “shared responsibility” payments under the ACA

If your human resources (HR) or finance team has received Internal Revenue Service (IRS) Letter 226J—which provides an initial estimate of the tax penalty for noncompliance in 2015 of the Patient Protection and Affordable Care Act (ACA) employer mandate—you should make every effort to respond within 30 days, indicating your agreement or demonstrating other facts that could reduce or eliminate the proposed tax penalty.

The IRS’s guidance on the Letter and penalties comes in the form of Questions & Answers (#55-58), “Making an Employer Shared Responsibility Payment.” In general, the guidance discusses the ACA’s requirements and provides information on how employers should respond to the Letter, with instructions on disagreeing with the IRS’s penalty determination and additional steps that group health plan sponsors may take, including appeals.

Here are a few key facts about the employer mandate:

• Employers are “applicable large employers” (ALEs) if they have at least 100 full-time employees. The ACA required ALEs to offer “affordable coverage” to at least 70% of these employees in 2015. The coverage percentage increased to 95% in 2016.
• Affordable coverage means that employee contributions for self-only coverage are less than 9.5% of the employee’s household income. The self-only cost is the marker in the ACA rules, even if the employee elected an option to cover more than just themselves under the health benefit plan. The rules permit use of an employee’s W-2 wages as a safe harbor substitute for the employee’s household income. In addition, your healthcare coverage must be the equivalent of at least a bronze-level plan on the health insurance exchange, covering 60% of the costs. This is known as minimum essential coverage (MEC).
• An ALE had to send IRS Forms 1095-C for 2015 to employees early in 2016 to use in their personal income tax filings. The Form 1095-C summarized the months in which you offered an employee (and qualified dependents) healthcare coverage. Concurrently, ALEs filed Forms 1094-C with the IRS. This form indicated the number of full-time employees who were offered coverage in 2015, either in each month or for the entire year.
• Based on the information in Forms 1095-C and 1094-C, the IRS determines the initial tax penalty for a failure to offer affordable coverage to 70% of full-time employees for at least one month during the year.

There are several other details ALEs must assess and examine, including new IRS Form 14764 (employer response form) and Form 14765 (a list of employees who allegedly caused the failure).

For information about and responding to the IRS’s Letter 226J, please contact your Milliman consultant.

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

Health plan choice and premiums in the 2018 federal health insurance exchange
The U.S. Department of Health and Human Services (HHS) has issued a brief that presents information on qualified health plans (QHPs) available on the federal health insurance exchange for states that use the HealthCare.gov platform. National estimates and summary tables are presented in each section of the text. State-specific estimates are in the appendix.

For more information, click here.

ACA AIR submission composition and reference guide published
The Internal Revenue Service (IRS) has published “Affordable Care Act (ACA) Information Returns (AIR) Submission Composition and Reference Guide.” The document provides details on composing and submitting Forms 1094/1095-B and Forms 1094/1095-C by transmitters to the IRS. The scope of the document addresses the application-to-application (A2A) messages exchanged on a Simple Object Access Protocol (SOAP) basis between client and exposed web service endpoints and the user interface (UI)-browser-based web, requiring human initiation.

For more information, click here.

Guidance on the requirements for providing a qualified small employer health reimbursement arrangement released
The IRS published Notice 2017-67 offering guidance on the requirements for providing a qualified small employer health reimbursement arrangement (QSEHRA) under section 9831(d)—which was added to the Internal Revenue Code by the 21st Century Cures Act (Cures Act)—the tax consequences of the arrangement, and the requirements for providing written notice of the arrangement to eligible employees.

For more information, click here.

IRS updates FAQs on employer-shared responsibility payments
The IRS updated its website listing frequently asked questions (FAQs) on employer-shared responsibility provisions under the Patient Protection and Affordable Care Act (ACA), including questions and answers regarding employer-shared responsibility payments.

For more information, click here.

COLAs for retirement, Social Security, and health benefits for 2018

With the release of the September 2017 Consumer Price Index (CPI) by the U.S. Bureau of Labor Statistics, the U.S. Social Security Administration (SSA) and the Internal Revenue Service (IRS) have announced cost-of-living adjustment (COLA) figures for Social Security and retirement plan benefits, respectively, for 2018. The 2018 adjusted figures for high-deductible health plans (HDHPs) and health savings accounts (HSAs) included in this Client Action Bulletin were released by the IRS earlier this year and are provided here for convenience.

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

Medicare offers more health coverage choices and decreased premiums in 2018
The Centers for Medicare and Medicaid Services (CMS) announced that people with Medicare will have more choices and options for their Medicare coverage in 2018. CMS estimates that the Medicare Advantage average monthly premium will decrease by $1.91 (about 6%) in 2018. More than three-fourths (77%) of Medicare Advantage enrollees remaining in their current plans will have the same or lower premium for 2018.

For more information, click here.

Fee funding the Patient-Centered Outcomes Research Trust Fund issued
The Internal Revenue Service (IRS) released Notice 2017-61, which provides the adjusted applicable dollar amount to be multiplied by the average number of covered lives for purposes of the fee imposed by §§ 4375 and 4376 of the Internal Revenue Code for policy years and plan years that end on or after October 1, 2017, and before October 1, 2018.

The fee imposed by §§ 4375 and 4376 helps to fund the Patient-Centered Outcomes Research Trust Fund (PCORTF) and is calculated using the average number of lives covered under the policy or plan and the applicable dollar amount for that policy year or plan year.

The applicable dollar amount must be used to calculate the fee imposed by §§ 4375 and 4376 for policy years and plan years that end on or after October 1, 2017, and before October 1, 2018, is $2.39. The increase from the prior amount is calculated by multiplying the adjusted applicable dollar amount for policy years and plan years ending in the previous federal fiscal year, $2.26, by the percentage increase of the projected per capita amount of National Health Expenditures published by the U.S. Department of Health and Human Services (HHS) on February 14, 2017.

For more information, click here.

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

IRS issues guide on ACA information returns
The Internal Revenue Service (IRS) released Publication 5258, “Affordable Care Act (ACA) Information Returns (AIR) Submission Composition and Reference Guide.” The purpose of this document is to provide guidance to all types of external transmitters about composing and successfully transmitting compliant submissions to the IRS.

To download the guide, click here.

IRS issues guide on electronic filing of ACA information returns
The IRS released Publication 5165, “Guide for Electronically Filing Affordable Care Act (ACA) Information Returns for Software Developers and Transmitters.” The guide outlines the communication procedures, transmission formats, business rules, and validation procedures for information returns transmitted electronically through the AIR system.

To download the guide, click here.

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

Draft ACA substitute Forms 1094 and 1095 published
The Internal Revenue Service (IRS) released a draft of Publication 5223 specifying general rules and specifications for Patient Protection and Affordable Care Act (ACA) Substitute Forms 1095-A, 1094-B, 1095-B, 1094-C, and 1095-C, if you will not be using the official IRS Forms 1095-A, 1094-B, 1095-B, 1094-C, and 1095-C, to furnish statements to recipients.

To download a copy of the draft, click here.