Tag Archives: shared responsibility rule

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.

IRS final rule for employers to “pay or play” under the ACA

The Internal Revenue Service (IRS) recently issued a final rule for large employers (50 or more full-time employees) to “pay or play” under the Patient Protection and Affordable Care Act (ACA), providing them more time to comply with the ACA’s requirement to offer affordable, qualifying healthcare coverage or pay a penalty under certain circumstances. For employers with 50 to 99 employees, the final rule delays the mandate until the 2016 plan year, while for employers with at least 100 employees, the requirement applies on a phased-in basis so that in the 2015 plan year, 70%—rather than 95%—of the workers must be offered coverage. Large employers must meet the 95% threshold in 2016 and later plan years. The final rule provides guidance on the delay and phase-in, and also address a broad range of related employer “shared responsibility” requirements considered in previous pronouncements.

For employers contributing to multiemployer plans, the final rule extends, indefinitely, the proposed rule’s relief from penalties for employers contributing to a multiemployer plan if the contributions are made pursuant to a collective bargaining agreement, coverage is offered to full-time employees and their dependents, and coverage is affordable and provides minimum value.

For more information about the IRS ruling, please contact your Milliman consultant.

IRS releases final rule on information reporting under the ACA

The Internal Revenue Service (IRS) has published two sets of final rules on the information reporting requirements of the Patient Protection and Affordable Care Act (ACA), providing guidance on the reporting of minimum essential coverage and of healthcare coverage. The minimum essential coverage reporting requirement under tax code Section 6055 applies to employers that sponsor self-insured group health plans, group health insurance issuers, and the boards of trustees, association, or committees of multiemployer plans that provide minimum essential coverage. The healthcare coverage reporting requirement under Section 6056 applies to large employers (with at least 50 full-time or equivalent workers, except that for 2015 only the threshold is 100 full-time or equivalent workers) that are subject to the ACA’s employer “shared responsibility” (also known as “pay or play”) provisions. In general, the reporting entities must collect the information beginning January 1, 2015, and include the information on a single, consolidated form submitted to the IRS and given to employees in 2016.

Separately, the Centers for Medicare and Medicaid Services (CMS) released a final rule governing insurance on the exchanges in 2015, but also providing guidance on the transitional risk reinsurance program (TRRP) fee that insurance issuers and self-funded plans must pay to help offset the costs of non-grandfathered individual coverage.

For Milliman’s perspective read this Client Action Bulletin.

IRS delays and phases in ACA’s employer “pay or play” requirements

The Internal Revenue Service (IRS) has issued a final rule for large employers (50 or more full-time employees) to “pay or play” under the Patient Protection and Affordable Care Act (ACA), providing them more time to comply with the ACA’s requirement to offer affordable, qualifying healthcare coverage or pay a penalty under certain circumstances. For employers with 50 to 99 employees, the final rule delays the mandate until the 2016 plan year, while for employers with at least 100 employees, the requirement applies on a phased-in basis so that in the 2015 plan year, 70%—rather than 95%—of the workers must be offered coverage. Large employers must meet the 95% threshold in 2016 and later plan years. The final rule provides guidance on the delay and phase-in, and also addresses a broad range of related employer “shared responsibility” requirements considered in previous pronouncements (see Client Action Bulletins 13-1 and 13-2). In addition, the U.S. Treasury Department and the IRS released a fact sheet and questions and answers on the ACA’s requirement and the final rule.

This Client Action Bulletin summarizes the most significant provisions of the final rule that applies to a broad range of employers. It does not cover the final rule’s provisions that will be of interest to specific employers, such as guidance on: seasonal employees; bona fide volunteers; adjunct faculty and teachers in educational institutions with academic years and student work-study programs; employees with breaks in service; and airline industry employees.

IRS specifies the health reform law’s individual penalty requirements

The Internal Revenue Service (IRS) has released a final rule that specifies the income tax penalties to which individual taxpayers will be subject if they do not obtain healthcare coverage in 2014. The rule implements the individual or “shared responsibility” mandate of the Patient Protection and Affordable Care Act (ACA), which requires most Americans to either have a minimum level of health insurance or pay an income tax penalty. Employer-sponsored coverage qualifies as minimum essential coverage.

Exemptions from the penalty are available, such as for individuals who qualify for Medicaid coverage but who live in states that have not adopted the ACA’s expanded Medicaid provisions. Also exempt are individuals for whom coverage is unaffordable (i.e., costing more than 8% of household income); those who are uninsured temporarily (e.g., no more than three consecutive months between jobs); and those who oppose having insurance coverage for religious reasons.

The penalty for not having insurance next year will be the greater of $95 or 1% of 2014 household income, in general. The penalties will increase in future years.

Federal premium subsidies will be available for certain low- and moderate-income households, including pre-Medicare-eligible retirees who are eligible for, but do not enroll in, any healthcare coverage that may be offered by their former employers. Similarly, subsidies will be available for former employees and their dependents who are eligible for, but not enrolled in, COBRA continuation coverage.

Although this final rule will not directly affect employer-sponsored group healthcare programs, Milliman consultants are available to discuss the ACA’s individual penalty requirements. The IRS is expected to issue separate guidance on issues of greater interest to employers, such as if an employer subsidizes or funds pretax arrangements for employees to obtain coverage in the individual market.

IRS proposes rule on employer “shared responsibility” under PPACA

The Internal Revenue Service (IRS) has issued a proposed rule on payments that certain employers will be subject to if they do not offer a minimum level of affordable healthcare coverage to their full-time employees beginning in 2014. The employer “shared responsibility” requirement under the Patient Protection and Affordable Care Act (PPACA) applies to employers with at least 50 full-time employees (taking into account full-time equivalent employees) if at least one of those employees receives a federal premium tax credit for purchasing individual coverage from a health insurance exchange in 2014. Employers may rely on the IRS’s proposed rule pending the publication of a final rule or other applicable guidance. Comments on the proposed rule must be submitted to the IRS by March 18, 2013.

This Client Action Bulletin discusses the proposed rule on the employer “shared responsibility” requirement under PPACA.

This blog first appeared at RetirementTownHall.com.