ACA Reporting in 2016 Rules, Changes, and Real-Life Examples 11/15/2016. Stephen J. Swanick, President

Transcription

1 ACA Reporting in 2016 Rules, Changes, and Real-Life Examples 11/15/2016 Stephen J. Swanick, President

2 About Your Presenter BSBA Graduate of UNC s Kenan-Flagler Business School 10 Years in industry as Accounting Manager, Controller, CFO Finishing MACC at UNC Charlotte in Spring 2017 Founded 1095EZ Online in early 2015 Entrepreneur, Husband, Father

3 Agenda The Affordable Care Act (ACA): Why are we here? ACA Deep-Dive & Examples Calculating size/who has to file Measurement Periods Understanding the 1095-C coding Affordability Penalties ACA in 2016: What s new for Year #2?

4 The Affordable Care Act: Why are we here?

5 The Affordable Care Act Full name: Patient Protection and Affordable Care Act (PPACA) Signed into law on March 23, 2010 Introduced individual coverage mandates, employer coverage mandates, minimum requirements for compliant coverage, subsidies, and insurance exchanges Phased-in over a period of years Employer Mandate effectively began in 2015 (the same year as the reporting requirement)

6 Employer Reporting Enforcement Mechanism Implemented by IRS Section 6055/6056 Individual returns on either 1095-B or 1095-C form Entity-level summary/transmittal report, 1094-B or 1094-C Who reports: No Coverage OR Fully- Insured Coverage Self-Insured Coverage <50 FTE s no reporting 1095-B & 1094-B Transmittal 50+ FTE s 1095-C: Parts I & II 1095-B Transmittal 1095-C: Parts I, II, & III 1095-B Transmittal

7 ACA Lingo FTE Full-Time Equivalent Employee Fractional (part-time) employees who add up to a whole FT ALE Applicable Large Employer An employer with 50+ FTE s ESR Employer Shared Responsibility Pay or Play provision

8 Compliant Coverage Requirements MEC Minimum Essential Coverage Coverage that meets ACA-defined qualities (such as the Ten Essential Benefits, availability, renewability, etc.) MV Minimum Value Coverage has an actuarial value of at least 60% Affordable cost of employee-only coverage is less than [threshold]

9 Penalties (2015) A Penalty B Penalty Penalty for failure to offer MEC to 70% of employees Penalty for failure to meet Affordability criteria $166.67*/month = $2,000/year $250*/month = $3,000/year Enforced on ALL employees, but with first 80 exempted (not penalized) Enforced ONLY on employees that go to marketplace and get a subsidy Upper-bound of annual penalty Capped at what A Penalty would have been *will be indexed to inflation

10 ACA Deep-Dive With Real-Life Examples

11 ACA Deep-Dive Understanding the Forms Calculating size/who has to file Measurement Periods Understanding the 1095-C coding Affordability Penalties

12 The 1095-C

13 The 1095-C, Commentary

14 The 1094-C

16 The 1094-C

18 EZ Insights #1 Box A limited value Box B N/A for 2016 Box C limited availability in 2016 Box D limited value

20 Does Company X have to file? Applicable Large Employers (ALEs) have to complete the returns ALEs average 50+ [FT+FTEs] for the prior calendar year Controlled groups are combined for FTE determination, but each EIN files separately FTE determination: FT work 120+ hours in a month FTE = total hours worked by non-ft in the month, divided by or 130 hours/month?

21 Example: Staffing Company

23 Is Employee John Doe a FT or PT employee? Threshold is 130 hours (not the 120 used for FTE determination) Any compensation counts as an hour Sick, Vacation, On-call Disability counts if receiving disability payments

24 Monthly vs. Look-back Monthly Measurement Hours are measured monthly to determine eligibility Coverage offered and terminated monthly Must provide a Form 1095-C if they worked FT hours for even one month Look-back Measurement Hours are averaged for up to 12 months to determine eligibility Coverage offered and terminated yearly Only provide a Form 1095-C if they averaged FT hours over the entire measurement period

25 Example: EE with FT hours Jan-Mar, non-ft Apr-Dec Monthly Measurement Must be offered coverage January through March COBRA offered due to reduction in hours Will receive 1095-C Look-back Measurement No coverage offered due to averaging non-ft for year COBRA is N/A regardless of hours change Will NOT receive 1095-C

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30 EZ Insights #2 IT DOESN T HAVE TO BE THAT COMPLICATED Most employers intrinsically know whether an employee is FT or PT If necessary, calculations can be done selectively

32 1095-C Coding, from

33 Part II in Detail Row 14: What did the employer do? Row 15: If [MEC+MV] was offered, what was the EE-only cost? Row 16: What did the employee do?

34 EZ Insights #3 Row Code(s) Usage and Comment 14 1A Qualifying Offer compliant coverage with FPL safe harbor 14 1B/1C/1D/1E Standard Full-Month offers: 1E, MEC to EE+Fam; 1C, MEC to EE+Children 14 1F Offer of MEC without MV 14 1G Offer to non-ft/non-employee AND enrolled in SI coverage for 1+ mo. 14 1H No Full-Month Offer of Coverage 14 1J/1K (NEW 2016) Other offers involving Conditional Coverage 16 2A Not employed for entire month 16 2B Not a full-time employee OR mid-month termination w/cancellation 16 2C Enrolled in coverage for entire month 16 2D Limited Non-Assessment Period (ex: first month, initial waiting) 16 2E Multiemployer Rule (ex: Union contracts) 16 2F/2G/2H Safe Harbors: W-2 Safe/Federal Poverty Line (FPL)/Rate of Pay

35 The 1095-C, Example #1 1E C The Situation Hire date of June 17, 2012 EE-Only Premium is $150/month, company pays 50% Employee enrolls

36 The 1095-C, Example #2 1E C The Situation Hire date of June 17, 2012 EE-Only Premium is initially $150/month, company pays 50% At May 1, 2016 renewal, Premium is now $180/month Employee enrolls

37 The 1095-C, Example #3 1H 1H 1H 1H 1H 1H 1H 1E 1E 1E 1E 1E A 2A 2A 2A 2A 2D 2D 2C 2C 2C 2C 2C The Situation Hire date of June 17, day wait for benefits EE-Only Premium is $150/month, company pays 50% Employee enrolls

38 The 1095-C, Example #4a 1H 1H 1H 1H 1H 1H 1H 1E 1E 1E 1E 1H A 2A 2A 2A 2A 2D 2D 2C 2C 2C 2C 2A The Situation Hire date of June 17, day wait for benefits EE-Only Premium is $150/month, company pays 50% Employee enrolls Termination date of November 22, 2016 Coverage ends November 30, 2016

39 The 1095-C, Example #4b 1H 1H 1H 1H 1H 1H 1H 1E 1E 1E 1H 1H A 2A 2A 2A 2A 2D 2D 2C 2C 2C 2B 2A The Situation Hire date of June 17, day wait for benefits EE-Only Premium is $150/month, company pays 50% Employee enrolls Termination date of November 22, 2016 Coverage ends November 22, 2016

40 The 1095-C, Example #5a 1E F The Situation Hire date of June 17, 2012 EE-Only Premium is $150/month, company pays 50% Employee did not enroll Employee makes $11.00 hour = $22,880/year Annual payroll deduction = $900 $900 / $22,880 = 3.93%, which is below 9.66% affordability threshold

41 The 1095-C, Example #5b 1E The Situation Hire date of June 17, 2012 EE-Only Premium is $450/month, company pays 50% Employee did not enroll Employee makes $11.00 hour = $22,880/year Annual payroll deduction = $2,700 $2,700 / $22,880 = 11.8%, which is above 9.66% affordability threshold

42 The 1095-C, Example #5c 1E C 2C 2C 2C 2C The Situation Hire date of June 17, 2012 EE-Only Premium is $450/month, company pays 50% Employee initially enrolled, but drops coverage June 1, 2016 Employee makes $11.00 hour = $22,880/year Annual payroll deduction = $2,700 $2,700 / $22,880 = 11.8%, which is above 9.66% affordability threshold

43 The 1095-C, Example #6 1E 1E 1E 1E 1E 1H 1H 1H 1H 1H 1H 1H F 2F 2F 2F 2F 2B 2B 2B 2B 2A 2A 2A The Situation Hire date of June 17, 2012 EE-Only Premium is $150/month, company pays 50% Employee did not enroll Employee moves to part-time status on June 1, 2016 Termination date of September 18, 2016

44 The 1095-C, Example #7a 1F 2C The Situation Hire date of June 17, 2012 Company offers a MEC Plan does not provide MV EE-Only Premium is $150/month, company pays 50% Employee enrolls

45 The 1095-C, Example #7b 1F The Situation Hire date of June 17, 2012 Company offers a MEC Plan does not provide MV EE-Only Premium is $150/month, company pays 50% Employee did not enroll

46 The 1095-C, Example #8 1H 2E The Situation Hire date of June 17, 2012 Company has a union-based workforce, and medical insurance is provided through union contract Employee decision unknown

47 The 1095-C, Example #9 The Situation John Smith was covered by a Self-Insured plan all year John s wife Jane became covered on March 1, 2016 Child was born on December 25, 2016 and became covered John Smith X Jane Smith X X X X X X X X X X Junior Smith 12/25/2016 X

49 Affordability Issues Affordability threshold is a moving target Originally 9.5%, set to 9.56% for 2015, now 9.66% in 2016 Three Safe Harbor Options: 1. W-2 Safe Harbor (Code 2F) 2. Federal Poverty Line (Code 2G) 3. Rate of Pay Safe Harbor (Code 2H)

50 W-2 Safe Harbor (2F) Pros: Most useful with employees with regular 40-hour weeks Usually offers employer the ability to pass along a higher cost Cons: Only counts earned wages (not unpaid absences) Not able to be perfectly determined until year-end Box 1 does not include pre-tax contributions

51 Federal Poverty Line Safe Harbor (2G) Pros: Allows use of Qualifying Offer Method Cons: Cannot charge employee more than 9.66% of $11,880 = $1,147.61/year ($95.63/month)

52 Rate of Pay Safe Harbor (2H) Pros: Fast worst-case calculation ($12.00/hr * 130 hours = $1,560 * 9.66% = $150.70/month) Cons: Only allowed to count 130 hours * rate during a calendar month Provides a much lower dollar threshold and higher employer cost

53 EZ Insights #4 If employer s goal is to offer affordable insurance to all: 1. Take lowest paid employee on payroll and find approx. W-2 threshold Ex: $12/hr * 2,080 hrs = $24,960 * 9.66% = $2, / 12 months = $200.93/month 2. Set path to compliance by either: Set payroll deduction on this worst-case, or Give raise to all $12/hr employees to increase the threshold 3. In December or at termination, project where W-2 Box 1 will finish, and provide bonuses to any employees (or just those that did not enroll) until affordable

55 Pay or Play Penalties (2016) A Penalty B Penalty Penalty for failure to offer MEC to 95% of employees Penalty for failure to meet Affordability criteria $180/month = $2,160/year $270/month = $3,240/year Enforced on ALL employees, but with first 30 exempted (not penalized) Enforced ONLY on employees that go to marketplace and get a subsidy Upper-bound of annual penalty Capped at what A Penalty would have been

56 Failure to File Penalties (2016) Misc. Penalties Failure to provide forms to employees: $260/form not provided, not to exceed $3,193,000 Failure to file forms with IRS: $260/form not filed, not to exceed $3,193,000 Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to file the returns and furnish the required statements form-filers are required to electronically file; if forms are not submitted electronically, $260/form penalty (first 250 are exempted)

57 Penalty Calculations A Penalty: Intentional Non-Compliance Company X employs 65 employees for all of 2016, and does not offer insurance. (65 30) * $2,160 = $75,600 Shared Responsibility Payment (Penalty) B Penalty: MEC Plan Strategy Company Y employs 80 employees for all of 2016, and offers a MEC Plan which does not provide MV. 60 enroll, 20 do not. Of those 20, 10 enroll in subsidized coverage. 10 * $3,240 = $32,400 Shared Responsibility Payment (Penalty)

58 EZ Insights #5 Transition Relief is done Good Faith Effort will not apply in 2016 IT IS TIME TO TAKE THIS SERIOUSLY

59 ACA in 2016: What s new for Year #2?

60 Changes Recap Minor increases in penalties, affordability threshold Transition is complete (no more Transition Relief/exceptions) Due Dates set to normal (EE s: Jan 31 st, IRS paper: Feb 28 th, IRS e: Mar 31 st )

61 Dealing with Discrepancies

62 Employer Appeal

63 And the Elephant in the Room

64 EZ Insights #6 It took a Democratic President and a Filibuster-proof Democratic majority to pass the Affordable Care Act However, Republicans have a simple majority and can obstruct/de-fund No timetable for an alternative, and the law is on the books

65 Thanks!