Affordable Care Act: Your New Data Reporting Requirements

Transcription

1 Affordable Care Act: Your New Data Reporting Requirements Thank you for joining us. We have a great many participants in today s call. Your phone is currently muted so that the noise level can be kept to a minimum. If you have not yet joined the audio portion of this webinar, please click on Communicate at the top of your screen, and then Audioconference. The dial-in information will appear. If you have any questions, you can send them to the host using the Chat feature in the bottom right corner during the webinar. The webinar will start momentarily Keenan & Associates 1

2 Affordable Care Act: Your New Data Reporting Requirements Presented by: Cynthia Stribling Vice President Keenan Regina Horton Legal Counsel Keenan License 2 No

3 Today s Agenda The Big Picture Why is this reporting needed? The Reporting Requirements Who must do what and by when? Forms for Reporting & Data Required What s all the fuss about? 3

4 The Big Picture 4

5 Individual Mandate Starting January 1, 2014, most individuals must have Minimum Essential Coverage (MEC) for themselves and their dependents or otherwise pay a tax. Examples of MEC: Employer-sponsored coverage (including COBRA and retiree coverage) Coverage purchased in the individual market, including through Covered California Government plans (e.g., Medicare and Medicaid) Student health coverage 5

6 Employer Mandate Internal Revenue Code (IRC) 4980H Starting January 1, 2015, an Applicable Large Employer (ALE) may be subject to a penalty if it does not offer its FT employees, and their dependents, MEC that is affordable and provides minimum value (MV). The A Penalty Failure to offer MEC to at least 95% of FT employees and their dependents (70% for 2015) The B Penalty Offers MEC to required percentage of FT employees and their dependents BUT: Is not offered to all FT employees and their dependents, Is unaffordable, or Does not provide MV 6

7 Availability of Exchange Coverage Qualified Health Plans (QHP) Guaranteed to provide certain levels of coverage, including the ten categories of Essential Health Benefits, required under the ACA. Premium Tax Credits and Cost-Sharing Subsidies For individuals and families meeting certain income requirements and without access to affordable MEC that provides MV through their employer. 7

8 How will the IRS Enforce & Administer? Questions from IRS Who is enrolled in MEC? Is it through an employer, the Exchange, individual market, etc.? Did an ALE offer MEC that is affordable, MV to its FT employees and their dependents? To all or some? Who qualifies for a Premium Tax Credit? Questions from Employers Did any of my FT employees get a Premium Tax Credit? Will I owe a penalty? Questions from Employees & other Individuals Do I have MEC or will I have to pay a tax? Can I get a Premium Tax Credit for Exchange coverage? 8

9 Reporting Requirements 9

10 Reporting by the Exchange Exchange must file Form 1095-A with IRS. Will report information on who enrolled in a QHP. Must also provide a statement to individuals to: Allow them to claim the Premium Tax Credit, Reconcile the credit on their returns with advance payments of the Premium Tax Credit, and File an accurate tax return. Form 8962 Premium Tax Credit Will be filed by taxpayer claiming the Premium Tax Credit Filed along with annual Federal tax return 10

11 Reporting Under IRC 6055 Insurers, sponsors of self-insured plans, governmental entities and other parties providing MEC must report on each individual covered under the plan. Will assist IRS with enforcing the Individual Mandate. Reporting to IRS Must report on each covered individual. Statements to Responsible Individuals Must be furnished to each responsible individual identified in the IRS reporting. 11

12 Who is Responsible for 6055 Reporting? Who is Responsible? Fully-Insured Plans Self-Insured Plans Issuer Plan Sponsor Employer for Single Employer Plans Each Participating Employer for Plans Maintained by More than One Employer but that are not Multiemployer Plans Joint Board of Trustees or Other Similar Group for Multiemployer Plans Each Participating Employer in MEWAs Employee Organization for Plans Maintained Solely by the Employee Organization 12

13 Reporting Under IRC 6056 ALEs subject to IRC Section 4980H must report on their fulltime employees and the employer-sponsored coverage offered. Will assist IRS with enforcing the Employer Mandate & with administering the Premium Tax Credit Reporting to IRS Must report on all FT employees and the employer-sponsored coverage offered. Statements to Full-Time Employees Must be furnished to each employee identified in the IRS reporting. 13

14 Timing for Reporting &6056 Reporting to IRS Due: By February 28 following the end of the calendar year. If filing electronically no later than March 31. If filing 250 or more forms, then must file electronically. Reporting is based on calendar year. First reporting is based on 2015 calendar year. First reporting to IRS: No later than March 1, 2016 (February 28, 2016 is a Sunday) March 31, 2016, if filing electronically. 14

15 Timing for Reporting &6056 Reporting to Individuals/Employees Due: By January 31 following the end of the calendar year. Same timing as for IRS Form W-2 First statements due no later than January 31, Can furnish electronically but only if certain notice, individual consent, software and hardware requirements are met. 15

16 Penalties for Noncompliance $100 for each failure up to a max of $1.5 million. Applies separately to IRS reporting and furnishing of statements. Reporting to IRS For failing to file return with IRS, Failing to include all the required information, or Providing incorrect information. Statements to Individuals/Employees For failing to provide statement in timely manner, Failing to include all the required information, or Providing incorrect information. There is relief for failure due to reasonable cause. 16

17 Relief for 2016 Reporting Penalties will not be imposed on entities who make good faith efforts to comply. But only for incorrect or incomplete information reported on the return or statement. No relief available if good faith effort to comply is not made or there is no timely filing of an information return or statement. But relief may be available if the failure to timely file was for reasonable cause. 17

18 Forms for Reporting & Data Required 18

19 Forms for Reporting IRC 6055 IRS released DRAFT forms and instructions. Finalized forms anticipated later in the year. Who reports on what forms? Forms 1094-B & 1095-B Applies only to 6055 reporting. Used by issuers for fully-insured plans. Used by plan sponsors for self-insured plans (excluding ALEs). ALEs with self-insured plans will report on Forms 1094-C & 1095-C. 19

20 IRS Form 1095-B 20

21 Reasonable Efforts to Obtain SSN A person will be treated as acting in a responsible manner if the person properly solicits the SSN. If reporting entity doesn t already have SSN, ask for it at time relationship established. If it is not provided, ask again by December 31 of the year in which the relationship begins (January 31 of the following year if the relationship begins in December). If the SSN is still not provided, ask again by December 31 of the following year. If it is still not provided, the reporting entity need not ask again. 21

22 IRS Form 1094-B 22

23 Forms for Reporting IRC 6056 Again, IRS released DRAFT forms and instructions. Finalized forms anticipated later in the year. Who reports on what forms? Forms 1094-C & 1095-C Used by all ALEs for 6056 reporting on top half of Form 1095-C (Parts I & II). ALEs with self-insured plans will report on bottom half of Form 1095-C (Part III) for 6055 reporting. 23

24 IRS Form 1094-C 24

25 Reporting on Behalf of ALE Designating other party to report on behalf of ALE Special Rules for Governmental Units: Governmental unit or agency may designate another entity to report on its behalf if it is part of, or related to, the same unit or agency. Designation must be in writing and signed by both parties. Appropriately designated entity assumes liability of the ALE for failure to report. Third Party: ALE can contract with a third party to report on its behalf but it will not transfer liability for failure to report. 25

26 IRS Form 1094-C 26

27 Example Authoritative Transmittal ABC Co. is a single employer with its corporate offices in Downtown Happyville and its operations located in a different location on the outskirts of Happyville. ABC wants to report on all of its FT employees at their corporate offices in one batch of Forms 1095-C with one Transmittal Form 1094-C and report on all of its FT employees at its operations location in a separate batch of Forms 1095-C with a separate Transmittal Form 1094-C. The IRS allows this but ABC must also include a separate Authoritative Transmittal that adds up both batches. 27

28 Authoritative Transmittal Must be only one Authoritative Transmittal filed for each ALE. If filing only one Form 1094-C, then check the box. It s the Authoritative Transmittal. If filing multiple Forms 1094-C, then add up all the Forms C, input the total number on Line 20 of a separate Form 1094-C and identify that form as the Authoritative Transmittal. 28

29 IRS Form 1094-C 29

30 Qualifying Offer Method Alternative Reporting Based on Certification of Qualifying Offers ALE must certify that, for all months of the year in which the employee was a FT employee, it made a Qualifying Offer of coverage to the employee. Qualifying Offer MEC that provides MV at an employee cost for self-only coverage that does not exceed 9.5% of Federal Poverty Line and includes an offer of MEC to the employee s dependents and spouse. 30

31 Qualifying Offer Method What is the benefit of using this method? Simplifies the reporting on Form 1095-C. Use Qualifying Offer code 1A on Line 14 of Form 1095-C. No dollar amount for employee contribution on Line 15 of Form 1095-C. May provide simplified statement to the employee. Info must include ALE contact info and a statement that a qualifying offer was made for all 12 months to the employee, spouse & dependents who are, therefore, ineligible for a premium tax credit. 31

32 Qualifying Offer Method Transition Relief Alternative Reporting Based on Certification of Qualifying Offers for 2015 Available Only for 2015 ALE must certify it made a Qualifying Offer for one or more months of the 2015 calendar year to at least 95% of its FT employees. Qualifying Offer MEC that provides MV at an employee cost for self-only coverage that does not exceed 9.5% of Federal Poverty Line and includes an offer of MEC to the employee s dependents and spouse. 32

33 Qualifying Offer Method Transition Relief What is the benefit of using this method? Simplifies the reporting on Form 1095-C. Use Qualifying Offer code 1A or 1L on Line 14 of Form 1095-C. Use code 1A if the employee received a Qualifying Offer. Use code 1L if the employee did not receive a Qualifying Offer. No dollar amount for employee contribution on Line 15 of Form 1095-C. May provide simplified statement to the employee but there are two possible versions. 33

34 Qualifying Offer Method Transition Relief Employee received Qualifying Offer for all 12 Months. Info on statement must include ALE contact info and a statement that a qualifying offer was made for all 12 months to the employee, spouse & dependents who are, therefore, ineligible for a premium tax credit. Employee did not receive Qualifying Offer for all 12 months. Info on statement must include ALE contact info and a statement indicating that the employee, spouse & dependents may be eligible for a premium tax credit for one or more months in

35 Section 4980H Transition Relief ALEs with FT employees, including FT equivalent employees: Eligible ALEs not subject to A or B penalties until first day of 2016 plan year. To be eligible, ALE must: Average at least FT employees, including FTEs during 2014, Maintain size of workforce & aggregate hours of service, and Maintain previously offered health coverage. Relief not available if plan year changed after February 9, 2014 to start at a later date. 35

36 Section 4980H Transition Relief ALEs with 100 or more FT employees, including FT equivalent employees: 70% threshold if MEC is offered to at least 70% of FT employees (and dependents), ALE not subject to A penalty through 2015 plan year. Applies to: ALEs with 100+ FT employees, including FTEs. ALEs with FT employees who were not eligible for the prior transition relief. 36

37 98% Offer Method Alternative Reporting Based on Certification of 98% Offers ALE must certify it offered for all 12-months of the calendar year, affordable (under any affordability safe harbor), MV coverage to at least 98% of the employees (and their dependents) on whom it must report. What is the benefit of using this method? Not required to identify which of its employees are actually FT. Not required to provide total number of FT employees. But still required to file Forms 1095-C on behalf of all its FT employees. How does ALE report on its FT employees without determining who is a FT employee? 37

38 98% Offer Method ABC Co. has 100 employees 65 are scheduled to work 40 hours per week, 5 are scheduled to work 5 hours per week and 30 are scheduled to work 27 hours per week. ABC knows the 65 employees are FT employees and must report on them. ABC also knows the 5 employees are not FT employees and does not need to report on them. What about the other 30 employees? They may or may not be FT employees so ABC would report on them. 38

39 IRS Form 1094-C 39

40 MEC Offer Indicator Column A Did the ALE offer MEC to at least 95% of its ACA defined FT employees and their dependents (70% for 2015)? For all 12 months? Only for certain months? This is only a certification that, in general, the ALE offers MEC to the requisite percentage of employees and not that MEC was offered to a particular employee. ALEs with non-calendar year plans will need to understand how the non-calendar year transition relief applies to them for purposes of determining if the 70% threshold is met and checking the applicable box. 40

41 IRS Form 1094-C 41

42 FT Employee Count Column B ALE must provide the total number of ACA defined FT employees by calendar month. If the ALE qualified for the 98% Offer Method we discussed earlier, they don t need to complete Column B. Exclude any employees in a Limited Non-Assessment Period. This is where the method(s) the ALE is using to determine FT employee status will come into play. Remember, only two methods available to determine FT status: Look-Back Measurement Method Monthly Measurement Method 42

43 Determining FT Status Look-Back Measurement Method ALE identifies its FT employees by looking back over a Standard Measurement (SMP) or Initial Measurement Period (IMP) and counting the hours of service to determine if an employee averaged at least 30 hours of service per week. Based on the determination at the end of the SMP or IMP, the employee s status is defined for a separate Stability Period (SP) that follows the SMP or IMP. Monthly Measurement Method Employee s hours of service are totaled at the end of each calendar month to determine the employee s FT status for that month. 43

44 Data Needed for Determining FT Status Under Look-Back or Monthly Measurement Method Understand how Hours of Service are defined under the regulations to ensure you re using the correct data. Need data for hours worked and hours not worked that the employee was paid or entitled to payment (e.g., vacation, sick days). Understand how to calculate hours of service for hourly vs. nonhourly employees. Understand the rehire and breaks-in-service rules. Need to track employee start dates, termination dates and rehire or resumption of service dates in order to apply these rules. Also need to track Special Unpaid LOA (i.e., FMLA, USERRA, jury duty) if using Look-Back Measurement Method. 44

45 IRS Form 1094-C 45

46 IRS Form 1094-C 46

47 IRS Form 1095-C 47

48 Offer of Coverage Indicator Codes Some examples of Indicator Codes for Line 14 1B: MEC providing MV offered to employee only. 1C: MEC providing MV offered to employee and at least MEC offered to dependent(s) but not spouse. 1E: MEC providing MV offered to employee and at least MEC offered to dependents and spouse. 1G: Offer of MEC to employee who was not a FT employee for any month of the calendar year and who enrolled in selfinsured coverage for one or more months. 1H: No offer of coverage made to employee. 48

49 IRS Form 1095-C 49

50 Affordability Safe Harbor Indicator Codes Some examples of Indicator Codes for Line 16 2A: Employee not employed on any day during the month. 2B: Employee not a FT employee for the month and did not enroll in MEC. 2C: Employee enrolled in MEC offered. 2D: Employee is in a Limited Non-Assessment Period. 2F: Form W-2 affordability safe harbor used for the employee. 2G: FPL affordability safe harbor used for the employee. 2H: Rate of Pay affordability safe harbor used for the employee. 50

51 IRS Form 1095-C 51

52 Example Madison Get s a New Job Madison, age 26, graduated from college in May While looking for a job during 2013, she enrolled in coverage through Covered California with a January 1, 2014 effective date. She chose a Silver Level plan with a monthly premium of $375. Fortunately, her low income qualified her to receive a $75 advance premium tax credit. As a result, the coverage costs her $300 a month. On February 15, 2014, Madison starts employment with ABC Co. as an Administrative Assistant. She earns $15.00 per hour and, as of her start date, she is reasonably expected to be a FT employee working 32 hours of service per week. ABC Co. is an ALE with approximately 120 employees. 52

53 Example Madison Gets a New Job ABC offers two medical plans a PPO and an HMO to its employees and their dependents but not spouses. The monthly premium for selfonly coverage is: Self-insured PPO: $244 HMO: $150 The waiting period for ABC s medical plan is 30 days (i.e., coverage is effective the first of the month following 30 days of employment). Because Madison already met her OOP Max with her Covered California plan, she decided not to enroll in any of ABC s medical plans and continued her Covered California coverage for She also continued to receive the $75 advanced premium tax credit because she didn t notify Covered California about her change in status. ABC uses the Rate of Pay safe harbor to determine if coverage is affordable. 53

54 Madison s Form 1095-C 54

55 Example Madison Gets a New Job Assume the same facts as before except: Madison notifies Covered California that her status has changed and that she is eligible for coverage through her employer, ABC Co. Since she is no longer eligible for a premium tax credit, Madison decides to enroll in one of ABC s plans. She chooses the self-insured PPO plan because she can keep the doctor she was seeing under her Covered California plan. 55

56 Madison s Form 1095-C 56

57 IRS Penalty Notification to Employers IRS will contact ALEs to inform them of any potential liability and provide an opportunity to respond before any liability is assessed or Notice and Demand for Payment is issued. Contact will occur after ALEs file their returns for IRC 6056 and after individuals file their annual Federal tax returns (i.e., sometime after April 15, 2016). If after contact by IRS and response by ALE, the IRS determines a penalty is owed, it will then send out Notice and Demand for Payment. 57

58 Tracking & Reporting Solutions 58

59 Tracking & Reporting Solutions For customers who need assistance in tracking employee status and submitting the required reports to the IRS, Keenan has reviewed a number of solutions offered in the marketplace and can recommend two vendors who offer different approaches: SAFEHARBOR TM by Empyrean facilitates tracking of variable hour employees only for full-time status determination and provides employer level reporting for your use in creating and filing the required reports. Once implemented, SafeHarbor is a software-as-a-service solution. Equifax Workforce Solution by Equifax facilitates tracking of all employees, and provides employee, employer and IRS reporting. Once implemented, Equifax loads all files for the client, and makes IRS submissions, providing a turnkey solution. Your Keenan representative can provide more information and assistance in contacting these vendors. 59

60 Questions? Disclaimer Keenan & Associates is an insurance brokerage and consulting firm. It is not a law firm or an accounting firm. We do not give legal advice or tax advice and neither this presentation, the answers provided during the Question and Answer period, nor the documents accompanying this presentation constitutes or should be construed as legal or tax advice. You are advised to follow up with your own legal counsel and/or tax advisor to discuss how this information affects you

61 Thank you for your participation! Innovative Solutions. Enduring Principles. 61