alabama | florida | georgia | mississippi | washington dc what employers must know now about aca...

ALABAMA | FLORIDA | GEORGIA | MISSISSIPPI | WASHINGTON DC

WHAT EMPLOYERS MUST KNOW NOW ABOUT ACA

COMPLIANCE

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KING V. BURWELL

• ORAL ARGUMENT MARCH 5, 2015 (JUNE 2015 DECISION)

• ARE SUBSIDIES AVAILABLE FOR INSURANCE PURCHASED THROUGH HEALTHCARE.GOV?

• IS THERE AN EMPLOYER MANDATE IN STATES SERVED BY HEALTHCARE.GOV?


COVERAGE AND COST SHARING MANDATES


MAXIMUM WAITING PERIOD RULES

Under these proposed regulations, one month would be determined by adding one calendar month and subtracting one calendar day, measured from an employee's start date in a position that is otherwise eligible for coverage. For example, if an employee's start date in an otherwise eligible position is May 3, the last permitted day of the orientation period is June 2. Similarly, if an employee's start date in an otherwise eligible position is October 1, the last permitted day of the orientation period is October 31. If there is not a corresponding date in the next calendar month upon adding a calendar month, the last permitted day of the orientation period is the last day of the next calendar month. For example, if the employee's start date is January 30, the last permitted day of the orientation period is February 28 (or February 29 in a leap year). Similarly, if the employee's start date is August 31, the last permitted day of the orientation period is September 30. If a group health plan conditions eligibility on an employee's having completed a reasonable and bona fide employment-based orientation period, the eligibility condition would not be considered to be designed to avoid compliance with the 90-day waiting period limitation if the orientation period did not exceed one month and the maximum 90-day waiting period would begin on the first day after the orientation period.


WELLNESS INCENTIVE RULES

ACA + HIPAA bar discrimination based on health status, HIPAA catching grandfathered plans.

Compliance with IRS rules (6/13) is an affirmative defense.

“[R]egardless of the type of wellness program, every individual participating . . . should be able to receive the full amount of any . . . incentive, regardless of any health factor.”

“participatory” vs. “health-contingent” “activity-only” vs. “outcome-based” OBWIP must include a “reasonable alternative standard.”


80% of FTE (and dependents)

No 4980H(a) tax, but potential 4980H(b) tax(2016 assessment)

65% of FTE (and dependents)

4980H(a) tax and potential 4980H(b) tax(2016 assessment)

EMPLOYER MANDATE TAXES


One employee’s monthly hours

One company’s FTE’s

One controlled group’s FTE’s

100 36 16

35 18

15 8 11 19

“Special unpaid leave” may count, too.

May include paid “on call” time.

120 HOS used for both.


PLAN DISCRIMINATION FAVORING HCE

Self-insured plan discrimination favoring the highly compensated makes their benefits taxable income, under 26 U.S.C. §105(h).

ACA extends “similar” rules, not yet written, to fully-insured plans Not applicable to grandfathered plans; NGI plan sponsor may be fined $100/day/NHCE.

Self-insured rules are being re-written, too. That low wage workers choose the cheapest mandated

option while executives pick the best is OK. No penalty for discriminating in favor of the lowly compensated.


AUTOMATIC ENROLLMENT

• ALE’S > 200 FTE (FLSA 18A)

• WHEN RULES PUBLISHED

• COORDINATION WITH EMPLOYER MANDATE AND MAXIMUM WAITING PERIOD RULES

• MEC PLANS SURPRISE – AUTO-ENROLLMENT IN AN MEC PLAN COULD NEGATE SUBSIDY ELIGIBILITY

• PRESSURE FROM BOTH SIDES FOR REPEAL


2015 ALE Coverage Reporting Mandates• Every “Applicable Large Employer” by 2/29/16 (if

paper) or 3/31/16 (electronic) must file with IRS and deliver to each full-time employee –• A Form 1095-C for each full-time employee;• A Form 1094-C cover sheet for the set.• Each ALE “Member” may report separately.• If 250, electronic reporting is required.• No exemption for state and local government

employers.• Self-insured health plans - Forms 1094-B, C versus 1095-B,C


Step 1: Identify Your “Employees”

• Employer mandate taxes (26 U.S.C. §4980H) and reporting penalties (26 U.S.C. §§6055, 6056, 6721, 6722) tied to “common law employer” relationship.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee


Common Law Employees

•W-2 payroll employees•Misclassified “contractors” and “consultants”• Section 530 inapplicable, 79 Fed. Reg. 8,568 (Feb. 12, 2014)• E.g., medical staff leadership?•Medical staff?

• Temp staff• Temp – to – Perm Staffing• Some longer-term leased employees


§414(n)(2) Exclusion

26 CFR §54.4980H-1(a)(15) excludes Code §414(n)(2) “leased employees” from §4980H “employees.”(n) Employee leasing(1) In generalFor purposes of the requirements listed in paragraph (3), with respect to any person (hereinafter in this subsection referred to as the “recipient”) for whom a leased employee performs services—(A) the leased employee shall be treated as an employee of the recipient, but(B) contributions or benefits provided by the leasing organization which are attributable to services performed for the recipient shall be treated as provided by the recipient.(2) Leased employeeFor purposes of paragraph (1), the term “leased employee” means any person who is not an employee of the recipient and who provides services to the recipient if—(A) such services are provided pursuant to an agreement between the recipient and any other person (in this subsection referred to as the “leasing organization”),(B) such person has performed such services for the recipient (or for the recipient and related persons) on a substantially full-time basis for a period of at least 1 year, and(C) such services are performed under primary direction or control by the recipient.


§414(n)(2) Exclusion (p. 2)

“not an employee of the recipient”“full-time . . . for . . . at least 1 year”

• Has the IRS told us that §414(n)(2) leased employees are never §4980H employees of the recipient?• Or, that leased employees are not automatically the recipient’s

§4980H employees, as mandated by §414(n)(1)?• Or something else?


§414(n)(2) Exclusion (p. 3)

If never, then why 26 CFR §54.4980H-4(b)(2)?(2) Offer of coverage on behalf of another entity. [ . . . ]For purposes of section 4980H, . . . . For an offer of coverage to an employee performing services for an employer that is a client of a staffing firm, in cases in which the staffing firm is not the common law employer of the individual and the staffing firm makes an offer of coverage to the employee on behalf of the client employer under a plan established or maintained by the staffing firm, the offer is treated as made by the client employer for purposes of section 4980H only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay the staffing firm for the same employee if that employee did not enroll in health coverage under the plan.

“full-time . . . for . . . [<] 1 year” solution?


Separate ACA Issues

2015 failure to offer qualifying, affordable coverage to full-time employees

Subsidized 2015 QHP purchase by FTE (but see King v. Burwell, S.Ct. No. 14-114, 3/4/15)

2016 IRS assessment of §4980H taxes for 2015

2016 failure accurately to report 2015 coverages offered to full-time employees (Code §§6055, 6056, Form 1095-C)

2016 (or later) IRS assessment of reporting penalties (Code §§6721, 6722) (not contingent on King v. Burwell)

= “employee”? =

http://www.irs.gov/pub/irs-dft/f1095c--dft.pdf


Code §6056 “employees”

• 26 CFR §301.6056-1(b)(6)

(6) Full-time employee. The term full-time employee has the same meaning as in section 4980H and § 54.4980H–1(a)(21) of this chapter, as applied to the determination and calculation of liability under section 4980H(a) and (b) with respect to any individualemployee, and not as applied to the determination of status as an applicablelarge employer, if different.

Sub-section 21 merely adds “full-time” to the “employee” definition in sub-section 15.


Our cautious conclusion

• Full-time common law employees leased for less than one year, are ACA “employees” under both §4980H and §6056.• Complexity starts here.


Exchanges Flag MisclassificationsFed Data HubIRS – SSA – DHS – CMS – HHS – State Medicaid

1099’s, W-2’s, Forms 1094, 1095-C

Application Attestations

Resolve Contradictions

Subsidy Certification or Denial

Medicaid Enrollment

Mailed, Paper Notice of Subsidy (2015)

Rulings

QHP Purchase from Insurer

Subsidy Certification Appeal (90 days?)

Subsidy Denial Appeal Reports

IRS (2016)


No problem, nevertheless

Employer

PEO W-2 employees supervising

PEO W-2 employees

PEO paying and supervising $


No problem, necessarily

Employer

Employer W-2 employees supervising

W-2 employees Temp Staff Workers (< 90 days)

Temp Staff Employer $

$


Temp - to - Perm Staffing

Employer


W-2 employees Temp Staff Workers

Temp Staff Employer $

$

> 90 days


Leased Employees 90 days to 1 year

Employer


W-2 employees Leased Workers

Leasing Employer $

$


Observed Strategies

• Temp – to – Perm: Transfer temps to perm during waiting period and offer FTE coverage before end of waiting period.

• Long-Term Leased Workers:• Leasing contract indemnity clause• Indemnity clause + ACA compliance warranty• ACA compliance warranty + surcharge for all leased

employees offered coverage (26 CFR §54.4980H compliant?)

• ACA compliance warranty + surcharge for each leased employee enrolled in coverage (retaliation exposure?)


Form 1095-C Puzzle

If the leasing firm and the employer must file Form 1095-C for the same workers, how will the employer obtain this data?


Form 1095-C Puzzle (p. 2)

If the employer does not file Form 1095-C for a leased worker, can it claim §4980H credit for coverage offered to that worker? How? When?



79 Fed. Reg. 13,233 (March 10, 2014, preamble)

“Section 6056 reporting is needed for the administration of section 4980H. Generally, a payment will be assessed under section 4980H if the employer either does not offer minimum essential coverage to its full-time employees (and their dependents) or the coverage offered is not affordable or does not provide minimum value, and one or more of the full-time employees receive a premium tax credit for purchase of coverage on an Affordable Insurance Exchange (Exchange).”



Excerpts from the draft Form 1095-C instructions:“[A] full-time employee who works for more than one employer that is a member of the same Aggregated ALE Group . . . must receive a separate Form 1095-C from each employer.”“For this purpose, an employee is an individual who is an employee under the common-law standard for determining employer-employee relationships.”“An employer offers health coverage to an employee if . . . in certain cases, a staffing firm, offers health coverage on behalf of the employer.”

http://www.irs.gov/pub/irs-dft/i109495c--dft.pdf


Our cautious conclusion

• IRS expects both the leasing firm and the customer employer to file with IRS and deliver a Form 1095-C for/to each employee for whom a qualifying coverage offer is claimed.• Employers should track and report employees leased

90 days to one year.


Reporting Penalties

• Code §§6721, 6722• §6721 “Failure to file correct information returns”

“In the case of a failure . . . such person shall pay a penalty of $100 for each return with respect to which such a failure occurs, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $1,500,000.”

• §6722 “Failure to furnish correct payee statements”“In the case of each failure . . . such person shall pay a penalty of $100 for each statement with respect to which such a failure occurs, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $1,500,000.”


Where we think out loud . . .

www.acareview.com

The preceding information is not legal advice and should not be substituted for legal advice. Rules change frequently; small fact differences may change obligations materially. Seek competent, current legal advice regarding your specific situation.

http://www.acareview.com/

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