Important Affordable Care Act Updates For 2015
Employers have been reacting to the impact the Affordable Care Act (ACA) has made on employer-provided health coverage since early 2010. This year will be no different, with significant portions of the Affordable Care Act going into effect, such as the employer shared responsibility mandate (“employer mandate”) and new ACA reporting requirements.
Applicable Large Employer Status
The first item employers with around 50 employees should be doing right now is determining whether they are an “applicable large employer” or “ALE” under the ACA. The employer mandate provisions, and much of an employer’s responsibility for the new ACA reporting requirements, hinges on whether the employer is an ALE.
An employer that employed at least 50 full-time employees (or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) during the previous year is an ALE. A full-time employee is an individual who works on average at least 30 hours per week. Note that groups of companies with common ownership are combined for purposes of determining whether an employer is an ALE. If employers are unsure about their status, they should work with an advisor knowledgeable about how to perform the employee count, including:
- Whether an employer’s seasonal workers can be disregarded for purposes of determining if the employer’s workforce exceeds 50 full-time employees
- Transitional guidance that permits an employer to average the number of full-time employees over a consecutive 6-month period (as opposed to a 12-month period) for purposes of determining ALE status
Planning For The Employer Mandate
If the employer determines it is an ALE, it will want to ensure its plan design going forward does not trigger penalties under the employer mandate. The employer mandate generally penalizes an ALE if:
- the ALE does not offer coverage to substantially all of its full-time employees (and their dependent children) and at least one employee receives a premium tax credit to purchase coverage through the insurance marketplace; or
- the ALE offers coverage to substantially all of its full-time employees and their dependent children but at least one full-time employee receives a premium tax credit because the employer did not offer coverage to that employee or employer’s coverage is either not affordable or does not provide minimum value.
There is special transition relief for the 2015 plan year that exempts ALEs with 50-99 full-time employees (including full-time equivalents) from the penalties under the employer mandate. This 50-99 full-time employee transition relief has additional requirements that an employer will need to observe in order to rely on this transition relief. ALEs with 100 or more full-time employees (including full-time equivalents) are subject to the employer mandate for the 2015 plan year.
For purposes of determining whether an ALE is covering substantially all of its full-time employees, the ALE must track the hours of its employees to ensure that it is properly accounting for its full-time employee population for purposes of the employer mandate. The employer mandate provides different methods, including a look-back measurement method and monthly measurement method (with certain stability periods) that can be used for employees that have variable hours that make it difficult for the employer to determine whether they would be considered a full-time employee. ALEs should also consider whether their summary plan descriptions and other participant communications regarding the group health plan should include a description of the measurement methods and stability periods used by an employer for purposes of determining whether a variable hour employee is a full-time employee.
The calculation of the penalties under the employer mandate, determination as to whether the employer covers substantially all full-time employees, and whether the coverage is affordable or provides minimum value cannot be covered in detail here. If an employer determines it is an ALE and subject to the employer mandate either this plan year or for 2016, the ALE should make certain determinations as to whether the group health coverage covers its full-time employee population and whether the coverage offered is affordable and provides minimum value. ALEs should also make sure that they are reviewing their plan documents for any additional disclosures for purposes of describing the measurement method and stability periods for variable hour employees and developing systems to track hours.
New ACA Reporting Requirements
Newly finalized IRS forms report to the IRS and individuals whether an employee received an offer of minimum essential coverage (i.e. coverage under an employer sponsored plan, certain government sponsored programs and individual coverage) for purposes of administering the individual mandate. Other IRS forms report information to the IRS and individuals about the health insurance coverage offered to the employee (if any) for purposes of administering the employer mandate and for purposes of determining whether an employee is eligible for a premium tax credit.
Note that an ALE that is eligible for 50-99 employee transition relief from the penalties under the employer mandate is still subject to these reporting requirements for 2015. With these new IRS forms due to the IRS and individuals in early 2016, employers should be reviewing these forms and the related IRS instructions to determine what information they will need to gather to report this information.
Gabriel Marinaro is an employee benefits and executive compensation attorney at Smith Haughey Rice & Roegge (SHRR) in Traverse City. He can be reached at firstname.lastname@example.org. SHRR will host a free ACA seminar at the Hagerty Center on April 2.