IRS Penalties Are Being Issued

capitalThe Internal Revenue Service is finally issuing penalty letters to employers who failed to provide health coverage in compliance with the employer shared responsibility provisions of the ACA for the 2015 tax year. Some letters may describe a no coverage excise tax while others may assess an excise tax for failure to provide “adequate or affordable” coverage. The notices are catching many employers off guard because issuance of these letters was delayed several times.

Those who receive a letter describing the specific violation could be liable for penalties ranging from $2,080 to $3,480 per affected employee, depending on the violation and the plan year involved. Regulatory experts recommend that employers refer to the data submitted on forms 1094-C and 1095-C and respond to the IRS on time, even if they don’t believe the tax is owed.

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Commonsense Reporting Bill Introduced

dg-commonsense-reportingIn October, a bipartisan group of senators introduced a bill that would ease the ACA reporting mandates for employer-sponsored health plans. The bill would roll back the reporting requirements of Section 6056 and replace them with a voluntary reporting system. The bill would also allow payers to transmit employee notices electronically rather than having to send paper statements by mail.

While self-funded health plans must now comply with Sections 6055 and 6056, it is not yet clear how the bill would affect Section 6055 requirements. Senators Rob Portman of Ohio and Mark Warner of Virginia, sponsors of the bill, say their proposal would give the government a more effective way of applying premium tax credits to consumers who purchase insurance through an Exchange, something the administration has been trying to accomplish.

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ACA Mandate Penalty Eliminated

The ACA has required people to have what the government has classified as minimum essential coverage, or else pay a penalty which now amounts to 2.5% of modified adjusted gross income over the income tax filing threshold.

While the House version of tax reform did not change the penalty in any way, the Senate version cut the penalty to 0% and in joint conference debates, the reduction was kept in the bill that was just passed by both houses. The Senate provision is not a repeal of the penalty, but instead a reduction, which could be increased by Congress in the future. While lower corporate and personal tax rates will take effect this year, this reduction will not become effective until 2019.

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Doing What We Can

dgb-doing-what-we-can-blogWe often hear of professional athletes succeeding under pressure by staying “in the moment” and remaining focused on the things that are within their control. This challenge can be applied to the uncomfortable position all of us find ourselves in today – somewhere between complying with existing laws and anticipating the unknowns coming from Washington.

While the IRS has relaxed enforcement of the individual mandate and acknowledged problems in the ACA reporting system, it has confirmed that an applicable large employer is still subject to an employer shared responsibility payment if it fails to offer coverage to 95% of its full-time employees. We continue to help large employers offer minimum essential coverage to avoid penalties, when appropriate, and track offers of coverage to comply with reporting requirements on IRS forms 1094 and 1095.

Other matters remain up in the air as well, including the so-called Cadillac tax on high-cost health plans and any changes in maximum contributions that may be made to HSAs, which would require legislative action. While any significant ACA repeal, replace or repair efforts appear to be overshadowed by the Administration’s interest in tax reform, we continue to monitor developments in healthcare reform and keep our clients and partners informed. It’s our way of doing what we can and remaining “in the moment.”

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Self-Funding Keeps Growing

Self-FundingWith time running out on an opportunity for Congress to repeal and replace the Affordable Care Act and open enrollment season approaching, thousands of small and mid-sized businesses are likely bracing for another round of premium increases. A growing number of employers, however, will choose to avoid the uncertainty plaguing traditional group insurance markets by moving to a self-funded health plan – an option that provides an opportunity for savings and far more plan design flexibility.

Healthcare benefits continue to be perhaps the biggest obstacle facing small and mid-sized businesses. The Self Insurance Institute of America reports that between 2011 and 2016, the average annual deductible for employer-sponsored plans increased by 49% and the percentage of firms with fewer than 200 employees still providing health benefits fell from 68% in 2010 to 55% in 2016.

Self-funding on the other hand, has proven to be a far more responsible alternative for employers, enabling thousands to not only use their health benefit plan to attract and retain high quality employees, but to do so at an a affordable cost. While self-funding has long been a staple for the nation’s largest employers, nearly a third of companies with 200 or more employees now offer at least one self-funded option.

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Great News for Self-Funded Plans: Senators Want to Quash ACA Sec 6056

The article below was published on October 10, 2017 by MyHealthGuide, written by Matthew Albright.

capital-hillA bipartisan group of senators introduced a bill the first week in October that will significantly ease the Affordable Care Act reporting mandates for employer-sponsored health plans.

The bill, called the Commonsense Reporting Act of 2017, in effect rolls back the employer reporting requirements of Section 6056 and creates a voluntary reporting system in its place. Self-funded plans must comply with both 6055 and 6056, though it’s less clear how the bill would affect Section 6055 requirements.

Technically, the bill proposes that an employer does not have to meet the 6056 IRS reporting requirements, as long as the employer takes part in a prospective reporting system set up by the bill.

The bill also relieves employers of the requirement to send notices to all employees under 6056, as long as the employer provides notices to employees who have been reported as having enrolled through an Exchange.

Current Sections 6055 and 6056 mandate that employers report detailed coverage information to the IRS and give notices to all employees. Under 6055 and 6056, the IRS requires detailed information about each covered employee and the employee’s covered dependents. The information in the filing is intended to be used by the IRS to appropriately apply premium tax credits to consumers who purchase insurance through an Exchange.

According to the sponsors of the bill, Senators Mark Warner (D-VA) and Rob Portman (R- OH), current sections 6055 and 6056 do not create an effective way to administer the premium tax credits. The current administration has been looking for a regulatory solution to relieve the reporting burdens of 6055 and 6056, but concluded that legislative action would be needed.

The prospective reporting system proposed by the bill requires high-level information about an employer’s coverage, including:

  • the time period (months) that coverage is available;
  • waiting periods that may apply;
  • certification that the employer’s coverage meets the definition of minimum essential coverage and the minimum value requirement; coverage is offered to part-time employees, dependents and/or spouses of employees;
  • certification that the employer’s coverage meets affordability safe harbors; and
    certification that the employer reasonably expects to be liable for any shared responsibility payment.

In addition, there are a few other elements to the Commonsense Reporting Act that are important to note:

  • Allows payers to electronically transmit employee notices. The current statute now requires paper statements sent via snail mail.
  • Allows payers to use names and dates-of-birth in place of the currently required Social Security numbers when filing reports with the IRS.

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