Your Top ACA Questions Answered!
June 15th, 2016
When it comes to the Affordable Care Act, it often seems like the more we learn about it, the more questions we have. In February, we covered some key ACA topics in a #bWebinar aptly titled, “ACA Regulatory Roundup: The Top 10 Things You Need to Know Now.” Since then, we thought of a few extra nuggets of information that could prove valuable as you plan your benefits strategies for the years ahead.
Check out the webinar on-demand and read the extended Q&A below with session speakers Don Garlitz and Mary Bauman to learn even more about the ACA’s hidden complexities.
- If an employee is on a leave of absence that triggers COBRA eligibility, is this still considered a valid offer of coverage under ACA requirements if he is offered continuation of benefits under COBRA and is still technically listed as an employee?
An offer of COBRA coverage is considered an offer of coverage for purposes of avoiding the $2,000 penalty. However, COBRA typically is not affordable so if the person would decline COBRA and go to the exchange, it is possible that the $3,000 penalty could still be triggered.
- If short-term disability is paid at less than 100% pay, how do I count hours? 60% pay equals 60% of hours?
While IRS Notice 2015-87 does not specifically address your question, it appears that there is no proration. Rather, you would still count the person’s regular hours during the period of absence rather than a prorated amount.
- How do you define a controlled group where there are partners of different percentages involved in multiple companies?
The controlled group rules are complicated, but they do address this situation (where there are partners with different percentages involved in multiple companies). Consult a tax advisor to make this determination carefully.
- With respect to the clarification on disability hours for purposes of the look-back period, how would it be handled if the employer pays for the base long-term disability (e.g. benefit of 50% of earnings), but the employee can buy-up (e.g. to 66 2/3%) with after-tax dollars?
Because the LTD benefit is paid at least in part with employer dollars (i.e., the base portion) it would appear that the disability hours would need to be included.
- My client has a six-month look-back period, which happened this month. For employees that continue to be eligible for coverage, are we required to hold a mid-year enrollment and allow the employees to make elections?
You are not required to hold a mid-year enrollment period (in fact, you really can’t under the Section 125 rules if employees pay their required contributions pre-tax, unless you change offerings at that time), but you should have a mid-year enrollment circumstance for those employees who were not eligible for the prior six months who now have become eligible as a result of the six-month look-back measurement period.
- I'm an employer located in a U.S. territory. Individuals here are exempt from the shared responsibility. Would I, the employer, still be required to file a Form 1095-C?
It appears that employers in U.S. territories are required to send any full-time employees a Form 1095-C. Having said that, for purposes of the pay-or-play penalty, an hour of service does not include hours of service performed outside of the United States. In other words, if these employees are not credited for their hours of service, they are likely not full-time employees. However, we recommend that you confirm this with your tax advisor.
- How do you count hours for an employee if the employee is on an unpaid leave of absence not related to FMLA?
If an employee is on an unpaid leave of absence that is not due to FMLA, jury duty or USERRA (the military leave law), then counting unpaid leave time is generally not required for purposes of the ACA measurement periods.
- Will a defined contribution plan design work if you put it all in one bucket but "earmark" the health plan as the first plan that will always get used first—so it ensures the employee is only ever paying the health minus defined contribution?
Our read on Notice 2015-87 is that it doesn’t matter what people actually buy with the money, rather what they could buy with the money. So in a “one bucket” approach, if the employee is allowed to buy life or disability or some other non-section 213 item, the contribution will not count toward an offer of affordable coverage. The comment period on this has passed, but we suspect it will be some time before they release final regulations, so I’d sit tight until we learn what the final rules say.
- How is affordability different for a tobacco user vs. non-tobacco user for a company that offers non-tobacco incentives?
While the premium or premium equivalent of the medical plan may have a single blended overall rate for tobacco users as well as non-tobacco users, the employer could also have a wellness plan that provides for an incentive to be paid to non-tobacco users, or for a surcharge to be applied to a tobacco user. In either case, the employer is allowed to use the cost that would be applied to a non-tobacco user as the cost basis of the plan for everyone, including tobacco users. In other words, tobacco users are not allowed to argue that the plan is unaffordable to them because they did not benefit from any tobacco-related incentives.
- In regards to the waiver incentive, does this mean the Section 105 Medical reimbursement is no longer? If so, effective when?
We don’t believe that Notice 2015-87 negates any provisions of Section 105. Rather, it says that when an employer chooses to use a waiver incentive, the amount of that waiver incentive may be added to the normal employee cost of coverage (i.e., payroll deduction) for the lowest-cost single-only medical plan, for purposes of determining whether the employer’s offer of coverage is affordable to the individual. The final rules about how this concept will be applied remain to be seen.
- Does the Cadillac tax not affect employers that always offer benefits as 100% employer-paid?
The Cadillac tax, now set to take effect in 2020, affects health coverage only, not other benefits such as life or disability. Whether the employer pays all or part of the total plan cost makes no difference in determining the excise tax that will be owed. The tax is calculated based on the total plan cost, and any portion of cost that exceeds the thresholds will be subject to the tax and payable by the employer (for self-insured plans) or insurer (for fully insured plans). In the case of fully insured plans, the insurer will undoubtedly load the fully insured rate with sufficient premium to cover the tax that will be owed, so the employer will end up paying the tax indirectly.
- Are the PACE [Protecting Affordable Coverage for Employees Act] guidelines indefinite? Will employers in that 51–99 employee segment be considered small groups in the near future?
Yes, unless changed by future legislation. PACE leaves it up to each state to determine how to define "small group."" Some states will stay with the traditional approach of up to 50 lives; others may go to 100. Some that have gone to 100 based on the prior ACA requirement to go to 100 may decide to revert back to 50. This will be something to follow in the state legislatures.
- We file Form 1095 this year for our 59 employees enrolled. How does the PACE Act change our obligation for next year?
PACE doesn’t change the filing requirements of the ACA. It does affect which market certain fully insured plans will fall into. Since the ACA imposes market reforms, including community rating, on all small groups, it’s a question of what size group will be considered small group. PACE says that the ACA requirement to move all groups of 1-100 into small group is changed, and it’s now up to each state to determine whether their small group market will cap at size 50, or whether they will require larger groups up to 100 to be placed into that community rated pool also.
- Can you recap the webinar’s ACA Top 10 list
While we didn’t keep to a Letterman-style top 10 format, here’s what we think represents the top 10:
- Employers still cannot sponsor/pay for individual health plans for employees.
- Incentives to waive medical insurance may soon adversely affect affordability of employer plans, possibly subjecting employers to penalties.
- Individuals may now begin to apply for tax credits if employer waiver incentives would make the employer plan unaffordable for that individual.
- If employers co-mingle medical and non-health contributions (for example, with defined contribution), those contributions may not count toward the affordability calculation.
- HRA plans may only pay claims on dependents if the dependents are covered on the integrated medical plan effective the first day of the 2017 plan year.
- Affordability thresholds will be adjusted annually from 9.5% to 9.56% for 2015 and 9.66% for 2016, while penalty amounts will also be adjusted for inflation.
- When calculating hours of service to determine health plan eligibility, do not include hours from work comp or disability laws OR from disability plans paid 100% by employees, but do count hours from disability plans paid at least in part by the employer.
- Employers can now impose certain restrictions on FSA rollovers.
- The Cadillac Tax is delayed to 2020 and also makes the fine tax deductible.
- The PACE Act stops the mandatory expansion of small-group markets to larger groups and leaves it to each state to determine whether to expand its small-group definition above group size of 50.
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