Employer

What are consequences to employer for not establishing health insurance plan?

Employer Health Care Arrangements

Q1.  What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)?

Under IRS Notice 2013-54, such arrangements are described as employer payment plans. An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation. As explained in Notice 2013-54, these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing.  Notice 2013-54 clarifies that such arrangements cannot be integrated with individual policies to satisfy the market reforms.  Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.

Q2. Where can I get more information?

On Sept. 13, 2013, the IRS issued Notice 2013-54, which explains how the Affordable Care Act’s market reforms apply to certain types of group health plans, including health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain other employer healthcare arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy.

DOL has issued a notice in substantially identical form to Notice 2013-54, DOL Technical Release 2013-03, and HHS will shortly issue guidance to reflect that it concurs with Notice 2013-54. On Jan. 24, 2013, DOL and HHS issued FAQs that addressed the application of the Affordable Care Act to HRAs.
Source: IRS, http://www.irs.gov/uac/Newsroom/Employer-Health-Care-Arrangements

in employee / Employer / health insurance  by probityadmin 0 comments

IRS Highlights Stiff Penalty for Reimbursing Individual Premiums

Since the IRS and Treasury published Notice 2013-54 in September 2013, pre-tax employer reimbursement of an employee’s individual health insurance premiums has been a hot topic of conversation.  Historically, many employers have provided this type of benefit in lieu of offering a group health plan – a strategy that now needs to be reevaluated as a result of regulations implementing the Patient Protection and Affordable Care Act (PPACA).

The IRS has affirmed its stance on these types of arrangements (called “employer payment plans”) in a short two question FAQ published on May 19, 2014.  Question 1 reads as follows:

Q1.  What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)?

Referencing Notice 2013-54, the IRS emphasizes that these employer payment plans are considered group health plans under PPACA. As group health plans, these arrangements are subject to the market reforms, including the prohibition on annual limits and the requirement to cover preventive care without cost-sharing.  These arrangements cannot be integrated with individual health insurance plans in order to satisfy the market reform requirements.

Unlike Notice 2013-54, this recent FAQ shines a spotlight on the consequences for employers operating employer payment plans to reimburse employees for the cost of individual health insurance policies.  The potential penalty? Up to $100 per day per applicable employee, under Code 4980D.  The IRS also points out that the penalty could total $36,500 per year per employee.  This figure does not include potential liability as a result of additional DOL enforcement of compliance with the market reforms, incorporated into ERISA by the Public Health Service Act (PHSA).

The Department of Labor also issued Technical Release 2013-03, which is substantially similar to Notice 2013-54.  The IRS notes in the FAQ that HHS is expected to issue guidance in the near future concurring with Notice 2013-54 and Technical Release 2013-03.  Employers currently utilizing this strategy or who are considering the implementation of such an employer payment plan should consult with counsel on the impact of Notice 2013-54, Technical Release 2013-03 and this FAQ to consider the risks and find an alternative benefits strategy if necessary.  See http://www.irs.gov/uac/Newsroom/Employer-Health-Care-Arrangements

Source LISI, http://blog.lisibroker.com/irs-highlights-stiff-penalty-for-reimbursing-individual-premiums/

in Employer / health insurance / Premiums  by probityadmin 0 comments

How do employers and insurers report under the ACA?

FACT SHEET: Final Regulations Implementing Information Reporting for Employers and Insurers under the Affordable Care Act (ACA)

3/5/2014

WASHINGTON – Today, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) released final rules to implement the information reporting provisions for insurers and certain employers under the ACA that take effect in 2015.

“Today’s announcement is part of the Administration’s effort to provide certainty and early guidance about major health policies so employers, small business owners and other individuals can plan for 2015,” said Assistant Secretary for Tax Policy Mark J. Mazur.  “Treasury’s final rules significantly streamline and simplify information reporting while making it easier for employers and insurers of all sizes to provide the quality, affordable health coverage that every American deserves.”

While 96 percent of employers are not subject to ACA reporting requirements or the employer responsibility provision because they have fewer than 50 employees, in 2015 requirements begin to phase-in for the remaining four percent of employers that are required to offer quality, affordable coverage to employees or make a payment.  The final regulations released today on information reporting by those employers will substantially streamline reporting requirements for employers, particularly those that offer highly affordable coverage to full-time employees.  Final rules were also released today to provide guidance for reporting by insurers and other parties that provide health coverage under the ACA.  Together, these rules respond to feedback from stakeholders and will help employers and insurers effectively comply with their responsibilities.

Today’s final rules include the following key provisions:

Single, Combined Form for Information Reporting

  • Employers that “self-insure” will have a streamlined way to report under both the employer and insurer reporting provisions.  Responding to widespread requests, the final rules provide for a single, consolidated form that employers will use to report to the IRS and employees under both sections 6055 and 6056, thereby simplifying the process and avoiding duplicative reporting.  The combined form will have two sections: the top half includes the information needed for section 6056 reporting, while the bottom half includes the information needed for section 6055.
    • Employers that have fewer than 50 full-time employees are exempt from the ACA employer shared responsibility provisions and therefore from the employer reporting requirements.
    • Employers that are large enough to be subject to the employer responsibility provisions and that “self-insure” will complete both parts of the combined form for information reporting.
    • Employers that are subject to employer responsibility but do not “self-insure” will complete only the top section of the combined form (reporting for section 6056). Insurers and other providers of health coverage will report only under section 6055, using a separate form for that purpose.  Insurers do not have to report on enrollees in the Health Insurance Marketplace, since the Marketplace will already be providing information on individuals’ coverage there.

Simplified Option for Employer Reporting

  • For employers that provide a “qualifying offer” to any of their full time employees, the final rules provide a simplified alternative to reporting monthly, employee-specific information on those employees.
    • A qualifying offer is an offer of minimum value coverage that provides employee-only coverage at a cost to the employee of no more than about $1,100 in 2015 (9.5 percent of the Federal Poverty Level), combined with an offer of coverage for the employee’s family.
    • For employees who receive qualifying offers for all 12 months of the year, employers will need to report only the names, addresses, and taxpayer identification numbers (TINs) of those employees and the fact that they received a full-year qualifying offer.  Employers will also give the employees a copy of that simplified report or a standard statement indicating that the employee received a full-year qualifying offer.
    • For employees who receive a qualifying offer for fewer than all 12 months of the year, employers will be able to simplify reporting to the IRS and to employees for each of those months by simply entering a code indicating that the qualifying offer was made.
    • To provide for a phase-in of the simplified option, employers certifying that they have made a qualifying offer to at least 95% of their full-time employees (plus an offer to their families) will be able to use an even simpler alternative reporting method for 2015.  Those employers will be able to use the simplified, streamlined reporting method for their entire workforce, including for any employees who do not receive a qualifying offer for the full year.  Those employers will provide employees with standard statements relating to their possible eligibility for premium tax credits.
  • The final regulations also give employers the option to avoid identifying in the report which of its employees are full-time, and instead to just include in the report those employees who may be full-time.  To take advantage of this option, the employer must certify that it offered affordable, minimum value coverage to at least 98 percent of the employees on whom it is reporting.

What Information Is Reported

The statute calls for employers, insurers, and other reporting entities to report information including:

  • For section 6055
    • Information about the entity providing coverage, including contact information.
    • Which individuals are enrolled in coverage, with identifying information and the months for which they were covered.
  • For section 6056
    • Information about the employer offering coverage (including contact information and the number of full-time employees).
    • For each full-time employee, information about the coverage (if any) offered to the employee, by month, including the lowest employee cost of self-only coverage offered.
  • Streamlined information:  The final rules omit data elements in the statute that are not necessary to understanding coverage offered and provided, in the interest of streamlining.  These include (but are not limited to):
    • The length of any waiting period;
    • Employer’s share of the total allowed costs of benefits provided under the plan;
    • The amount of advance payments of the premium tax credit and cost-sharing reductions.

For more information, see sections 6055 and 6056 final regulations here.

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Source:  US Dept of the Treasury, http://www.treasury.gov/press-center/press-releases/Pages/jl2310.aspx

in Employer / health insurance / Insurers  by probityadmin 0 comments