HEALTH CARE REFORM
STRATEGIES FOR EMPLOYERS
© 2014 Fraser Trebilcock
Davis & Dunlap, P.C.
Elizabeth H. Latchana, Esq.
Phon...
Introduction
Be Prepared for
Health Care Reform
 Are You a Large or Small Employer?
 Pay or Play Mandate (2015).
 Reporting Requirem...
Are You a Large
or Small Employer?
How do you Determine Your FTEs?
 Step 1: Evaluate employees’ monthly hours for each mo...
Are You a Large
or Small Employer?
How do you Determine Your FTEs?
 Step 2: Repeat this process for each month of the pro...
Under 50 FTEs
 Employers do not have to offer insurance to employees.
 However, if health insurance is offered, it must ...
 The Pay or Play Mandate applies to large employers and imposes
employer shared responsibility requirements beginning in ...
 For 2015, timing to determine large employer status?
 For 2015 only, employer can determine large employer status by re...
Calculating Hours of Service:
 Actual hours for which payment is made or due
 Days-worked equivalency option
 Weeks-wor...
Periods Used to Determine Full-Time Status:
 Look-Back Measurement Method
 On-going Employees
 New Full-Time Employees
...
Pay or Play Mandate (2015)
No Coverage Penalty
 Under IRS Code 4980H(a), a large employer must pay a penalty
for failing ...
Pay or Play Mandate (2015)
Unaffordable/Lack of Required Value Penalty
 Under IRS Code 4980H(b), a large employer must pa...
Reporting Requirements
 Optional reporting in 2014.
 Required reporting starts for 2015.
 Under Section 6055, starting ...
How do Applicable Employers Report?
 Under Section 6055, a non-large employer providing self-insured
health coverage must...
Simplified Alternatives May Be Available
 1) Simplified return if Employer certifies is made a "qualifying
offer" of cove...
Combined Reporting Under Section 6055 & 6056
 A large employer that provides self-insured coverage is subject to
Section ...
Statements Furnished to Individuals
 Under Section 6055, reporting entities must furnish statements to each
responsible i...
 Prohibition on Excessive Waiting Periods
 Effective for plan years beginning on or after January 1, 2014.
 Group healt...
Group Health Plan Mandates
 Cost of Employer-Sponsored Health Coverage on W-2
 Report with Code DD in Box 12.
 Certain ...
Group Health Plan Mandates
 Prohibition on Annual Benefit Limits
 Beginning in 2014, annual limits on the dollar value o...
Group Health Plan Mandates
 PCORI Fee Payments
 The new Form 720, as well as the attached Form 720-V to submit payment, ...
 Transitional Reinsurance Fees
 Section 1341 of the ACA provides for this transitional reinsurance program in each
State...
 Extension of Non-Discrimination Rules (Delayed)
 No eligibility rules or levels of coverage that favor high-wage employ...
Small Business Health
Option Programs
Small Business Health Option Programs (SHOP)
 Open to all small businesses in 2014....
Secret Cash Bonus
for Small Employers
Small Business Health Care Tax Credits
Secret Cash Bonus
for Small Employers
Potential Tax Credits 2010 - 2013
For-Profit
Up to 35% of employer
contribution to
e...
Secret Cash Bonus
for Small Employers
Potential Tax Credits 2014 - 2016
For-Profit
Up to 50% of employer
contribution to
e...
Secret Cash Bonus
for Small Employers
Requirements
< 25
Employees
Average
Employee
Wages
< $50,000
Employer must
contribut...
Secret Cash Bonus
for Small Employers
Requirements
Maximum credit available to employers with 10 or
fewer FTEs and average...
Secret Cash Bonus
for Small Employers
Which Employees Count?
 Seasonal Workers
 Leased Employees
 Owner of Business
 F...
Secret Cash Bonus
for Small Employers
Members of a controlled or an affiliated service group may
be treated as a single em...
Secret Cash Bonus
for Small Employers
Calculating the Number of Employees
Calculating FTEs for Tax Credit Purposes - Three...
Secret Cash Bonus
for Small Employers
Calculating Average Employee Wages
1) Add up the total wages paid by employer during...
Secret Cash Bonus
for Small Employers
Calculating Employer Contributions
1) Employer must pay at least 50% of coverage.
Em...
Secret Cash Bonus
for Small Employers
Calculating Employer Contributions
2) Payments must be made under a qualified arrang...
Secret Cash Bonus
for Small Employers
Calculating Employer Contributions
3) Cap on the amount of employer’s premium paymen...
Summary
1) Determine the employees who count toward the credit.
2) Calculate the hours of service for these employees.
3) ...
Secret Cash Bonus
for Small Employers
How to Claim the Credit
 Tax-exempt employer:
 Form 990-T with attached Form 8941 ...
Health Care Reform
Checkup for Your Business
 Is your business compliant with all the current health care
regulations?
 ...
Develop a Compliance Plan
Fraser Trebilcock Davis & Dunlap, P.C.
124 W. Allegan Street, Suite 1000
Lansing, Michigan 48933
www.fraserlawfirm.com
Pho...
Upcoming SlideShare
Loading in...5
×

Health Care Reform Strategies for Employers

169

Published on

Fraser Trebilcock attorneys Beth Latchana and Mark Kellogg spoke this week at the Institute of Continuing Legal Education’s 27th Annual Tax Conference. In their overview of health care reform, they detailed most important aspects of the ACA, including: the health insurance marketplace, employer classification, the Pay or Play Mandate, reporting requirements, group health plan mandates, the individual insurance mandate, the Small Business Health Option Program, and the Small Business Health Care Affordability Tax Credits.

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
169
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Transcript of "Health Care Reform Strategies for Employers"

  1. 1. HEALTH CARE REFORM STRATEGIES FOR EMPLOYERS © 2014 Fraser Trebilcock Davis & Dunlap, P.C. Elizabeth H. Latchana, Esq. Phone: (517) 377-0826 Email: elatchana@fraserlawfirm.com Mark E. Kellogg, JD, CPA Phone: (517) 377-0890 Email: mkellogg@fraserlawfirm.com
  2. 2. Introduction
  3. 3. Be Prepared for Health Care Reform  Are You a Large or Small Employer?  Pay or Play Mandate (2015).  Reporting Requirements (Section 6055 and Section 6056).  Additional Health Plan Mandates and Changes.  Individual Insurance Mandate.  SHOP & Small Business Health Care Affordability Tax Credits.
  4. 4. Are You a Large or Small Employer? How do you Determine Your FTEs?  Step 1: Evaluate employees’ monthly hours for each month:  Number of full-time employees, with respect to a calendar month, average 30 hours of service per week [Please note that special optional methods exist: a monthly equivalency rule (130 hours per calendar month) or a weekly rule (120 hours for months with 4 weekly periods; 150 hours for months with 5 weekly periods – special rules apply].  Total non-full-time hours in a month (but not more than 120 hours per any employee) / 120.  Add the number of full-time employees for the month and FTEs for the month together to get the company's total count for the month.
  5. 5. Are You a Large or Small Employer? How do you Determine Your FTEs?  Step 2: Repeat this process for each month of the proceeding calendar year.  Step 3: Add the monthly calculations together.  Step 4: Divide total monthly calculations by 12.  Step 5: Round down to the nearest whole number. The FTE is the average of each monthly calculation across the preceding calendar year. The rules related to counting employee hours are complex and different rules and guidelines exist for different types and classifications of employees.
  6. 6. Under 50 FTEs  Employers do not have to offer insurance to employees.  However, if health insurance is offered, it must meet the essential health benefits, metal levels and be available to full-time employees. Small Employers Are You a Large or Small Employer?
  7. 7.  The Pay or Play Mandate applies to large employers and imposes employer shared responsibility requirements beginning in 2015.  For purposes the Mandate, large employers are those employers with 50 or more FT/FTEs (transition relief for 2015 exists).  If a large employer either fails to offer health insurance to its full- time employees (and dependents) or fails to offer those employees affordable coverage that meets the required minimal value, that large employer is subject to penalties under the Internal Revenue Code if a Section 1411 Certification is issued (tax credit/subsidy received through the Exchange).  In February 2014, key changes were made to the Pay or Play Mandate. Pay or Play Mandate (2015)
  8. 8.  For 2015, timing to determine large employer status?  For 2015 only, employer can determine large employer status by reference to a period of at least six consecutive calendar months in the 2014 calendar year.  For 2015, does it have 50 FT/FTEs but less than 100 FT/FTEs? If so, does it meet the transition relief?  Cannot reduce the size of workforce between February 9, 2014 and December 31, 2014.  Cannot eliminate or materially reduce the health coverage offered as of February 9, 2014 (including employer contributions).  Must certify (as part of the transmittal form require to be filed with the IRS under Code section 6056 employer reporting requirements) that it meets the safe harbor.  Not available if employer modifies its plan year after February 9, 2014 to begin on a later calendar date.  Special rules exist for new employers, employers first becoming large employers, employers part of a controlled group or affiliated service groups, and other circumstances mentioned in regulations. Determine if Employer is a Large Employer
  9. 9. Calculating Hours of Service:  Actual hours for which payment is made or due  Days-worked equivalency option  Weeks-worked equivalency option Periods Used to Determine Full-Time Status:  Monthly Measurement Method  Count hours of service for each calendar month  Weekly period alternative  Special rules for newly eligible employees  Special rules for termination and rehire or resumption of services of returning from a leave of absence  Special rules for international transfers Determine Full-Time Employees
  10. 10. Periods Used to Determine Full-Time Status:  Look-Back Measurement Method  On-going Employees  New Full-Time Employees  New Variable Hours / New Seasonal / New Part-Time  Special Rules for Rehire & Termination or Absences  Special Rules for International Transfers  Special Rules Regarding Changes in Employment Status  Transition Relief for 2015: shorter measurement period Determine Full-Time Employees
  11. 11. Pay or Play Mandate (2015) No Coverage Penalty  Under IRS Code 4980H(a), a large employer must pay a penalty for failing to provide minimal essential coverage to its full-time employees.  Is triggered if an eligible employer does not offer coverage:  To 95% of its full-time employees [70% for 2015] and their dependents [certain transition relief] and if a Section 1411 Certification is issued.  The penalty for a calendar month equals 1/12 of $2000 multiplied by the number of full-time employees (minus the employer's allocable share of 30 full-time employees [80 full-time employees for 2015] and employees in a limited non-assessment period.  Reminder: All common law employees must be considered.  Special rules apply to controlled groups.
  12. 12. Pay or Play Mandate (2015) Unaffordable/Lack of Required Value Penalty  Under IRS Code 4980H(b), a large employer must pay a penalty for failing to provide affordable health insurance coverage or for offering health insurance coverage that fails to meet the 60% minimum value.  Is only triggered if a full-time employee goes to the Marketplace and receives a tax credit or subsidy (Section 1411 Certification).  The Excise Tax is the lesser of:  The “no coverage” penalty; or  $3,000 for each full-time employee who enrolls in insurance through the Marketplace and receives a tax credit or subsidy.  Safe Harbors Exist for Affordability.
  13. 13. Reporting Requirements  Optional reporting in 2014.  Required reporting starts for 2015.  Under Section 6055, starting in 2015, if an employer provides self-insured health coverage to its employees, it must file an annual return reporting certain information for each employee it covered.  Under Section 6056, starting in 2015, a large employer must file an annual return reporting whether and what health insurance it offered to its employees. Who is Required to Report?
  14. 14. How do Applicable Employers Report?  Under Section 6055, a non-large employer providing self-insured health coverage must file an annual return (Form 1095-B) plus a transmittal form (Form 1094-B) on or before February 28th (March 31st if electronic filing) of the year following the calendar year in which the minimum essential coverage was provided.  Under Section 6056, a large employer must file an annual return (Form 1095-C) plus a transmittal form (Form 1094-C) on or before February 28th (March 31st if electronic filing) of the year immediately following the calendar year to which the return related. Reporting Requirements
  15. 15. Simplified Alternatives May Be Available  1) Simplified return if Employer certifies is made a "qualifying offer" of coverage for all months an employee was a full-time employee.  Applies to employers that provide a “qualifying offer” to their full-time employees.  2) Further simplified return for 2015 only if employer certifies it made "qualifying offer" to at least 95% of its full–time employees and their spouses/dependents.  3) Employers can avoid separately identifying their full-time employees if they certify they offered minimum essential coverage providing minimum value that's affordable under Section 4980H to at least 98% of its employees (and dependents). Reporting Requirements
  16. 16. Combined Reporting Under Section 6055 & 6056  A large employer that provides self-insured coverage is subject to Section 6055 and 6056 reporting. All large employers will file a combined return.  1) Large employers that self-insure will report on Form 1095-C, completing both sections to report under sections 6055 and 6056.  2) Large employers that fully-insure will report on Form 1095-C, completing only the section to report under 6056.  3) Non-large employer reporting entities (such as small employers that self-insure) will report under Section 6055 on Form 1095-B. Reporting Requirements
  17. 17. Statements Furnished to Individuals  Under Section 6055, reporting entities must furnish statements to each responsible individual (employee/former employee or other person listed in regulation who enrolled one or more individuals in coverage) by January 31st of year following calendar year in which minimal essential coverage is provided.  Under Section 6056, large employers must furnish statements to each full-time employee by January 31st of year following calendar year for which a 6056 IRS return was filed related to them.  Under both Sections, first class mail to last known permanent address discharges responsibility. Special rules for electronic statements exist. Reporting Requirements
  18. 18.  Prohibition on Excessive Waiting Periods  Effective for plan years beginning on or after January 1, 2014.  Group health plans and a health insurance issuer offering group or individual health insurance coverage are prohibited from applying any waiting period that exceeds 90 days.  Waiting Period = the period that must pass before coverage begins for an employee or dependent who is otherwise eligible to enroll under the terms of a group health plan.  Check your plan!  Many are changing waiting period. Group Health Plan Mandates
  19. 19. Group Health Plan Mandates  Cost of Employer-Sponsored Health Coverage on W-2  Report with Code DD in Box 12.  Certain transition relief still available.  Uniform Summary of Benefits and Coverage  Group health plans must provide a summary of benefits and coverage that meets requirements, including whether plan offers minimal coverage and minimal value.  Make sure your SBC is updated. Special distribution and timing rules apply.  Cost-Sharing Requirement (Deductible Limit for Small Group Market Repealed)  Plan years beginning on or after January 1, 2014 cannot impose cost-sharing requirements exceeding certain limits (for 2014, those are $6,350 for self-only coverage, $12,700 for other than self-only coverage).  Cost-sharing includes deductibles, co-insurance, co-payments or similar charges with respect to essential health benefits, but does not include premiums.  Additionally, the ACA limited the deductibles for small insured plans to $2,000/$4,000, but that provision was recently repealed.
  20. 20. Group Health Plan Mandates  Prohibition on Annual Benefit Limits  Beginning in 2014, annual limits on the dollar value of benefits for any participant or beneficiary will no longer be allowed. Lifetime limits previously prohibited.  However, group health plans may still place annual or lifetime limits on specific covered benefits that are not essential health benefits.  Flexible Spending Account Limit to $2,500  The flexible spending account limit on salary deferral will be $2,500, adjusted in future years for changes in the cost of living. Applies to plan years effective on or after January 1, 2013.  Health Insurance Marketplace Notice  An employer is required to provide notice of the availability of the Exchange, informing employees of:  1) the existence of the Marketplace; 2) that employees may be eligible for a subsidy under the Marketplace if the employer’s share of the aggregate cost of benefits is less than 60%; and 3) that if the employee purchases a policy through the Marketplace, he or she will lose the contribution to any health benefits offered by the employer.  Notice must be provided to each employee now due at the time of hiring (within 14 days).
  21. 21. Group Health Plan Mandates  PCORI Fee Payments  The new Form 720, as well as the attached Form 720-V to submit payment, must be used to report and pay the requisite PCORI fee to the IRS.  Plan sponsors of applicable self-funded health plans are liable for this fee imposed by Code section 4376.  The first fee is $1.00 per covered life for plan years ending on or after October 1, 2012 and before October 1, 2013. The fee increases per year and concludes with plan years ending on or after October 1, 2018 and before October 1, 2019.  HRAs and health FSAs that are not excepted from reporting only must count the covered participant and not the spouses and dependents.  The fee is due no later than July 31 of the year following the last day of the plan year.  There are specific calculation methods to be used to configure the number of covered lives and special rules may apply depending on the type of plan being reported.
  22. 22.  Transitional Reinsurance Fees  Section 1341 of the ACA provides for this transitional reinsurance program in each State from 2014 to 2016.  This fee for benefit year 2014 averages approximately $63.00 per covered life.  Contributing entities must submit enrollment counts by November 15, 2014 to HHS. HHS will invoice entity by December 15, 2014 and entity then has 30 days to make payment.  Exclusions.  Automatic Enrollment for Large Employers Offering Coverage  An employer with more than 200 full-time employees that offers employees enrollment in one or more health benefits plans must automatically enroll new, full- time employees in one of its plans and to continue the enrollment of current employees in a health benefits plan offered through the employer. (Subject to waiting period authorized by law)  Requires adequate notice and the opportunity to opt out of coverage.  Effective date is unclear; Department of Labor says regulations by 2014. Group Health Plan Mandates
  23. 23.  Extension of Non-Discrimination Rules (Delayed)  No eligibility rules or levels of coverage that favor high-wage employees.  New under the ACA for fully-insured group health plans, except for 125 cafeteria plans.  Has been delayed; still need to keep in mind when making design choices.  Excise Tax on Cadillac Plans  Effective date 2018.  A 40% nondeductible excise tax will be imposed on high-cost health coverage. Group Health Plan Mandates
  24. 24. Small Business Health Option Programs Small Business Health Option Programs (SHOP)  Open to all small businesses in 2014.  Must have 50 FTEs or less.  In 2014, employer chooses one insurance product for all employees.  In 2015, employer picks the metal level, employees choose the insurance product.  In 2016, SHOP expands to businesses with up to 100 FTEs.  In 2017+, States have option to expand SHOP eligibility to large groups.
  25. 25. Secret Cash Bonus for Small Employers Small Business Health Care Tax Credits
  26. 26. Secret Cash Bonus for Small Employers Potential Tax Credits 2010 - 2013 For-Profit Up to 35% of employer contribution to employees’ health insurance premium Non-Profit Up to 25% of employer contribution to employees’ health insurance premium
  27. 27. Secret Cash Bonus for Small Employers Potential Tax Credits 2014 - 2016 For-Profit Up to 50% of employer contribution to employees’ health insurance premium Non-Profit Up to 35% of employer contribution to employees’ health insurance premium
  28. 28. Secret Cash Bonus for Small Employers Requirements < 25 Employees Average Employee Wages < $50,000 Employer must contribute at least 50% of premium cost
  29. 29. Secret Cash Bonus for Small Employers Requirements Maximum credit available to employers with 10 or fewer FTEs and average annual wages of $25,000 or less.  For each FTE above 10 FTEs, the credit is reduced by 1/15.  For each $1,000 above $25,000 in average wages, the credit is reduced by 1/25.
  30. 30. Secret Cash Bonus for Small Employers Which Employees Count?  Seasonal Workers  Leased Employees  Owner of Business  Family Members of Business Owner
  31. 31. Secret Cash Bonus for Small Employers Members of a controlled or an affiliated service group may be treated as a single employer for tax credit purposes. Which Employees Count?
  32. 32. Secret Cash Bonus for Small Employers Calculating the Number of Employees Calculating FTEs for Tax Credit Purposes - Three Methods: 1) Actual Hours Worked + Paid Leave  Limit of 2,080 hours per employee, per year 2) Days-Worked Equivalency + Paid Leave  8 hours for each day 3) Weeks-Worked Equivalency + Paid Leave  40 hours for each week Add up the total hours of service the employer pays wages to employees and divide by 2,080. Round down.
  33. 33. Secret Cash Bonus for Small Employers Calculating Average Employee Wages 1) Add up the total wages paid by employer during the tax year. 2) Divide total wages by the number of FTEs for the year. 3) Round down the result to the nearest $1,000. The employer’s average wages are $24,000 ($245,786 / 10 = $24,578.60, rounded down to the nearest $1,000). Example: In 2013, an employer pays a total of $245,786 in wages and has 10 FTEs.
  34. 34. Secret Cash Bonus for Small Employers Calculating Employer Contributions 1) Employer must pay at least 50% of coverage. Employer pays at least 50% of the premiums for each employee enrolled in health insurance coverage offered by the employer. Uniformity Requirement:  The employer is not required to pay the same percentage of the premium for each employee.  Required to be at least 50% of the premium for single coverage; does not have to pay 50% of premium for more expensive coverage options.
  35. 35. Secret Cash Bonus for Small Employers Calculating Employer Contributions 2) Payments must be made under a qualified arrangement. Only premiums paid to a health insurance issuer.  Major medical plan, dental, vision, etc.  Each plan must meet requirements. Payments that do not count:  Portion paid by employees;  Premium payments under a salary reduction arrangement;  Employer contributions to HRAs, FSAs, and HSAs.
  36. 36. Secret Cash Bonus for Small Employers Calculating Employer Contributions 3) Cap on the amount of employer’s premium payments that toward tax credit. Employer’s premium payments may not be more than the average premium for the small group market in the state where the employer offers coverage. 2013 Michigan: Average Premiums for Small Group Markets  Single: $ 5,569  Family: $ 13,256
  37. 37. Summary 1) Determine the employees who count toward the credit. 2) Calculate the hours of service for these employees. 3) Calculate the number of the employer’s FTEs 4) Calculate the average annual wages paid per FTE. 5) Calculate the relevant employer contributions. Initial Amount of Credit (Contribution x Percentage) - Reduction for FTE in excess of 10 - Reduction for avg. wages in excess of $25,000 Total Small Business Health Care Tax Credit Secret Cash Bonus for Small Employers
  38. 38. Secret Cash Bonus for Small Employers How to Claim the Credit  Tax-exempt employer:  Form 990-T with attached Form 8941 showing calculation of credit.  Other employers:  Claim the credit on income tax return, use attached From 8941 showing calculation of credit.  Credit may be able to be used to offset Alternative Minimum Tax liability.  The tax credit can be reflected in determining estimated tax payments for the year.  The credit affects an employer’s allowable deduction for health insurance premiums; deduction is reduced by amount of credit.  Credit does not affect employer’s employment tax payments.
  39. 39. Health Care Reform Checkup for Your Business  Is your business compliant with all the current health care regulations?  Many regulations went into effect in 2012 and 2013. Have you made the necessary adjustments?
  40. 40. Develop a Compliance Plan
  41. 41. Fraser Trebilcock Davis & Dunlap, P.C. 124 W. Allegan Street, Suite 1000 Lansing, Michigan 48933 www.fraserlawfirm.com Phone: (517) 482-5800 Fax: (517) 482-0887 Fraser Trebilcock Davis & Dunlap, P.C. One Woodward Avenue, Suite 1550 Detroit, Michigan 48226 www.fraserlawfirm.com Phone: (313) 237-7300 Fax: (313) 961-1651 Elizabeth H. Latchana, Esq. Phone: (517) 377-0826 Email: elatchana@fraserlawfirm.com Mark E. Kellogg, JD, CPA Phone: (517) 377-0890 Email: mkellogg@fraserlawfirm.com © 2014 Fraser Trebilcock Davis & Dunlap, P.C. Fraser Trebilcock Health Care Reform www.mihealthcarelaws.com

×