Feb 2015 mma_webinar2.19

ACA Update and Tackling the ACA’s
Reporting Requirements
February 19, 2014
Presented by:
Stacy H. Barrow
Proskauer Rose LLP
sbarrow@proskauer.com

MARSH & McLENNAN AGENCY LLC
COMPLIANCE RESOURCE AND PARTNER: PROSKAUER
• Recent Developments
• ACA Reporting Requirements
1February 24, 2015
Agenda

• SCOTUS will hear King v. Burwell in 2015
• Issue: Does ACA provide for subsidies in states with a federal Exchange?
• On its face, the ACA only provides subsidies for insurance purchased in
state Exchanges
– Majority of states have federal Exchanges
• This case can go either way
– Does the Administration want to chance going down 3-1?
– Will the Administration and Congress work together to fashion a
legislative fix?
2February 24, 2015
Recent Developments: The Legal Landscape

• Wellness is an important component of ACA
• Someone neglected to tell the EEOC
• DOL has blessed conditioning eligibility and amount of premium on
completion of Health Risk Assessment (HRA), as long as not results-
oriented
• EEOC sees involuntary HRA requirement as violation of ADA
• Three High Profile Cases Filed in 2014
• Will 2015 See More?
• Will Seff v. Broward County help?
3February 24, 2015
Recent Developments: EEOC & Health Risk Assessments

• On 11/6/14 the Federal Regulators released FAQ XXII: Reiterates position
on “premium reimbursement” and states that arrangements where
employers pay an employee more to drop or not take coverage violates
ERISA
• Focus was on high claims targeting strategy
• Impact is greater:
– Service Contract Act employers who offer cash in lieu of benefits (based
on rates in SCA contract)
– Employment contracts in which employees opt out for higher pay
4February 24, 2015
Recent Developments: Employer “Opt-Out Credit”

• Wellness Programs: Employers may treat all employees as non-smokers
for “affordability” purposes
• For example, if an employer charges tobacco users $150 per month and
non-tobacco users $100 per month, then $100 is the required employee
contribution for affordability purposes, even if some employees pay $150
– Employers using tobacco/non-tobacco rates must do so within the
confines of a bona fide wellness program
– Reasonable alternative standard applies
5February 24, 2015
Recent Developments: Wellness Programs

COMPLIANCE RESOURCE AND PARTNER: PROSKAUER 6February 24, 2015
ACA EMPLOYER AND PROVIDER
REPORTING

• Some tax preparers are asking employees for 1095 forms for 2014 taxes
• Employers are not required to provide a Form 1095-C for 2014
– Carriers are not required to provide a Form 1095-B for 2014
– These forms are not necessary to prepare an individual’s tax return for
2014
• Individuals with Marketplace coverage in 2014 will receive a Form 1095-A
from the Marketplace, which is used to reconcile premium credits.
• In Massachusetts, 1099-HC is still required
7February 24, 2015
2014 Individual Tax Returns

• For 2014 returns, taxpayers will check a box on line 61 of Form 1040 (line
11 on Form 1040EZ) indicating that they had coverage the entire year
• If a taxpayer did not have full-year coverage in 2014, they should see the
instructions for line 61 (line 11 on Form 1040EZ) and Form 8965 for more
information
– Form 8965 is used to report or claim a coverage exemption
– If, for any month, the taxpayer or another member of the taxpayer’s tax
household had neither health care coverage nor a coverage exemption,
the instructions for Form 8965 provide the information they will need to
calculate their shared responsibility payment
8February 24, 2015
2014 Individual Tax Returns

• ACA imposes complex reporting requirements in order for the government
to track compliance with the individual and employer mandates, and to
determine eligibility for premium tax credits used to purchase Exchange
coverage
• Employers should determine which reporting requirements apply based on
their size and plan type (insured, self-funded, or none at all), and which
internal systems house the information necessary for reporting
• May involve payroll systems, time & attendance
• Will generally need to track FT/PT status on a monthly basis, offers of
coverage, premiums, and controlled group status
9February 24, 2015
Getting Ready

• “Applicable large employer” status is determined on a controlled group
basis
• Thus, Form 1094-C (for applicable large employers) requires disclosure of
controlled group status
• Employers will need to report related entities:
• Parent-Subsidiary controlled group
• Brother-Sister controlled group
• Affiliated Service Groups
• Familial attribution rules also apply
• Talk to ERISA counsel if analysis is needed
10February 24, 2015
Getting Ready – Controlled Groups

• Code Sections 6055 (all insurers and self-insured plans) & 6056 (applicable
large employers – ALEs)
• Effective Dates – Both reporting rules are effective in 2014; however,
compliance is voluntary until 2015
• First mandatory reporting in January/February 2016 for 2015
• Complex reporting requirements
• Relief offered to employers who are offering affordable coverage to
employees and to spouses and children
• Reporting includes employers with 50-99 FTEs who are exempt from the
pay-or-play mandate in 2015
• Must certify on their Code § 6056 reporting filed in 2016 that they
qualify for the transition relief in the pay-or-play regulations
11February 24, 2015
Overview of Reporting Requirements

• Code Sections 6055 (insurers and self-insured plans, & 6056 (applicable
large employers)
• Reminder: Applicable large employers are employers with at least 50 full-
time equivalent employees (employees having an average of at least 30
hours of service per week)
• Employers are only required to report full-time employees under Code
Section 6056; however, employers with self-insured plans must report on
all covered employees to comply with Code Section 6055
12February 24, 2015
Overview of Reporting Requirements

• Required by Code § 6055
• Reporting used by government to track individual mandate compliance
• Used to verify that individuals had insurance have been provided
minimum essential coverage and are not subject to ACA Penalty
• Small Employers (< 50 FTE) offering fully insured plans:
• no filing requirement—carriers will provide/file
• 1095-B is provided to participants (and sent to IRS)
• 1094-B is the transmittal form sent to the IRS
• Small Employers (<50 FTE) sponsoring self-insured plans:
• must provide and file 1094-B and 1095-B for covered participants
13February 24, 2015
Forms 1094-B and 1095-B

• Large Employers (≥50 FTE) file using 1094-C and 1095-C—DO NOT FILE
B-SERIES
• Reporting not required for HSAs, on-site medical clinics, wellness programs
or dental/vision
• FINAL forms and instructions have been released
• Form 1094-B (transmittal to IRS)
• www.irs.gov/pub/irs-pdf/f1094b.pdf
• Form 1095-B: (an employee statement)
• http://www.irs.gov/pub/irs-pdf/f1095b.pdf
• Instructions: http://www.irs.gov/pub/irs-pdf/i109495b.pdf
14February 24, 2015
Forms 1094-B and 1095-B

• Required by Code § 6056 Reporting
• Applies to Applicable Large Employers
• Reporting used by government to track “play-or-play” and to determine
individuals’ eligibility for premium tax credits
• FINAL forms and instructions released
• Form 1094-C (transmittal to IRS)
• http://www.irs.gov/pub/irs-pdf/f1094c.pdf
• Filed with IRS by February 28 (March 31 if electronic)
• Form 1095-C (an employee statement)
• http://www.irs.gov/pub/irs-pdf/f1095c.pdf
• Provided to full-time employees by January 31
• Electronic delivery is permissible with employee’s consent
• Fully-insured: Employer completes top half of the form (Parts I and II)
• Self-insured: Employer completes whole form (Parts I, II and III)
• Instructions: http://www.irs.gov/pub/irs-pdf/i109495c.pdf
15February 24, 2015
Forms 1094-C and 1095-C

• General Reporting Method
• Full Reporting for all full-time employees
• Reporting on a month-by-month basis
• Lowest cost monthly premium for self-only coverage
• To whom was coverage offered (employee, spouse, dependents?)
• Did the coverage provide minimum value?
• Indicator codes will be used to report certain other information
• Employers filing 250 or more Forms 1095-C must file the forms
electronically (including Form 1094-C)
16February 24, 2015
Forms 1094-C and 1095-C

• Transmittal Form to the IRS
• Provides a summary to the IRS of aggregate employer-level data
• Discloses any Transition Relief employer is claiming
• Essentially a cover page to Forms 1095-C that are sent to the IRS
• What information is required?
• Company information, including Controlled Group information
• Information about whether an offer of coverage was made to 70% of FT
employees and their dependents (95% starting in 2016)
• Total number of Forms 1095-C issued to employees
• Full-time employee counts by month
• Total employee counts by month
23February 24, 2015
Nuts and Bolts of Form 1094-C

• The employee statement – provided to FT employees to use when filing
their tax returns
• Copies also filed with the IRS, along with 1094-C
• Reports information about employer’s offer of coverage, if any, and any
safe harbors or other relief relied upon by the employer
• Helps the IRS determine if employer owes a Pay-or-Play Penalty and
whether employees and their dependents are eligible for the premium tax
credit
24February 24, 2015

• What information is required?
• Which employees are full-time in each month
• Identifying information for employer and employee such as name and
address
• Information about the health coverage offered by month, if any
• The employee’s share of the monthly premium for lowest-cost self-only
minimum value coverage
• Months the employee was enrolled in your coverage
• Months the employer met an affordability safe harbor with respect to an
employee and whether other relief applies for an employee for a month
• If the employer offers a self-insured plan, information about the covered
individuals enrolled in the plan, by month
25February 24, 2015

• 1A – Qualifying Offer (discussed later)
• 1B – Minimum essential coverage (MEC) providing minimum value offered to employee
only
• 1C – MEC providing minimum value (MV) offered to employee and at least MEC offered to
dependents (not spouse)
• 1D – MEC providing MV offered to employee and at least MEC offered to spouse (not
dependents)
• 1E – MEC providing MV offered to employee and at least MEC offered to dependents and
spouse
• 1F – MEC NOT providing MV offered to employee, or employee and spouse or dependents,
or employee, spouse and dependents
• 1G – Offer of coverage to employee who was not a FT employee for any month and who
enrolled in self-insured coverage
• 1H – No offer of coverage
• 1I – Qualifying Offer Transition Relief 2015: Employee (and spouse or dependents)
received no offer of coverage, received an offer that is not a qualifying offer, or received a
qualifying offer for less than 12 months
26February 24, 2015
Form 1095-C: Line 14 Indicator Codes to Report
Offers of Coverage

• Complete line 15 only if code 1B, 1C, 1D, or 1E is entered on line 14
either in the “All 12 Months” box or in any of the monthly boxes
• Note that this amount may not be the amount the employee is paying for
the coverage, for example, if the employee chose to enroll in more
expensive coverage such as family coverage
27February 24, 2015
Form 1095-C: Line 15 (Cost of Coverage)

• 2A – Employee not employed during the month
• 2B – Employee not FT employee; not enrolled
– Use if employee terminated during the month
• 2C – Employee enrolled in coverage offered
– Use regardless of whether affordability safe harbor applies
• 2D – Employee in a Limited Non-Assessment Period
– For example, initial measurement period or waiting period
• 2E – Use for any month for which the multiemployer interim relief applies
for the employee (slides 41-42)
28February 24, 2015
Form 1095-C: Line 16 Indicator Codes to Report Safe Harbors

• 2F – W-2 Safe Harbor applies for the year
– Must be used in all months of the year during which employee was offered
coverage
• 2G – Federal Poverty Level safe harbor applies
• 2H – Rate of Pay safe harbor applies
• 2I – Non-calendar year transition relief applies
29February 24, 2015
Nuts and Bolts of Form 1095-C – Line 16 Indicator Codes to
Report Safe Harbors

• An employer need not file a Form 1095-C for an individual who for each
month of a calendar year is either not an employee of the employer or is an
employee in an LNAP
– Examples of LNAP’s include waiting periods and initial measurement
periods
– Note that the employee is still included in the total employee count
reported on Form 1094-C for any month in which the employee was
employed
– For example, an employee who terminates during an initial
measurement period or waiting period will not receive a Form 1095-C
30February 24, 2015
Limited Non-Assessment Period (LNAP)

• Employers that have non-employees who enroll in their self-insured health
plan may use Forms 1094-B and 1095-B, rather than Form 1095-C, Part III,
to report coverage for those individuals and other family members
– The Series-C forms may be used, if desired
• Form 1095-C has indicator codes for an employer to use when reporting on
non-employees covered under a self-insured plan (e.g., non-employee
directors, retirees (after year of retirement), or former employees on
COBRA (after year of termination)
31February 24, 2015
Plans offering coverage to Non-Employees

• For reporting purposes, an offer to a spouse includes an offer to a spouse
that is subject to a reasonable, objective condition, regardless of whether
the spouse meets the reasonable, objective condition
• For example, an offer of coverage that is available to a spouse only if the
spouse certifies that the spouse does not have access to health coverage
from another employer is treated as an offer of coverage to the spouse for
reporting purposes
32February 24, 2015
Plans offering Spousal Coverage

• A Qualifying Offer is an offer of minimum value coverage to the employee
that costs the employee no more than 9.5% of the FPL (~$1,100 in 2014)
for single coverage
– Offer must include offer of MEC to spouse and children
– Employer not required to contribute toward the cost of
spouse/dependent coverage
33February 24, 2015
“Simplified” Reporting – Qualifying Offer

• Employer reporting for employees who receive a Qualifying Offer for the
entire calendar year is “simplified”
• Employers making a Qualifying Offer will only need to report names,
addresses, and tax IDs for employees who receive Qualifying Offers for the
entire year
– Indicator Code used on 1095-C to denote Qualifying Offer
– If Qualifying Offer not made for all 12 months, full reporting required for
any month in which Qualifying Offer was not made
– Employees with Qualifying Offers either receive Form 1095-C or may be
provided an “alternative statement” informing them that the family is
ineligible for a premium credit that year
34February 24, 2015
“Simplified” Reporting – Qualifying Offer

• If an employee (A) is not covered under a self-insured plan, and (B)
receives a Qualifying Offer for the entire calendar year, the employer may
provide an “alternative statement” in lieu of Form 1095-C
• Limited usefulness, as employer must still provide 1095-C to IRS
• An employer may report that it made a Qualifying Offer to an employee in
certain months, even if the employee did not receive one for the entire
year; however, use of the alternative statement is not permissible unless
the Qualifying Offer was made for the entire calendar year
35February 24, 2015
Alternative Statement for Qualifying Offers

• Employer name, address, and EIN
• Contact name and telephone number at which the employee may receive
information about the offer of coverage and the information on the Form
1095-C filed with the IRS for that employee
• A statement indicating that, for all 12 months of the calendar year, the
employee and his or her spouse and dependents, if any, received a
Qualifying Offer and therefore are not eligible for a premium tax credit
• A statement directing the employee to see Pub. 974, Premium Tax Credit
(PTC), for more information on eligibility for the premium tax credit
36February 24, 2015
Alternative Statement – Content

• For 2015, employers making a qualifying offer to 95% of their FT
employees for one or more months may use the alternative statement
method for all employees, even those who did not receive a qualifying offer
for the entire year
• Statement must:
– Include employer name, address, and EIN;
– Include contact name and telephone number at which the employee may
receive information about the offer of coverage (if any) and the
information on the Form 1095-C filed with the IRS for that employee;
– Indicate that an employee who did not receive a Qualifying Offer (or
received no offer) may be entitled to the premium tax credit for one or
more months of 2015; and
– Direct the employee to see Pub. 974 for more information on eligibility
for the premium tax credit
37February 24, 2015
Alternative Statement – 2015 Transition Relief

• “Option to Report without Separate Certification of FT Employees”
• Employers that offer affordable, minimum value coverage to at least 98% of
employees (and dependents) included on the report may certify the offering
without identifying which employees are full time
• All the 98% Method does is allow the employer to report on an employee
without identifying FT/PT status
38February 24, 2015
“Simplified” Reporting – 98% Method

• When might the 98% Method be useful?
• When an employer with a self-insured plan offers coverage to FT and PT
employees and does not want to have to identify FT/PT status when
reporting covered employees on 1095-C
– Employers using this method are not required to complete the FT
employee count in Part III, column (b) of Form 1094-C
39February 24, 2015
“Simplified” Reporting – 98% Method

• Multiemployer plans may facilitate filing and furnishing returns for
applicable large employers
• Liability for section 6056 reporting or information reporting penalties is not
transferred to the multiemployer plan
• Liability for the section 4980H provisions remains with the employer
40February 24, 2015
Employer ACA Reporting – Multiemployer

• Interim Guidance Regarding Multiemployer Arrangements
• An employer is treated as offering health coverage to an employee if the
employer is required by a collective bargaining agreement to make
contributions for that employee to a multiemployer plan that offers, to
individuals who satisfy the plan’s eligibility conditions, health coverage that
is affordable and provides minimum value, and that also offers health
coverage to those individuals’ dependents
41February 24, 2015
Employer ACA Reporting – Multiemployer

• Penalty Relief for 2015
• Employers that show a good faith effort in complying with the information
reporting requirements under section 6056 will not be liable for any
accuracy related penalties
• The reasonable cause standards do apply under normal rules for those that
fail to meet the timely reporting requirements
42February 24, 2015
Employer ACA Reporting – Penalty Relief

Questions?
The information provided in this slide presentation is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the
opinions of the firm, our lawyers or our clients. No client-lawyer relationship between you and the firm is or may be created by your access to or use of this presentation or any information contained on them. Rather,
the content is intended as a general overview of the subject matter covered. Proskauer Rose LLP (Proskauer) is not obligated to provide updates on the information presented herein. Those viewing this presentation
are encouraged to seek direct counsel on legal questions. © Proskauer Rose LLP. All Rights Reserved.
Marsh & McLennan Agency | www.mma-pbs.com

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