This document summarizes the key compliance requirements and updates related to the Affordable Care Act (ACA) for 2016. It discusses ongoing employer responsibilities under the employer mandate, measurement periods for determining employee status, reporting requirements, and penalties for noncompliance. It also outlines delays and potential repeals of certain ACA provisions and compliance tips for employers, such as maintaining documentation and ensuring plan documents are updated. The impact of the ACA to date on employers and uncertainty around the future of the law given the political environment are also addressed.

1. 2016 ACA UPDATE
Birmingham Society for
Human Resource Management
Annual Legal Update
Dana L. Thrasher
Constangy, Brooks, Smith & Prophete LLP
(205) 226-5464
dthrasher@constangy.com

2. Setting the Stage
•Current compliance requirements for 2016
•Delay/repeal of ACA requirements
•Impact of ACA to date
•Political situation – November 2016 elections
•Compliance tips/best practices

3. 2016 ACA Compliance
•Phase-in of requirements since 2010
•Most requirements are now in effect
•Continued focus on employer shared responsibility
provisions
•Dealing with the reporting requirements and
corrections
•Implementing and improving processes for
compliance

4. 2016 ACA Compliance
•Employer shared responsibility provisions (employer
mandate)
Employer must offer minimum essential coverage
that is affordable and provides minimum value to
full time employees working 30 hours per week or
more
Employers with 50 or more full time employees
(aggregating part-time employees to determine
FTE equivalents) are subject to the employer
mandate

5. 2016 ACA Compliance
•Consider controlled group analysis and impact
•Carefully review worker classifications – correct
classification is key for ACA compliance (full time,
part time, variable hour, seasonal)
•Are independent contractors correctly classified?
•Leased employees, those hired through agencies,
etc. may count

6. 2016 ACA Compliance
•Determine whether monthly measurement
period or lookback measurement period is
best
•Understand measurement periods for new
hires and ongoing employees
•Follow special rules when employees change
classifications or are rehired

7. 2016 ACA Compliance
•Determine which safe harbor will be used for the
affordability calculation – W-2, rate of pay,
federal poverty line
•Document either (i) that the employer is paying
the employer mandate penalty for all full time
employees minus 30, (ii) the employer is
providing ACA compliant coverage that is
affordable, or (iii) that the employer is providing
ACA compliant coverage that may not be
affordable for all (risk of $3,000 penalty)

8. 2016 ACA Compliance
•Carefully review compliance with the
“minimum value,” “minimum essential
coverage,” and “affordability” requirements
•Recent guidance affects these determinations
– particularly use of “skinny plans” with
limited benefits

9. 2016 ACA Compliance
•Employer mandate penalties will be
assessed based on tax filings (employer
and individual)
•Penalties are significant!

10. 2016 ACA COMPLIANCE
•Increase in out of pocket maximum ($6,850
for individual coverage and $13,700 for
family coverage)

11. 2016 ACA COMPLIANCE
•Small employers are now defined as businesses with
1 to 100 full time equivalent employees for some
purposes.
•This will affect insurance rating (applying “small
employer” age-banding rules to employers with
51-100 employees instead of the large employer
rules that considered claims experience, location,
etc.).
•Employers may be able to keep the large employer
rules by renewing existing coverage by October
2016.

12. 2016 ACA COMPLIANCE
•Employers with 51-100 employees may now
use the Small Business Health Options
Program (SHOP), depending on the laws of
each state.

13. 2016 ACA Compliance
•Section 6055 and 6056 reporting
•Employers with 50 or more employees must
comply
•Form 1095-C is issued by an employer to
employees annually (by January 31) to provide
information about employment and the offer of
health coverage
•Employer transmits all 1095-C forms to IRS
with Form 1094-C

14. 2016 ACA Compliance
•Section 6055 and 6056 reporting
•Insurers provide the “B forms”
•Deadline for providing forms to employees and
to IRS was extended for 2016 (brief reprieve)
• March 31st (rather than January 31) for providing
forms to employees
• May 31st (June 30th if filing electronically) for
providing forms to the government
• Remedial correction periods also apply

15. 2016 ACA Compliance
•Forms are confusing – codes, etc.
•Any mistakes in the forms must be corrected
quickly (reduced penalties for a limited
period of time)
•Undeliverables - retain evidence of attempts
to provide forms; establish that the employer
made good faith, reasonable efforts to deliver
forms
•Retain copies of documentation

16. Delay/Repeal of ACA Provisions
•Significant delays/repeals address some
problem areas of the ACA and may
significantly affect the effectiveness of
the law
•Delay in excise tax on high-cost health
plans (“Cadillac Tax”) delayed until
2020, and excise tax will be deductible

17. Delay/Repeal of ACA Provisions
•Cadillac Tax Delay
•Applies to plans that cost $10,200 or more for
individual coverage or $27,500 or more for
family coverage
•Originally scheduled to be effective in 2018
•Delays receipt of funding likely needed to
support ACA costs
•Delay gives more time to fight for repeal of the
tax

18. Delay/Repeal of ACA Provisions
•Repeal of Automatic Enrollment
•Employers with more than 200 full time
employees would have been required to
automatically enroll employees in coverage
subject to an opt-out right
•Eliminates a significant burden for employers
•Likely impact is to reduce the number of
employees who elect coverage – assuming that
automatic enrollment would have been effective
to increase the number of employees covered

19. Delay/Repeal of ACA Provisions
•Nondiscrimination requirements for fully
insured plans – still waiting on guidance for
implementation
•Very significant change in compliance
requirements
•Delay in penalty enforcement

20. Impact of ACA to Date
•Clearly one of the most comprehensive pieces of
benefits legislation since ERISA (1974)
•Mandated benefits – for both employers and
individuals
•Massive changes to employer health plans in cost
and structure – “play or pay”
•Tremendous overhaul of employer health plan
administration – significant new responsibilities for
employers (new administrative platforms required –
limited reliance on vendors)

21. Impact of ACA to Date
•Employers struggle to comply as
vendors/insurers also are dealing with the
“learning curve” and tools for compliance
•Misinformation is a problem – compliance
only “works” if the employer uses correct
data
•Employer costs obviously have increased –
either due to penalties or significant
additional coverage and administrative costs

22. Impact of ACA to Date
•Initial “all in” goal – remains to be seen how
many additional individuals will have
coverage and the additional costs to make
that happen
•Many employers are offering new lower
coverage options (bare minimum to comply) –
lower cost but are employees taking the
coverage?

23. Impact of ACA to Date
•Employers have significant
questions/concerns:
•Is the individual mandate significant enough to
encourage individuals to get coverage?
•Will the exchange coverage (and employer
coverage) be sustainable if not enough “healthy
individuals” get coverage?
•If costs continue to increase, how will the
assessment of “play or pay” change?

24. Impact of ACA to Date
•Obvious impact on hiring, employee
classification, employer structure
•Significant new costs and administrative
responsibilities must be considered in overall
business plan
•Recruiting/retention and benefits issues must
be revisited and analyzed based on new costs

25. Politics . . .
•Huge political issue – “full steam ahead” or
“it’s history”
•Control of the White House/control of
Congress
•If “full steam ahead” – is it financially
sustainable?
•If “it’s history,” what is the alternative?

26. Compliance Tips
•Don’t assume – ask about compliance issues
•Vendors cannot do everything – significant
new employer requirements
•Confirm accuracy of data – do the homework
•Make reasoned decisions
•Maintain complete documentation/keep
records

27. Compliance Tips
•Make sure that plan document(s), SPD, SBC,
etc. reflect the correct information for ACA
updates
•Confirm that all enrollment materials,
notices, etc. are correct as a result of the ACA
updates

28. Compliance Tips
•Be prepared for audits – keep good records!
•Negotiate special provisions with staffing
agencies
•Renegotiate agreements with vendors for
additional services to be provided
•Be prepared for future changes – the crystal
suggests that the future is uncertain!

29. QUESTIONS
dthrasher@constangy.com
205-226-5464