Following the failure to bring the American Health Care Act to avote in the House of Representatives, many employers are asking,“What now?” Tom Price, the new Secretary of Health and HumanServices (HHS), indicated that, after Congress’ inability to reachan agreement on the American Health Care Act, HHS would enforce thecurrent law under the Affordable Care Act (ACA). So the “what now?”is … business as usual.

Despite this directive, we have found there are ACA requirementsof which some employers are not fully aware. We have highlighted anumber of provisions to help brokers remind employers of their obligations under the current law.

Grandfathered plans

Employers who maintain a grandfathered plan should reviewwhether or not they have maintained their status. Grandfatheredplans are excused from some, but not all, of the ACA mandates. If adisqualifying act occurs, even inadvertently, the plan loses itsstatus as of the date of the act.

Questions employers should ask include:

• Have we provided the annual notice to our employees regardinggrandfathered status?

• Have we decreased our rate of contributions toward the premiumor premium-equivalent?

• Have we made changes to the plan beyond what isallowed?

• Has there been a corporate transaction that may have caused thegrandfathered plan to lose its status?

Reimbursement of health premiums

A common employer practice prior to 2013 was to reimburse thepremiums for health insurance policies purchased by activeemployees who, for whatever reason, did not participate in theemployer’s plan. In 2013, the IRS indicated that such practice wasnot in conformance with the market reform provisions of the ACA. Employers who continued this practicewould be subject to a daily fine. The one exception under the ACAis if the employer only had one active employee receive suchreimbursement in a given year.

There is another exception under more recent legislation thatallows employers with fewer than 50 full-time plus full-timeequivalent employees to offer these arrangements without a penalty.Under all scenarios, the employee would still be able to receivethe reimbursement tax-free.

Employer shared responsibilityrequirements

The ACA does not require employers to offer health benefits totheir employees. The employer shared responsibility requirementsare applicable only to employers who had 50 or more full-timeemployees and full-time equivalent employees in the previous year.Those employers are referred to as “applicable largeemployers.”

Employers that do not provide health benefits to their employeesmay be subject to a significant penalty. In order to avoidthis significant penalty, the employer would need to offer healthbenefits to at least 95 percent of full-time employees and theirchildren. Full-time for ACA purposes means anyone who on averageworks at least 30 hours per week. For 2017, the penalty is equal to$188.33 times the number of full-time employees (minus 30) forevery month in which coverage was not offered. Theannualized penalty is $2,260. For this penalty to be triggered, atleast one full-time employee must receive subsidized coverage onthe insurance marketplace.

An employer who provides health benefits to at least 95 percentof its employees and their children may be subject to anotherpenalty. To avoid this penalty, the health benefits coverage mustbe affordable and meet minimum value requirements. For 2017, themonthly penalty is equal to $282.50 times the number of full-timeemployees who purchase health insurance from the insurancemarketplace and receive subsidized coverage. The annualized penaltyis $3,390.

For coverage to be considered affordable, the employee cost forsingle coverage under the lowest-cost health benefit option offeredby the employer in 2017 must not exceed 9.69 percent of theemployee’s household income. Because most employers do not know anemployee’s household income, the IRS established three safe harborsto determine affordability: the federal poverty level safe harbor,the rate of pay safe harbor and the W-2 safe harbor.

For coverage to be considered to meet minimum value, the planmust pay at least 60 percent of the medical costs. The value is determinedactuarially or by using an HHS calculator.

Independent contractors/leased employees

An employer who uses independent contractors and/or leasedemployees may find itself not meeting the employer-sharedresponsibility requirements described above. If 5 percent or moreof an employer’s full-time workforce is composed of independentcontractors or leased employees, the employer should review itsdetermination that those workers are not common-law employees ofthe employer. The IRS (as well as state authorities) are auditingemployers concerning misclassification of workers and findingthousands of such workers to be common-law employees. If the IRSdetermines that these workers were misclassified, the employer mayface substantial ACA penalties if those workers had not beenoffered health benefits coverage by the employer.

The IRS has established a safe harbor for those leased workerswho are determined to be common-law employees of the employerwhen:

• The leasing (staffing) agency offers health care to those leasedemployees.

• The agreement between the employer and leasing agency stipulatesthat the employer will pay a surcharge or additional amount forthose leased workers who accept the health care benefits offered bythe leasing agency.

Assuming both conditions are met, the offer of coverage by theleasing agency will be considered an offer of coverage by theemployer.

A number of leasing agencies have created an ACA surcharge forall leased employees, whether or not the leased employees acceptthe offer. If an employer has a leasing agency that does this, theoffer of coverage will not conform to the safe harbor. Accordingly,the leasing agency’s offer of coverage would not be considered anoffer of coverage by the employer.

Reporting of coverage

All providers of health benefits coverage must report suchcoverage to the IRS. In addition, all applicable large employersmust also report to the IRS whether they offer coverage.

Applicable large employers must provide a Form 1095-C to eachfull-time employee, regardless of whether the coverage is insuredor self-insured, and other individuals (such as part-time employeesor partners) to whom it provides self-insured health benefitscoverage. This Form 1095-C must be provided by January 31 of thefollowing year. (In the first two years since this requirement tookeffect, the IRS has extended the time to provide the form.) Thenthe employer must file a Form 1094-C with the IRS, along with theForms 1095-C, by February 28 if filing by paper (less than 250forms) or by March 31 if filing electronically.

Other providers of health coverage, such as insurance companies,union plans and other third-party providers of health coverage,must provide each of its insured a Form 1095-B by January 31 of thefollowing year. The provider must file a Form 1094-B with the IRS,along with the Forms 1095-B, by February 28 if filing by paper(less than 250 forms) or by March 31 if filing electronically.

The employees of an applicable large employer that providesinsured coverage, rather than self-insured coverage, will receivetwo forms: a Form 1095-C from the employer and a Form 1095-B fromthe insurance company.

A Form 1095-C requires a number of codes to describe the statusof the employee and the offer of coverage for each month of thecalendar year. We have observed that some software packages havepre-programmed a default code for the employer to use, which someemployers fail to review. Unless an employer experiences nopersonnel changes throughout the year, it will not have the samecode for each of its employees.

Penalties for not reporting accurate and complete informationmay result in a penalty of $500 520 per form, up to a maximum of$6.4 million.

W-2 reporting

Employers who previously issued 250 or more Forms W-2 per yearstill need to report on each employee’s W-2 the cost ofemployer-sponsored health coverage. The amount included is thetotal cost of the coverage — not just what the employee or employerpaid.

PCORI fees

Employers with self-insured health care coverage must pay anannual fee to fund the Patient-Centered Outcomes ResearchInstitute, which the ACA established. The fees are applicable topolicies and plan years ending after October 1, 2012, and beforeOctober 1, 2019. For policy or calendar-year plans, the fees areapplicable to the 2012 through 2018 plan years. Regardless of thepolicy or plan year, the tax is reported on Form 720 and due thefollowing July 31.

Summary of benefits coverage

The administrator of the health benefits plan must provide asummary of benefits coverage (SBC) to each employee eligible forcoverage during initial enrollment, open enrollment, specialenrollment or upon request. The SBC must be presented in aculturally and linguistically appropriate manner. If 10 percent ormore of the residents in the employer’s county of business areliterate in one of the following non-English languages — Spanish,Chinese, Tagalog or Navajo — then the SBC must be available in thatlanguage. HHS has published a model SBC that employers canmodify.

Exchange notice

An employer subject to the Federal Labors Standards Act mustprovide all new and current employees with a written notice abouthealth care options that are available through the insurancemarketplace.

The employer requirements outlined here are far fromall-encompassing. Most provisions involve hundreds of pages ofdetail and other governmental notices. However, the legislativeimpasse presents an opportune time for employers to review theirobligations under the ACA to ensure compliance.

This content is not intended to answer specific questions orsuggest suitability of action in a particular case. For additionalinformation about the issues discussed, contact an appropriateprofessional advisor.