Complete Story
04/07/2016
LEGALLY SPEAKING
from Paul Routh of Dunlevey, Mahan & Furry
IRS Forms 1094 and 1095 Deadlines Coming and Gone
All large employers (i.e. those with 50 or more full-time and full-time equivalent employees) and small employers (i.e. those with fewer than 50 full-time and full-time equivalent employees) that sponsor self-funded health plans have to prepare, distribute and file new IRS Forms 1094 and 1095 as part of health care reform. The deadline for passing out IRS Forms 1095 to the employees is March 31, 2016. The deadline for submitting IRS Form 1094 and IRS Forms 1095 to the IRS is May 31, 2016, if submitted in paper format and June 30, 2016, if submitted electronically.
This is the first year the forms are due and the government said it would not assess penalties if the employer makes a “good faith” attempt to comply. However, the government also said that failing to prepare the forms is NOT a good faith attempt. In other words, if the employer simply ignores the rules, the government will assess penalties.
New SBC Next Year
Prior to health care reform many people had trouble comparing different health plans. Each carrier would develop their own summaries, and it was difficult to compare the summaries. Health care reform requires the carriers to prepare a uniform summary of benefits and coverage (i.e. SBCs) using the same format. The goal is to make shopping for health coverage easier and individuals can now do an “apples to apples” comparison.
http://www.dol.gov/ebsa/faqs/faq-aca30.html
The government is updating the standardized template and carriers will start using the new document next year.
Medicare Data Match Letters
The Medicare Secondary Payer rules coordinate coverage between Medicare and the employer’s group health plan when an individual is covered under both the employer’s group health plan and Medicare. Oftentimes a person will tell the provider he or she has Medicare and neglect to inform the provider they also are covered under the employer’s group health plan. Medicare will pay the provider but, in most cases, the employer’s group health plan should have been the primary payer. The government has recently stepped up its enforcement efforts with respect to the Medicare Secondary Payer rules.
Specifically the government has started sending letters to employers asking them to provide information about the employer’s group health plan and certain individuals enrolled in Medicare. Failure to respond to the letter can result in penalties of up to $1,000 per letter.
Community Rating Delayed Another Three Months
The government keeps changing the rules and delaying the effective date of various health care reform provisions. On February 29, 2016, the government delayed the effective date of the community rating rules to no later than January 1, 2018. The community rating rules apply to small employers. Each state has the ability to define small employers for these rules. In Ohio, a small employer is defined as an employer with fewer than 50 employees.
Many of the delays seem to be politically motivated. However, this delay will give small employers the ability to adopt calendar plan years rather than some off-cycle period merely to postpone the community rating rules.
Government Releases 2017 Out-of-Pocket Limits
One of the issues with health plans is the increasing amount of out-of-pocket expenses people have to pay. Therefore, health care reform limited the maximum amount of out-of-pocket expenses people have to pay under a non-grandfathered health plan.
Those amounts are indexed each year, and the government just released the number for next year.
IRS Notice on Individual Mandate
Under health care reform most people have to have health coverage or pay a penalty (i.e. the individual mandate).
The IRS released a one-page notice explaining the penalty and directing people to IRS Form 8965. The notice talks about a payment options if the taxpayer is unable to pay the total amount. You may want to share this with your employees.
Health Care Reform Lawsuit and Part-Time Employees
Health care reform requires larger employers to offer quality/affordable health coverage to full-time employees (i.e. 30 hours or more per week) or maybe pay a penalty. As result, some employers are reducing the employees’ hours to fewer than 30 per week so that they need not offer the employees health coverage.
However, ERISA says employers cannot take adverse employment actions against employees because of an employee benefit plan. Employer Dave & Buster's reduced its employees’ hours, and the employees filed a class action lawsuit saying the employer violated ERISA for reducing their hours to avoid the potential penalty under health care reform. The Court refused to dismiss the lawsuit so stay tuned.
Small Business Tax Credit A Bust?
Most people agree health care reform expanded coverage but did little, if anything, to control costs. One of the health care reform provisions was a tax credit for small businesses (i.e. those with fewer than 25 employees) that offered health coverage.
However, few businesses have taken advantage of this credit. Nevertheless, the IRS continues to promote the credit, and this link is the latest attempt to get businesses to sign up for the credit.
Government Resource Guide
Different government agencies have released numerous forms of guidance on a wide variety of health care reform topics.
This publication tries to pull all the information into one central depository with links to the actual source documents. It is pretty comprehensive and it’s a good place to go if you have questions.
IRS Issue Q&As for Individuals RE: Form 1095
The first article talks about the extended deadline employers and carriers have to distribute IRS Form 1095 to the employees. This raised questions about how the new deadline will impact the employees when they file their personal tax returns (i.e. Forms 1040). The IRS released guidance on this topic.
The IRS says taxpayers are not supposed to attach IRS Form 1095 to their personal tax return (i.e. Forms 1040) but if the taxpayer got coverage under the Health Care Exchange or Marketplace, they should wait until they receive IRS Form 1095-A. However, taxpayers need not wait until they receive IRS Form 1095-B or IRS Form 1095-C.
Sample Employee Communications
This article has sample communications you may want to send to employees with IRS Form 1095. This article lists some common questions to expect once the forms are sent out to the employees.
A lot of people get outside help to prepare their taxes but a substantial number of people do their own taxes. This may help employees understand the new IRS forms.
Tobacco Surcharge Affidavits
Employers are adopting smoker surcharges as a way to encourage individuals to stop using tobacco, which in turn may reduce health care costs. Those programs usually require the individual to disclose whether or not they are using tobacco products. Oftentimes the affidavit contains a statement that providing false information may result in the health coverage being rescinded (i.e. retroactively terminated). The government recently confirmed that providing inaccurate information regarding tobacco use DOES NOT permit the employer to rescind health coverage.
The only remedy available to the employer is to retroactively increase the premiums for the current plan year. For example, if the tobacco surcharge is an additional $100 per month and the employee provided false information regarding her status as a tobacco use, the employer can go back to the first day of the current plan year and charge the employee the additional $100 per month. The employer could not rescind (i.e. retroactively terminate) the coverage. It is a labor issue (and not a benefits issue) as to whether the employer can terminate the employee for providing false information.
Marketplace Notices in the Mail
The employer mandate requires large employers (i.e. those with 50 or more full-time and full-time equivalent employees) offer quality/affordable health coverage to full-time employees (i.e. those that work at least 30 hours per week) or be subject to a potential penalty. That is, the employer will be subject to a penalty if a full-time employee goes to the health care exchange or marketplace and gets a tax credit.
The government is still working out the process but employers will start getting notices from the government that an employee has gone to the health care exchange or marketplace and received a tax credit. The employer will then have the opportunity to contest the employee’s eligibility for the tax credit.
Employer Mandate Flowchart
Health care reform is extremely complicated and the employer mandate or play-or-pay penalties could impact a large number of employers. Therefore, it is important to have at least a basic understanding of the rules. A lot of people do better with flowcharts and graphs to gain a basic understanding of complex topics.
This is a nice one-page chart that outlines the basics of the employer mandate or play-or-pay rules. It is only the starting point of a complex topic but it is a good place to start when tackling the rules.
Dependent Audits
Everyone agrees that health care is expensive and employers are struggling with providing employees and their families with quality/affordable health coverage. It is hard enough to offer coverage to employees and their eligible family members. However, some employees either intentionally or unintentionally cover individuals who are not entitled to the benefits under the employer’s group health plan.
Employers are starting to combat this trend by conducting dependent audits where employees are required to provide proof that their listed family members are, in fact, eligible to participate in the employer’s group health plan. For example, an employee may try to cover an ex-spouse under the health plan. These audits are designed to ensure that everyone covered under the plan is really eligible to participate in the plan.
The DOL Could Come Knocking
No one wants to answer the door and find an auditor from the Department of Labor on the doorstep, but it is happening. There are basically two ways you could be selected for audit. The first is a random audit where the government simply picks your name out of a hat based on your Form 5500 filing. The second way is if someone files a complaint with the government.
Most of the time the audit goes pretty smoothly unless something is really out of order. In the context of a group health plan, the insurance company or third party administrator can provide you most of the information you will need to get through the audit. This article talks about what to expect if the DOL does come knocking on the door.
