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Past ACA Articles

Archive for the ‘Past ACA Articles’ Category

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ACA 1094-C/1095-C Reporting Through EaseCentral

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It’s no secret, ACA compliance can be difficult and IRS reporting requirements are very complex. To successfully meet these obligations, it’s critical employers have the proper guidance and reporting infrastructure to manage and submit the data required.

After a thorough evaluation of the products in the market, we recommend EaseCentral for online ACA tracking and reporting. For a limited time, Claremont is offering complimentary* ACA 1094-C/1095-C reporting with a new broker subscription.

How To Get Started

Simply sign up now for a new EaseCentral standard plan, indicate Claremont as your referral source, and we’ll pay the EaseCentral fee for generating IRS Forms 1094-C and 1095-C for one year, up to three groups per broker. A $6 per employee value!
Sign Up Now and Save*!

 

To learn more about EaseCentral’s ACA reporting solution and get an overview of the ACA Large Employer Mandate compliance requirements, view our slides and recorded presentation.

Webinar: ACA Large Employer Mandate Compliance-YouTube Image

 

Need help understanding the ACA requirements?

Download our easy-to-use ‘Play or Pay’ guides to learn the ACA compliance requirements and how employers will be impacted by the Large Employer Mandate. You’ll get actionable tips and helpful examples to advise your clients and strengthen your relationships.

With Claremont, turn ACA compliance challenges and risks into opportunities to win and retain more business.

 

Questions?
Contact the small group experts at 800.696.4543 or info@claremontcompanies.com.

 

*This offer only applies to new EaseCentral subscriptions. This offer is not available if you already have an EaseCentral subscription.

ALEs and Employee-Only Coverage

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An Applicable Large Employer (ALE) may be meeting its Large Employer Mandate obligation to offer Minimum Essential Coverage and a Minimum Value plan, but are they certain they are offering coverage to all eligible employees and dependents? If your client has selected an employee-only coverage plan, the employer may be exposing their business to a penalty. While the employer does not need to contribute towards the cost of dependent coverage, they are required to offer coverage to dependent children.

The Society for Human Resource Management (SHRM) states that dependent status under the PPACA is based on the relationship between a child and a participant and that a large employer that fails to offer coverage to employees’ dependents is not meeting the ACA requirements for coverage and therefore subject to an assessable penalty.

Did you know groups with substantially fewer than 50 employees may be an ALE?
If you have ALEs in your book that are on employee-only coverage, we can assist those groups written with Covered California.

To learn more about the Large Employer Mandate and how to identify Applicable Large Employers, download our essential ‘Play or Pay’ guides.

Questions?
Contact the small group experts at 800.696.4543 or info@claremontcompanies.com.

Controlled and Affiliated Service Groups – ALE Determination

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The Large Employer Mandate requires Applicable Large Employers (ALEs) to offer Minimum Essential Coverage (MEC), that is Minimum Value (MV) and affordable, to substantially all of its full time (FT) employees and their dependents (does not include spouses) or otherwise be assessed a penalty. Employers must first determine if it’s an ALE. An ALE is an employer that employed an average of at least 50 FT and full-time equivalent (FTE) employees in the prior calendar year. What many employers may not know is that under the Large Employer Mandate, all employees of all businesses that are part of a controlled group and/or affiliated service group must be treated as employed by a single employer and thus must be calculated together when determining ALE status. This can result in businesses with only a few employees being an ALE if the business is part of a controlled group and/or affiliated service group and the number of FT and FTE employees combined for all businesses that are part of the controlled group and/or affiliated service group equal 50 or more.

A controlled group is a combination of two or more businesses that are under common control or ownership. There are three types of controlled groups – parent-subsidiary, brother-sister, and combined. An affiliated service group is another type of group of related employers. It is comprised of two or more organizations that have a service relationship and, in some cases, an ownership relationship. There are three types of affiliated service groups – two include a First Service Organization (FSO) and either an A-organization or B-organization, and the third is a Management Group.

More information and examples on controlled groups and affiliated service groups can be found in the following IRS publication.

There are many complex rules that go into what makes up a controlled group and affiliated service group. It’s best to seek the advice of legal and/or tax counsel to determine controlled group and/or affiliated service group status. Claremont can assist you with a referral to a legal or tax professional if needed.

To learn more about the Large Employer Mandate, download Claremont’s essential ‘Play or Pay’ guides.

Questions?
Contact the small group experts at 800.696.4543 or ACA@claremontcompanies.com.

 

The Importance of Worker Classification and the Large Employer Mandate

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Employers need to know who its employees are for two purposes related to the Affordable Care Act’s Large Employer Mandate. The first is to determine whether it is an Applicable Large Employer (ALE). The second is to know who must be offered Minimum Value and affordable coverage so as to avoid being assessed a penalty.

The Large Employer Mandate requires ALEs to offer Minimum Essential Coverage (MEC), that is Minimum Value (MV) and affordable, to substantially all of its full time (FT) employees and their dependents (does not include spouses) or otherwise be assessed a penalty. Employers must then first determine if it’s an ALE. An ALE is an employer that employed an average of at least 50 FT and full-time equivalent (FTE) employees in the prior calendar year. A critical component of this determination is identifying who are employees. The common law standard is used to define employees. Under the common law standard, an employment “relationship exists when the person for whom the services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished…it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if [the employer] has the right to do so.” 26 CFR § 31.3401(c)-1. There are several factors that are considered when determining if an employment relationship exists. The determination depends on the particular facts and circumstances of the relationship. This is relevant when the employer has independent contractors and workers from staffing firms. Misclassifying workers as not employees would mean an inaccurate calculation of the number of FT and FTE employees and therefore an incorrect determination of whether an employer is an ALE.

An ALE may be assessed a penalty if it fails to offer MEC to at least 95% (70% in 2015) (or to put in another way, fails to offer to more than 5% or 5 whichever is greater) of its FT employees and their dependents for any month in the year; and at least one FT employee enrolls in a Qualified Health Plan (QHP) on the Exchange to which a premium tax credit or cost-sharing reduction is allowed or paid for that month. The monthly penalty is $2,000 times the number of FT employees minus the first 30 (80 in 2015) FT employees divided by 12. Not offering MEC to at least 95% of FT employees, for example only offering to 94% of FT employees, means the employer would be subject to the penalty for all of its FT employees (minus the first 30). Misclassifying workers, even just one, may cause an employer to fail to offer MEC to at least 95% of its FT employees, thereby triggering a penalty based on all of its FT employees, not just the misclassified workers.

Even if MEC is offered to all or to all but 5% (or, if greater, 5) FT employees and their dependents, an ALE may still be subject to a penalty if at least one FT employee enrolls in a QHP on the Exchange where a tax credit or cost-sharing reduction is allowed or paid. This may occur because the employer did not offer coverage to that employee (i.e. part of the 5% not offered coverage); or the coverage was unaffordable to the employee and/or did not provide MV. The penalty is the lesser of $3,000 times the number of FT employees who receive a premium tax credit or cost-sharing reduction divided by 12; or $2,000 x the number of FT employees minus the first 30 (80 in 2015) FT employees divided by 12. If a misclassified worker enrolls in a QHP on the Exchange where a tax credit or cost-sharing reduction is allowed or paid, the employer will be assessed a penalty for that misclassified worker. Finally, employers may also be subject to a penalty for failing to file and furnish the necessary forms to the IRS and misclassified workers under the reporting requirements in Internal Revenue Code Sections 6055 and 6056.

Worker classification can be complex, therefore, it’s best to seek legal counsel.  Claremont can assist you with a referral if needed.

Note: After 2014, the penalty amounts are adjusted for inflation.

Additional resources:

To learn more about the Large Employer Mandate, download Claremont’s essential ‘Play or Pay’ guides.

Questions?
Contact the small group experts at 800.696.4543 or ACA@claremontcompanies.com.

 

Essential Health Benefits, Minimum Essential Coverage, and Minimum Value…Oh My!

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The Affordable Care Act (ACA) introduced a number of new requirements and along with it a number of new terms that appear similar, which makes complying with the various requirements confusing. A few of these terms are Essential Health Benefits (EHBs), Minimum Essential Coverage (MEC), and Minimum Value (MV). With hope, after reading this, you’ll better be able to distinguish between these terms.

Essential Health Benefits (EHBs) is the term used to describe the benefits that non-grandfathered health plans in the individual and small group markets are required to cover. The benefits must include at least the following general categories and the items and services covered within the categories: (1) ambulatory patient services, (2) emergency services, (3) hospitalization, (4) maternity and newborn care, (5) mental health and substance use disorder services, including behavioral health treatment, (6) prescription drugs, (7) rehabilitative and habilitative services and devices, (8) laboratory services, (9) preventive and wellness services and chronic disease management, and (10) pediatric services, including oral and vision care. Large group health plans are not required to cover the EHBs. Although, plans that fail to provide substantial coverage for in-patient hospitalization and/or physician services do not provide MV (see below for what this means).

Minimum Essential Coverage (MEC) is a different concept from EHBs. It is the term used to describe the coverage individuals are required to have to comply with the Individual Mandate and the coverage Applicable Large Employers are required to offer to avoid one of the Large Employer Mandate penalties. Even if a health plan does not provide EHBs, the coverage will still likely meet MEC. MEC means any of the following: (1) government sponsored programs, such as Medicare and Medicaid, (2) coverage under an eligible employer-sponsored plan, (3) plans in the individual market, (4) grandfathered health plans, and (5) other health benefits coverage that the U.S. Department of Health and Human Services recognizes, such as a state health benefits risk pool. A plan consisting solely of Excepted Benefits is not MEC.

Minimum Value (MV) is a higher threshold than MEC. MV means the plan’s share of the total allowed costs of benefits is at least 60% (i.e. 60% actuarial value). This means the enrollees covered pay (via deductibles, coinsurance, copayments, and other out-of-pocket expenses) on average 40% of the covered benefits. These costs are determined based on a standard population and do not predict the out-of-pocket costs for any one individual. Even if the coverage offered by an Applicable Large Employers does not meet MV, it will still likely meet MEC, which means the employer avoids one of the Large Employer Mandate penalties and employees who have such coverage will not be subject to the Individual Mandate penalty. To avoid both of the Large Employer Mandate penalties, Applicable Large Employers must offer MEC, that is MV and affordable, to substantially all of its full-time employees and their dependents (does not include spouses).

To learn more about the Large Employer Mandate, download Claremont’s essential ‘Play or Pay’ guides.

SB 125: Revises the Definition of Small Employer

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On June 17, the Governor approved Senate Bill (SB) 125. A section of SB 125 revises the definition of small employer for plan years commencing or renewing on or after January 1, 2016. The definition of small employer, for purposes of determining employer eligibility in the small group market, will no longer be based on a count of eligible employees, but shall instead be determined using the method for counting full-time employees and full-time equivalent employees set forth in Section 4980H(c)(2) of the Internal Revenue Code. Quickly see where new rules differ from prior rules by downloading the guide below.

SB 125 Definition of Small Group

Employer size under Section 4980H(c)(2) of the Internal Revenue Code is determined by taking the sum of the total number of full-time employees and full-time equivalent employees for a calendar month. To be a small employer in California, the result must be at least one, but no more than 100, on at least 50 percent of the preceding calendar quarter or preceding calendar year. The majority of these employees must be employed within California. The requirement that a bona fide employer-employee relationship exists still applies.

A full-time employee is someone employed an average of at least 30 hours of service per week. To calculate full-time equivalent employees, the number of hours of service for a calendar month of all employees who are not full-time are aggregated then divided by 120. No more than 120 hours of service can be credited for any employee who is not full-time. Hours of service includes both working hours and non-working hours for which an employee is paid or entitled to be paid, such as vacation, holiday, illness, incapacity, jury duty, military duty, and leave of absence.

The regulations of Section 4980H(c)(2) specify to include seasonal workers when counting the number of full-time employees and calculating the number of full-time equivalents. A seasonal worker is someone who performs labor or services on a seasonal basis. This employment is only done during certain periods and not throughout the year, such as those who only work during the holidays. Someone who works in agriculture, but performs different activities in different seasons, is considered seasonal, even if they are employed most of the year. A reasonable, good faith interpretation of the term seasonal worker may be applied.

As described above, SB 125 will result in significant changes to the small group market. However, the practical administration of this law has yet to be determined. Stay tuned for updates on this topic.

Questions?
Contact us at 800.696.4543 or info@claremontcompanies.com.

When Is An Employer’s First Year As An ALE?

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The final large employer mandate regulations provide for a transition rule for an employer’s first year as an applicable large employer (ALE). An ALE is an employer that employed an average of at least 50 full-time (FT) and full-time equivalent (FTE) employees in the prior year. During an employer’s first year as an ALE, the ALE will not be subject to a penalty from January through March for failure to offer coverage to employees who were not offered coverage at any point during the prior calendar year provided the ALE offers affordable and minimum value coverage to these employees on or before April 1.

This transition rule allows employers, particularly employers that have close to 50* FT employees (including FTEs), but are not certain they will be ALEs, time to put coverage in place once they have determined they are ALEs. Since the measurement period to determine ALE status ends December 31**, employers will have no time to offer coverage to its employees by January 1. Starting coverage in the middle of the month to give employers time to put coverage in place is not an option, because an employer that fails to offer coverage to a FT employee for any day in a calendar month is treated as not offering coverage for the entire calendar month.

There has been some confusion among employers that want to take advantage of this transition rule in 2015 as to when is their first year as an ALE. In 2013, the IRS delayed the reporting requirements making it impractical to determine which employers owed a penalty. As such, no penalties were assessed in 2014. However, this had no effect on the effective date of the law, it was simply enforcement of the reporting requirements and penalties that were delayed. This means employers still needed to determine if they were an ALE in 2014. Therefore, 2015 is not the first year an employer is an ALE, if that employer was an ALE in 2014 (based on 2013 data).

It can be argued that the first year as an ALE for every employer with 100 FT employees (including FTEs) is 2015. Since no penalties were assessed in 2014, it can be claimed that employers were not required to comply with the provisions of the large employer mandate in 2014, including determination of ALE status. However, if this were the case, any employer with 100 FT employees (including FTEs) in 2015 could avoid penalties from January through March for failure to offer coverage to employees who were not offered coverage at any point during the prior calendar year. It is unlikely that this was the IRS’ intention. Moreover, the instructions for the reporting forms for ALEs (IRS Forms 1094-C and 1095-C) are clear that 2015 is not the first year an employer is an ALE, if that employer was an ALE in 2014 (based on 2013 data).

*Only employers with 100 or more FT employees (including FTEs) are subject to the mandate in 2015. Employers with 50-99 FT employees (including FTEs) will not be subject to the mandate in 2015 if these employers meet certain conditions and certify to the IRS that they meet these conditions. These ALEs will be subject to the mandate in 2016.

* *To determine ALE status for 2015, an employer may use a reference period of at least six consecutive calendar months (as chosen by the employer) during 2014 (rather than the entire 2014).