Category: ACA

Affordable Care Act and Benefits Compliance Part 3: ACA Reporting

For the third part of our ACA refresher series, let’s take a look at what reporting is required of the Affordable Care Act so you can make sure you’re compliant. (And if you’d like additional background, here are parts 1 and 2 of our benefits compliance refresher.)

What Reporting Does ACA Require?

The employer (and in some cases, the insurer) is required to include information about who is covered by the Affordable Care Act, who is offered coverage, who took the coverage and how much the coverage was. This information is found on the 1094 and 1095 forms.  

1095 forms are due to employees on January 31 of the following year (January 31, 2022 for the 2021 calendar year). 1094 forms are due to the IRS by the following February 28 if submitted in paper form, or by March 31 if filed electronically. 

Each year the IRS has extended the deadline to provide 1095 forms to employees by 30 days, but this year, we do not anticipate this extension for 2021 filing, so it’s important to ensure your employees receive their 1095 forms by January 31, 2021. 

Part 1 on the 1095-C form is about the employee; part 2 is mostly where the information for the ACA required reporting will be. Part 3 asks the employer to complete a list of covered individuals and which months they were enrolled in the plan. Depending on what plan you offer and what the size of your company is will determine what type of reporting and information is required. 

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If you file more than 250 W-2s in the previous calendar year, you are required to report the total cost of the employee’s health insurance for employer-sponsored health coverage. You must include employee and employer contributions even though it is non-taxable. This is optional for employers who filed fewer than 250 W-2s in the previous calendar year.

Changes to ACA’s Electronic Filing Process

The IRS has proposed two significant changes to the electronic filing process. The proposed changes would also affect the filing of W-2 and 1099. 

The ACA filing threshold for e-filing will be reduced from 250 returns to 100 for returns due in 2022 (and to 10 for returns due in 2023). 

Additionally, employers would be required to aggregate the number of different returns it files when determining whether the 250-return threshold is reached. 

For example, the employer would aggregate all W-2s, forms 1095-C and forms 1094-C to determine a total amount. If that amount surpasses 100, the forms must be transmitted and filed electronically. If this proposal goes into effect, this rule will result in almost all employers electronically filing for 2023.

How Cornerstone Can Help With ACA

We know you’re busy, and staying compliant with the ever-changing (and often complex) ACA rules can be difficult. By working with AssuredPartners Cornerstone, you can be assured that your workplace — and employees — are covered and compliant.

Connect with our human resources experts if you’d like assistance with the benefits administration process. Our skilled team can ensure you offer a healthcare plan for your employees that is ACA compliant.   

If you have any questions or concerns about the Affordable Care Act and how it affects you or your employees, contact Cornerstone today.

Affordable Care Act and Benefits Compliance Part 2: Safe Harbors

Now that we’ve looked at the general refresher of how to stay compliant with the Affordable Care Act, let’s review the ways ACA makes health benefits more affordable through its three safe harbors. 

What Does ACA Say About Affordability?

Employers are required to offer health coverage to eligible full-time employees at an affordable rate. You need to look at what the employee pays for their own coverage on the lowest benefit plan that you offer. 

For plans beginning in 2022, the required contribution for employee-only coverage should not exceed 9.61% of the employee’s household income. 

Safe Harbors of the Affordable Care Act

Because employers may not know their employee’s household income, the IRS provides three safe harbors for affordability: 

  • Federal Poverty Level (FPL)
  • Rate of Pay
  • W-2 

Federal Poverty Line Safe Harbor

Under the Federal Poverty Level Line Safe Harbor, affordability is determined based on the federal poverty line for a single individual. Under this safe harbor, employer-provided coverage offered to a single individual is considered affordable if the employee’s cost for self-only coverage does not exceed 9.61% of the FPL for a single individual. The 2022 FPL for an individual is $12,880.

$12,880 x 9.61 = $1,237.77

$1,237.77 / 12 months = $103.14

Employee coverage for the Federal Poverty Line Safe Harbor is $103.14.

Rate of Pay Safe Harbor

The rate of pay safe harbor works great for hourly employees. Under the rate of pay safe harbor, affordability can be determined without the need to analyze every employee’s wage and hours. Use the hourly rate for the lowest-paid employee at the beginning of the plan year. For instance, you can use the lowest hourly rate at $11.50. 

$11.50 x 130 hours = $1,495

$1,495 x 9.61 = $143.67

The employee coverage for the rate of pay safe harbor for hourly employees in this example is $143.67.

W-2 Safe Harbor

The W-2 safe harbor works well for salaried employees, employees who receive tips or employees who consistently work more than 30 hours per week. Estimated wages are entered by the employee on their W-2 forms. 

It is a bit of a guess as to what W-2 wages will be next year. If the employee notes estimated wages at $20,000, this is the number we base our equations on. 

$20,000 / 12 months = $1,922

$1,922 / 12 months = $160.17

The base amount is $160.17 for employee coverage. This option allows the employer to charge more for the employee-only coverage and still be compliant but is sometimes a gamble because the rate is based on the employees’ estimated wages.  

How Can Cornerstone Help With Benefits Compliance?

Because the legislation is ever-changing, we know it can be difficult to keep up with benefits compliance information. AssuredPartners Cornerstone is here to help you make sense of ACA so you can keep your employees informed. Looking for more information on ACA? Here are previous blogs from Cornerstone on changing ACA and CARES Act legislation as well as previous appeals to legislation. 

Whether you need help with benefits administration or are looking to create a wellness program that meets your workplace’s needs, our team has the expertise to assist you.

If you have any questions or concerns about the Affordable Care Act and how it affects you or your employees, contact Cornerstone today.

Affordable Care Act and Benefits Compliance: A Refresher

The Affordable Care Act or ACA was passed back in 2010, but what affected you as an employer was enacted in 2014 and later. With about 23,000 pages of legislation, some aspects of the ACA are unchanged from the original law, but some look very different today.

As an employer, benefits compliance is necessary. Cornerstone Insurance stays up to date on changing ACA and CARES Act legislation and can help you stay informed of any potential appeals to legislation. 

What is Included in the Affordable Care Act?

Important components of ACA include: 

  • Dependent coverage is available to anyone ages 26 and older
  • No cost-sharing for preventative care services such as: 
    • Physicals
    • Mammograms
    • Flu shots
  • Medical loss ratio rebates
  • Enhanced preventative care for women
  • HSA & Health FSA limit
  • W-2 reporting for over 250 W-2s
  • SBC (summary of benefits and coverage) and exchange notification requirements

Before we discuss the employer mandate under the ACA, note that the individual mandate is still in place, but the tax penalty has been reduced to zero dollars, so for all intents and purposes, the individual mandate is not in effect today. 

Who is an Applicable Large Employer?

The employer mandate requires “applicable large employers” (ALEs) to provide affordable health care coverage to full-time employees or pay a penalty.

You are an ALE if you employ 50 or more full-time employees, including full-time equivalents, on average through the previous calendar year. You may be required to calculate each year. All commonly owned entities need to be considered in order to determine the status of ALE. Generally, if two entities have 80% common ownership, they would be considered commonly owned. Since this is a general rule, check with your legal counsel or CPA with any questions. 

Employers need to count anyone who works full-time as one full-timer. All the part-timer employees’ hours are totaled and divided by 30 hours. For example, an employer has 35 full-time employees and 30 part-time employees who work a total of 29,780 hours. 

29,780 hours / 52 weeks / 30 hours = 19 full-time employees

The total of 35 full-time employees plus 19 full-time employees based on part-time hours equals 54 employees. This measurement determines your status for the following year.  

ALE Requirements to Avoid Penalty

If you are an ALE, you are subject to the play or pay mandate and must do the following in order to avoid the penalty: 

  • Establish who is considered to be a full-time employee
  • Offer those full-time employees health insurance that meets “minimum essential coverage”
  • Offer that health coverage to eligible full-time employees at an “affordable” rate
  • Report offer of coverage to the IRS annually

According to the ACA,  there are three types of employees: 

  • Full-time employees who work 30+ hours per week
  • Employees who work less than 30 hours per week
  • Employees who work an unpredictable number of hours per week

A full-time employee is an employee who regularly works 30 or more hours per week — you must offer them coverage. Employers do not need to offer coverage for employees who never work 30 or more hours a week, but there are some employees who you don’t know how many hours a week that they will work. For these employees, you will need to measure hours to determine potential full-time status. 

You must establish a corporate measurement period and consistently measure variable hour employees to determine if they are eligible for health insurance. Employers will need to measure new hires in an initial measurement period to determine if they are eligible for health insurance. If these employees are determined full-time (if they work an average of 30 or more hours during the measurement period), you must offer these employees coverable for an established stability period. 

Most payroll platforms assist with this measurement process. If your payroll does not, please reach out to Cornerstone Insurance for help on setting up the best way to create a measurement process for your variable hour employees. Once you’ve established how many employees you need to offer coverage to, you will need to establish the coverage plan and affordability. 

What is Minimum Essential Coverage?

To be considered a minimum essential coverage plan, a health insurance plan must meet the minimum threshold of coverage as defined by the ACA. These include:

  • No annual lifetime limits
  • No pre-existing conditions
  • Must comply with MLR rules
  • Provide substantial coverage for in-patient care and physician treatment
  • Many others 

Cornerstone can help you provide a healthcare plan to your employees that offers minimum essential coverage and are fully ACA compliant

ACA Penalties — What’s my Risk?

With the ACA requirements, there are potential penalties. The only way you can be penalized is if an employee goes to the exchange or the healthcare marketplace and obtains subsidized coverage as opposed to taking your health insurance. The IRS section 4980H covers the penalties. 

The two questions employers should ask themselves are: 

  • Do you offer minimum essential coverage to 95% of the eligible employees (a)
  • Is your coverage offered at an “affordable” rate (b)?

If you can’t answer yes to part (a), the 2022 penalty is $2,570 or $229.17 per month per eligible employee. There is relief from the IRS for the first 30 employees. The penalty to 4980H (b) in 2022 is $4120 or 343.33 per month per employee who received subsidized coverage on the exchange.

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The above image maps out the full process of how a penalty from the IRS is triggered. As the employer, you offer employees a healthcare insurance plan on January 1. The employee may or may not take your insurance. But, if the employee chooses to go to the healthcare market exchange for a subsidized healthcare insurance plan, this triggers an investigation by the IRS. 

If you are submitting your ACA reporting, you are informing the IRS who is eligible for what plans. The employee files a tax return, so the IRS knows what the household earns and ensures the plan you are offering is 9.61% of the household income.

If a penalty is triggered, the IRS provides form letter 226J to ALEs that may owe a penalty for prior tax years. This includes an employer shared responsibility penalty (ESRP) Summary Table itemizing your proposed ESRP by month. The IRS relies on the information from Forms 1095-C and 1094-C filed by ALEs as well as individual tax returns. If you receive a penalty, you have 30 days to respond.

What Can Cornerstone Do for Your Benefits Compliance?

As an employer, it’s important to ensure your employees understand their benefits. You are required to provide an SBC to all eligible employees at open enrollment, upon request and within 90 days of HIPAA special enrollment qualifying event. Cornerstone Insurance can help you keep your employees informed with updated benefit information. 

Cornerstone Insurance is here to offer you assistance with every step of the benefits process. Our skilled team can ensure you offer a healthcare plan for your employees that is ACA compliant.   

If you have any questions or concerns about the Affordable Care Act and how it affects you or your employees, contact Cornerstone today.