The Affordable Care Act (ACA) established Health Insurance Marketplaces (also called Exchanges) where individuals can shop and enroll in health coverage. Individuals who meet certain criteria are eligible for premium subsidies and cost-sharing reductions for coverage on the Marketplace.
For the first time, in 2016 some employers will receive a notice from a Marketplace indicating that one of their employees signed up for health coverage through the Marketplace and received advanced premium subsidies. Many employers are asking what these notices mean and what actions they should take if they receive one.
Premium subsidies and cost-sharing reductions are designed to expand healthcare coverage by making insurance, and its utilization, more affordable. Premium subsidies, more accurately referred to as a premium tax credit, are claimed on an individual’s income tax return at the end of the year. What is unique about this tax credit is that an individual can choose to have the expected premium tax credit advanced throughout the year, in which case the government makes payments directly to the health insurer on the individual’s behalf. Importantly, individuals who have access to health coverage through an employer that is affordable and meets minimum value are not eligible to receive the premium tax credit or advances of the premium tax credit for their coverage.
The ACA generally requires that applicable large employers – generally employers with 50 or more full-time employees, including full-time equivalents – offer health coverage that is affordable and of minimum value to their full-time employees (and their dependents) or face an Internal Revenue Service (IRS) tax. This is often referred to as the employer “pay or play” or employer mandate provision. Tax liability under this employer provision is triggered if one of the employer’s full-time employees receives a premium tax credit and the amount of the tax liability is determined by the number of full-time employees who received the premium tax credit.
During the Marketplace application process, individuals are asked a host of questions, including questions about access to health coverage through an employer. If the Marketplace determines that the individual does not have access through an employer to coverage that is affordable and meets the required minimum value, and assuming the individual meets other eligibility criteria, advance payments of the premium tax credit can begin.
In such an instance, the Marketplace is required to send the employer a Marketplace notice. This will be the first year the Federally Facilitated Marketplace (FFM) is sending out these notices. It is worth noting that there is not a commitment to send a notice to all employers, and the FFM has said it can send a notice only if the individual provides a complete employer address. Consequently, some employers expecting Marketplace notices may not receive them and notices may not be mailed to the preferred employer address.
The Marketplace notices will give employers advance warning that they may have potential tax liability under the employer mandate of the ACA. However, there are reasons that receiving a notice does not necessarily mean the IRS will be in hot pursuit, including:
The FFM recently posted a sample of its 2016 notice which can be found here.
Please note that the notice suggests that employers should call the IRS for more information if they have questions, however, IRS telephone assistors will be unable to provide information on the Marketplace process, including the appeals process, and will be unable to tell an employer whether they owe a tax under the employer mandate.
An employer who receives a Marketplace notice may want to appeal the decision that the individual was not offered employer coverage that was affordable and of minimum value. An employer has 90 days from the date of the notice to file an appeal, which is made directly to the Marketplace. Importantly, the IRS will independently determine whether an employer has a tax liability, and the employer will have the opportunity to dispute any proposed liability with the IRS. Similarly, an individual will have the opportunity to challenge an IRS denial of premium tax credit eligibility. Any contact by the IRS, however, will occur late in the game after the year’s tax liabilities have already been incurred. Therefore, although an appeal is not required, it may be advisable.
Regardless of whether an employer pursues an appeal, an employer, particularly one that offers affordable, minimum value health coverage, should communicate to its employees about its offering. Although an applicable large employer is required to furnish IRS Form 1095-C to full-time employees detailing the employer’s offer, a better option is providing employees with information before they enroll in Marketplace coverage.
In summary, the Marketplace notice serves as an advance warning that either the employer or the employee may have a tax liability. Given this exposure, employers should review Marketplace notices and their internal records and consider taking action.
The U.S Labor Department (USDOL) has finally released the anxiously awaited revised regulations affecting certain kinds of employees who may be treated as exempt from the federal Fair Labor Standards Act’s (FLSA) overtime and minimum-wage requirements. These will be published officially on May 23, 2016.
If you currently consider any of your employees to be exempt “white collar” employees, you might have to make some sweeping changes.
These rules will become effective on December 1, 2016, which is considerably later than had been thought. Unless this is postponed somehow, you must do by this time what is necessary to continue to rely upon one or more of these exemptions (or another exemption) as to each affected employee, or you must forgo exempt status as to any employee who no longer satisfies all of the requirements.
Essentially, USDOL is doubling the current salary threshold. This is likely intended to both reduce the proportion of exempt workers sharply while increasing the compensation of many who will remain exempt, rather than engaging in the fundamentally definition process called for under the FLSA. Manipulating exemption requirements to “give employees a raise” has never been an authorized or legitimate pursuit.
For the first time in the exemptions’ more-than-75-year history, USDOL will publish what amounts to an automatic “update” to the minimum salary threshold. This departs from the prior USDOL practice of engaging in what should instead ultimately be a qualitative evaluation that also takes into account a variety of non-numerical considerations.
USDOL did not change any of the exemptions’ requirements as they relate to the kinds or amounts of work necessary to sustain exempt status (commonly known as the “duties test”). Of course, USDOL had asked for comments directed to whether there should be a strict more-than-50% requirement for exempt work. The agency apparently decided that this was not necessary in light of the fact that “the number of workers for whom employers must apply the duties test is reduced” by virtue of the salary increase alone.
Right now, you should be:
USDOL has provided extensive commentary explaining its rationale for the revised provisions. We are continuing to study the final regulations and accompanying discussion carefully and will provide updates/changes as published.
In late April, the Department of Labor (DOL) announced that it soon will issue a new general FMLA Notice that can be used interchangeably with their current FMLA posting. In issuing this new directive, they also unveiled a new guide to help employers navigate and administer the FMLA.
Here’s the scoop:
Under the FMLA, an FMLA-covered employer must post a copy of the General FMLA Notice in each location where it has any employees (even if there are no FMLA-eligible employees at that location). According to the FMLA rules, the notice must be posted “prominently where it can be readily seen by employees and applicants for employment.”
The DOL has announced that it will release a new General FMLA Notice for employers to post in their workplaces. According to the DOL, the new poster won’t necessarily include a whole bunch of new information. Rather, the information in the notice will be reorganized so that it’s more reader friendly.
The DOL’s Branch Chief for FMLA, Helen Applewhaite, confirmed that employers would be allowed to post either the current poster or the new version. In other words, employers will not be required to change the current poster.
In 2012, the DOL issued a guide to employees to help them navigate their rights under the FMLA. Several years later, DOL now has issued a companion guide for employers. According to the DOL, the Employer’s Guide to the Family and Medical Leave Act (pdf) is designed to “provide essential information about the FMLA, including information about employers’ obligations under the law and the options available to employers in administering leave under the FMLA.”
The new guide was unveiled by the DOL at an annual FMLA/ADA Compliance conference sponsored by the Disability Management Employer Coalition (DMEC). Generally speaking, the new guide covers FMLA administration from beginning to end, and it follows a typical leave process — from leave request through medical certification and return to work.
While the guide helps explain the FMLA regulations in a user-friendly manner, the guide primarily is meant to answer common questions about the FMLA, so it leaves unanswered leave issues that continue to frustrate employers in their administration of the FMLA. However, the guide is likely to have some benefit to employers when administering the FMLA. For instance, the guide:
A number of employers have recently fallen victim to a phishing scam that tricks them into disclosing highly sensitive employee information to unknown third parties. Make sure to warn your Human Resources and Payroll Departments to be on the alert so that your company doesn’t get added to the ranks of those swindled.
In the wake of tax season, multiple businesses have reported receiving spoofing emails, usually sent to Payroll and Human Resources departments / personnel. The emails appear to be requests from in-house high-level company executives, including in some instances the CEO, requesting that employee W-2 tax forms be transmitted to them for various administrative purposes. In reality, these emails are phishing expeditions sent by outside data thieves, who use cloned company email addresses with authentic-looking company logos, colors, and signatures.
If the recipients are deceived into thinking the emails are legitimate company correspondence, they will comply with the request and end up delivering W-2 forms to the scam artists. These forms contain a treasure trove of employee personal data, including Social Security numbers and other personally identifiable information. The successful hackers often use the data obtained from this phishing scam to file fraudulent tax returns on behalf of company employees.
If you believe your company is a victim of this scam, you may have a legal obligation to follow applicable data breach notification requirements. Besides determining your legal responsibilities, which vary from state to state, you should consider encouraging your employees to monitor their credit reports and take all of the usual measures to prevent identity theft. You should also suggest they file their tax returns as soon as possible in an effort to avoid the filing of fraudulent tax returns on their behalf.
The current version of the Form I-9, the most fundamental tool used to determine if applicants are eligible to work in the U.S., expired on March 31. Until further notice, though, employers should keep using the expired form until the recently proposed “smart” I-9 is in effect, according to U.S. Citizenship and Immigration Services (USCIS).
Dave Basham, a senior analyst in the verification division at USCIS, has been answering the following question a lot recently: “What will happen on March 31, 2016, when the Form I-9 expires?” Basham says: “Employers should continue to use the current version of the form as it continues to be effective even after the OMB [Office of Management and Budget] control number expiration date March 31, 2016, has passed.”
On March 28, 2016, USCIS published a second round of proposed changes to the form in the Federal Register, giving the public 30 days to comment. Once the comment period ends April 27 and comments are considered, USCIS may make further changes before sending the proposal to OMB, which will need to review and approve it. The form will be available for download at www.uscis.gov upon being approved.
“Employers must continue to use the current version of Form I-9 until the proposed version is approved and posted on the USCIS website,” said Amy Peck, an immigration attorney in the Omaha, Neb., office of Jackson Lewis.
The proposed, revised form is designed to address frequent points of confusion that arise for both employees and employers.
The proposed changes specifically aim to help employers reduce technical errors for which they may be fined, and include:
The proposed changes will have far-reaching impact because all employers are required to complete and maintain the Form I-9 for each employee hired to verify their identity and authorization to work in the United States.
On March 1, 2016, the Department of Health and Human Services (HHS) announced the finalized 2017 health plan out-of-pocket (OOP) maximums. Applicable to non-grandfathered health plans, the OOP limits for plan years beginning on or after January 1, 2017 are $7,150 for single coverage and $14,300 for family coverage, up from $6,850 single/$13,700 family in 2016. The OOP maximum includes the annual deductible and any in-network cost-sharing obligations members have after the deductible is met. Premiums, pre-authorization penalties, and OOP expenses associated with out-of-network benefits are not required to be included in the OOP maximums.
In addition to the new OOP maximum limits, employers offering high deductible health plans need to be particularly mindful of the embedded OOP maximum requirement. Beginning in 2016, all non-grandfathered health plans, whether self-funded or fully insured, must apply an embedded OOP maximum to each individual enrolled in family coverage if the plan’s family OOP maximum exceeds the ACA’s OOP limit for self-only coverage ($7,150 for 2017). The ACA-required embedded OOP maximum is a new and often confusing concept for employers offering a high deductible health plan (HDHP). Prior to ACA, HDHPs commonly imposed one overall family OOP limit on family coverage (called an aggregate OOP) without an underlying individual OOP maximum for each covered family member. Now, HDHPs must comply with the IRS deductible and OOP parameters for self-only and family coverage in addition to ACA’s OOP embedded single limit requirement.
The IRS is expected to announce the 2017 HDHP deductible and OOP limits in May 2016.
In a first-of-its-kind decision, a federal court recently upheld the right of employees to sue their employer for allegedly cutting employee hours to less than 30 hours per week to avoid offering health insurance under the Affordable Care Act (ACA). Specifically, the District Court for the Southern District of New York denied a defense Motion to Dismiss in a case where a group of workers allege that Dave & Buster’s (a national restaurant and entertainment chain) “right-sized” its workforce for the purpose of avoiding healthcare costs.
Although this case is in the very early stages of litigation and is far from being decided, you should monitor this for developments to determine whether you need to take action to deter potential copycat lawsuits.
One of the initial concerns by ACA critics is that many employers would respond to the Employer Mandate by reducing full-time employee hours to avoid the coverage obligation and associated penalties, increasing the number of part-time workers in the national economy. This is because the ACA does not require an employer to offer affordable, minimum-value coverage to employees generally working less than 30 hours per week.
Although the initial economic data analyzing the national workforce suggests that the predictions of wide-scale reduction in employee hours have not materialized, some employers have increased their reliance on part-time employees as an ACA strategy to manage the costs of the Employer Mandate.
Section 510 of ERISA prohibits discrimination and retaliation against plan participants and beneficiaries with respect to their rights to benefits. More specifically, ERISA Section 510 prohibits employers from interfering “with the attainment of any right to which such participant may become entitled under the plan.” Because many employment decisions affect the right to present or future benefits, courts generally require that plaintiffs show specific employer intent to interfere with benefits if they want to successfully assert a cause of action under ERISA Section 510.
The court found that the class of plaintiffs showed sufficient evidence in support of their claim that their participation in the health insurance plan was discontinued because the employer acted with “unlawful purpose” in realigning its workforce to avoid ACA-related costs. In this regard, the employees claimed that the company held meetings during which managers explained that the ACA would cost millions of dollars, and that employee hours were being reduced to avoid that cost.
However, if you are considering reducing your employee hours, you should carefully consider how such reductions are communicated to your workforce. Employers often have varied reasons for reducing employee hours, and many of those reasons have legitimate business purposes. It is vital that any communications made to your employees about such reductions describe the underlying rationale with clarity.
Beginning in Spring 2016, the Affordable Care Act (ACA) Exchanges/Marketplaces will begin to send notices to employers whose employees have received government-subsidized health insurance through the Exchanges. The ACA created the “Employer Notice Program” to give employers the opportunity to contest a potential penalty for employees receiving subsidized health insurance via an Exchange.
The notices will identify any employees who received an advance premium tax credit (APTC). If a full-time employee of an applicable large employer (ALE) receives a premium tax credit for coverage through the Exchanges in 2016, the ALE will be liable for the employer shared responsibility payment. The penalty if an employer doesn’t offer full-time equivalent employees (FTEs) affordable minimum value essential coverage is $2,160 per FTE (minus the first 30) in 2016. If an employer offers coverage, but it is not considered affordable, the penalty is the lesser of $3,240 per subsidized FTE in 2016 or the above penalty. Penalties for future years will be indexed for inflation and posted on the IRS website. The Employer Notice Program does provide an opportunity for an ALE to file an appeal if employees claimed subsidies they were not entitled to.
The first batch of notices will be sent in Spring 2016 and additional notices will be sent throughout the year. For 2016, the notices are expected to be sent to employers if the employee received an APTC for at least one month in 2016 and the employee provided the Exchange with the complete employer address.
Last September, the Centers for Medicare and Medicaid Services (CMS) issued FAQs regarding the Employer Notice Program. The FAQs respond to several questions regarding how employers should respond if they receive a notice that an employee received premium tax credits and cost sharing reductions through the ACA’s Exchanges.
Employers will have an opportunity to appeal the employer notice by proving they offered the employee access to affordable minimum value employer-sponsored coverage, therefore making the employee ineligible for APTC. An employer has 90 days from the date of the notice to appeal. If the employer’s appeal is successful, the Exchange will send a notice to the employee suggesting the employee update their Exchange application to reflect that he or she has access or is enrolled in other coverage. The notice to the employee will further explain that failure to provide an update to their application may result in a tax liability.
An employer appeal request form is available on the Healthcare.gov website. For more details about the Employer Notice Program or the employer appeal request form visit www.healthcare.gov.
Although CMS has provided these guidelines to apply only to the Federal Exchange, it is likely that the state-based Exchanges will have similar notification programs.
Employers should prepare in advance by developing a process for handling the Exchange notices, including appealing any incorrect information that an employee may have provided to the Exchange. Advance preparation will enable you to respond to the notice promptly and help to avoid potential employer penalties.
Businesses With 100 Or More Workers Would Be Subject To Proposed New Law Aimed At Combating Gender Discrimination
The federal government announced at the end of January 2016 its intent to gather additional pay information from larger employers, forcing all businesses with over 100 workers to provide detailed information about their pay practices in an effort to address gender discrimination. If the President’s plan moves forward as expected, employers will be subject to a heightened pay transparency standard by the end of this calendar year.
In other words, once this new law takes hold, the EEOC will have greater ease in identifying disparities and areas of potential pay discrimination to determine where it will take enforcement action.
By conducting your own gender-specific audit of pay practices, you will be able to determine whether any pay gaps exist that might catch the eye of the federal government when you turn over this information next year. You will have time to determine whether any disparities that may exist can be justified by legitimate and non-discriminatory explanations, or whether you will need to take corrective action to address troublesome pay gaps.
You did it! Your 1095 forms are ready and going out to employees. Now what?
You guessed it: Employee confusion. You’re going to get some questions. If you’re the one in charge of providing the answers, remember a great offense is the best defense. You’ll want to answer the most common questions before they’re even asked.
We’ve put together a list of some basic things
employees will want to know, along with sample answers. Tailor these Q&As as
needed for your organization. and then send them out to employees using every channel you can (mail, e-mail, employee meetings, company
website, social media, posters). Tell employees how to get more detailed
information if they need it.
1. What is this form I’m receiving?
A 1095 form is a little bit like a W-2 form.
Your employer (and/or insurer) sends one copy to the Internal Revenue Service (IRS)
and one copy to you. A W-2 form reports your annual earnings. A 1095 form
reports your health care coverage throughout the year.
2. Who is sending it to me, when, and how?
Your employer and/or health insurance company should
send one to you either by mail or in person. They may send the form to you
electronically if you gave them permission to do so. You should receive it by
March 31, 2016. (Starting in 2017, you should receive it each year by January
31, just like your W-2.)
3. Why are you sending it to me?
The 1095 forms will show that you and your
family members either did or did not have health coverage with our organization during each month of
the past year. Because of the Affordable Care Act, every person must obtain
health insurance or pay a penalty to the IRS.
4. What am I supposed to do with this form?
Keep it for your tax records. You don’t actually
need this form in order to file your taxes, but when you do file, you’ll have to tell the IRS whether or not
you had health insurance for each month of 2015. The Form 1095-B or 1095-C
shows if you had health insurance through your employer. Since you don’t
actually need this form to file your taxes, you don’t have to wait to receive
it if you already know what months you did or didn’t have health insurance in
2015. When you do get the form, keep it with your other 2015 tax information in
case you should need it in the future to help prove you had health insurance.
5. What if I get more than one 1095 form?
Someone who had health insurance through more
than one employer during the year may receive a 1095-B or 1095-C from each
employer. Some employees may receive a Form 1095-A and/or 1095-B reporting
specific health coverage details. Just keep these—you do not need to send them
in with your 2015 taxes.
6. What if I did not get a Form 1095-B or a 1095-C?
If you believe you should have received one but
did not, contact the Benefits Department by phone or e-mail at this number or
address.
7. I have more questions—who do I contact?
Please contact _____ at ____. You can also go to
our (company) website and find more detailed questions and answers. An IRS website called
Questions and Answers about Health Care Information Forms for
Individuals (Forms 1095-A, 1095-B, and 1095-C)
covers most of what you need to know.
