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Thursday, March 26, 2015

Penalties & Reporting for Violations of ACA Requirements

 

March 26, 2015
If you are a private employer (non-governmental) who has failed to comply with the various portability, access and renewability requirements imposed on your single employer group health plan by the Affordable Care Act (ACA) (such provisions are found in Chapter 100 of the Internal Revenue Code and include prohibitions against annual or lifetime limits, pre-existing condition limitations and waiting periods in excess of 90 days, as well as a requirement to provide no-cost preventive services and other requirements), you must timely report your violation and pay the related excise tax under Section 4980D of the Internal Revenue Code. This includes employers who sponsor medical reimbursement plans or health reimbursement arrangements that have improperly reimbursed premiums for individual health insurance, another employer’s health plan, TRICARE or Medicare, or medical expenses that do not fit within a limited exception from the ACA limits (please see our recent alert on these arrangements here).

You should periodically check your compliance from time to time, since quick corrective action could save you significant dollars.

Penalties & Exceptions

The excise tax is $100 per day of noncompliance for each individual to whom the ACA failure relates. In most cases, this means the excise tax is calculated based upon the number of your full-time employees. The noncompliance period begins on the date of the first failure and ends on the date of correction.

However, it is important to note that certain exceptions and limits to the excise tax are available:
  1. if you can demonstrate that you did not know (and, in exercising reasonable diligence, would not have known) that there was a compliance failure, no tax is due.
  2. if you can demonstrate that the failure was due to reasonable cause rather than willful neglect and was corrected within 30 days after you first knew (or, in exercising reasonable diligence, should have known) that the failure existed, no tax is due (note that church plans may have a longer correction period).
  3. if you can demonstrate that the failure was due to reasonable cause and not willful neglect, your tax is reduced to the lesser of 10% of the amount that you paid during the preceding tax year for group health plans, or $500,000.
  4. if you can demonstrate that the failure was due to reasonable cause and not willful neglect, the IRS also has the power to waive part or all of the tax, to the extent the payment would be excessive relative to the failure involved.
Additionally, even if you meet an exception from the excise tax, it is important that you promptly take correction steps because a minimum excise tax will apply for compliance failures that occurred or continued during a taxable year if they are not corrected before you are notified by the IRS of an audit of that taxable year. The minimum excise tax is the lesser of the excise tax that would have been owed without applying the exceptions above or $2,500 per individual,but it is increased to $15,000 per individual if violations are "more than de minimis."

A failure is treated as “corrected” if it is retroactively undone to the extent possible and affected employees are placed in a financial position as good as they would have been in had the failure not occurred.

Reporting

If you have committed a violation, you must self-report the violation on IRS Form 8928 (Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code). It is unclear whether employers can avoid this filing requirement if they feel they clearly satisfy one of the first two exceptions above that exempts the employer from all taxes and does not otherwise contemplate IRS action to actually waive the taxes. However, since your qualification for these first two exceptions will be based on the facts and circumstances, it appears that you will only achieve certainty by filing the IRS Form 8928 and indicating that $0 is due.

You must file the IRS Form 8928 and pay any excise tax by the due date for filing your company’s income tax return for the taxable year in which the failure occurred (or continued). If your failure spans more than one taxable year, you will need to allocate and report the noncompliance periods to the proper taxable year. No deadline extension is available if you extend the date to file your company’s income tax return, but you may obtain an automatic 6-month extension by filing IRS Form 7004 on or before the deadline for the IRS Form 8928. However, obtaining this extension does not extend the time for you to pay any excise taxes due (so you will need to estimate taxes and may potentially owe interest on late payments), and the IRS has the right to terminate an automatic extension upon written notice to you.

Employer Actions

Since the ACA requirements have not been in effect for very long, it is unknown how strictly the IRS will enforce them. Many experts believe that the IRS is likely to audit compliance in this area because of the significant penalties involved and the overall need to fund other ACA costs.

Given the magnitude of the potential excise taxes that could become due under Code Section 4980D, and the possibility of a complete waiver if errors are quickly addressed, you should:
  • quickly determine whether you have any issues with the portability, access and renewability requirements imposed by the ACA on your single employer group health plan(s), especially any medical reimbursement programs or health reimbursement accounts (HRAs), and
  • periodically review your compliance with these requirements to make sure that problems are promptly identified, corrected and reported (if required).
With a team of professionals who are highly experienced in the employee benefits field, MLA can provide answers to questions and assistance in complying with these requirements. For assistance, please contact Ann Murray (404-527-4940) or any of our MLA benefits attorneys.
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ACA News: Final IRS forms for employer mandate and minimum essential coverage reporting

 

March 19, 2015
Employer mandate reporting
The employer mandate provision of the Affordable Care Act (ACA or health care reform law) says “applicable large employers,” which are companies with 50 or more full-time workers, have to offer minimum value, affordable health coverage to their full-time workers or face a penalty.
To check if employers are offering minimum value, affordable coverage to their full-time workers, the Internal Revenue Service (IRS) needs reports to be sent by applicable large employers. This is called Employer Mandate Reporting, or IRS Code Section 6056 Reporting.
The IRS has released the final forms and instructions: Form 1094-B, Form 1094-C,Form 1095-C, Instructions for 1094-B, Instructions for 1094-C and 1095-C.
Minimum essential coverage reporting
The individual shared responsibility provision of the ACA states that every person has to have basic health insurance coverage or face a penalty. This is known as minimum essential coverage (MEC). To make sure people have MEC, the Internal Revenue Service (IRS) needs reports to be sent by those who provide MEC. This is called Minimum Essential Coverage Reporting, or IRS Code Section 6055 Reporting. This is required of insurers with fully insured business and employers with self-funded (ASO) plans.
The IRS has released the final forms and instructions: Form 1095-B, Form 1095-C, Instructions for 1095-B, Instructions for 1095-C.
As a reminder, nothing needs to be done with the forms this year. These are for reference only since employer mandate and MEC reporting are not required until January of 2016 for the 2015 coverage year.
Questions?
Go to this fact sheet for more about employer mandate reporting. For more details about MEC reporting, read this fact sheet.


Thursday, March 19, 2015

New HHS Regs 'Clarify' That Health Plans Covering Families Must Have 'Embedded' Individual Cost-Sharing Limits


"[HHS] now requires group health plans to embed an individual cost sharing limit within the family limit.... The HHS clarification is not effective until plan years beginning on or after January 1, 2016. It is important to note that, at the moment, it is unclear whether the HHS clarification is intended to apply to self-insured plans.... Additionally, all previous cost sharing guidance applicable to self-insured plans have been issued jointly by the HHS, Department of Treasury and [DOL]. As of the date of this [article], the Departments of Treasury and Labor have not issued a similar clarification."

Friday, March 06, 2015

Americans Are Feeling a Little Better About Their Retirement Crisis


 
 
Fewer Americans are worried they won't have enough money to be self-sufficient in old age, but healthcare costs concerns still loom large.
READ MORE »

How to avoid legal trouble when firing an employee

Firing an employee can lead to legal complications if you aren't careful, writes Kim Shandrow. Among other things, ask yourself whether you are within the boundaries of the law and company policy. "No matter what, stick to your plan, your script, and be professional -- which isn't easy when someone cries or slams the table or threatens you with violence," said Chas Rampenthal, general counsel for LegalZoom. Entrepreneur online

HR Demo Video  Are HR Platform available to clients with online resources and answers from professionals to your questions.