Transcript Current Legal Hot Topics

Benefit Plan Legal Update
John Barlament
Quarles & Brady LLP
[email protected]
414.277.5727
Topics for Today
•
•
•
•
•
•
•
Hot topics
New reporting rules
Where obligation arises from
What must be reported
Who must do the reporting
When must filing occur
Planning strategies and tips
3
Current Legal Hot Topics
•
•
•
•
•
ACA judicial forecast
ACA political forecast
Pay or Play Rule (employer shared responsibility)
IRS prohibition on payment of individual health insurance policies
Wellness litigation (but no guidance)
–
–
–
–
–
Orion Energy
Flambeau
Honeywell
Political backlash
February 2015 regulations?
MEC Reporting: Overview
•
•
•
•
•
“Minimum essential coverage” (“MEC”) is coverage that most U.S.
citizens must have in order to avoid tax under Affordable Care Act
(“ACA”)
Penalty taxes for not having MEC (or an exception) generally start at
1% of income but rise thereafter
Government desired method to verify that individuals really had MEC
So, new rule requires that any person providing MEC to another
person must report that to the federal government
Originally supposed to have applied in 2014
– Delayed July 2013
•
Now first report due in early 2016, relating to 2015 coverage
5
ALE Reporting: Overview
•
“Employer shared responsibility” rules (aka “Pay or Play Rule”)
requires “large” employers to offer “good enough” health plan coverage
or risk tax penalty
– “Large” generally means having 50 or more full-time and full-timeequivalent employees
•
•
•
Again, government needed method to verify
New rules require employer to report to federal government whether it
offered this “affordable”, “minimum value” health plan coverage
Also was delayed from 2014 to 2015
– So, first report due early 2016, relating to 2015 coverage
– Note: Pay or Play Rule delayed to 2016, generally, for employers with 5099 employees
– But, NO delay for these employers from ALE reporting
6
Current Guidance
•
•
Statute and regulations
Draft forms
– Note: Several were updated on October 1 and October 2
•
•
Draft instructions
Unclear when final forms and instructions will be released
– Creates some practical timing issues for employers
•
FAQs
7
Due Dates
•
Similar to Form W-2
– January 31 of following year for furnishing statements to individuals
– February 28 for filing transmittals with IRS (but have until March 31 if filed
electronically)
– All reporting done based on calendar year, even if plan itself operates on a
non-calendar year (e.g., July 1 – June 30 plan year)
•
For 2016, delay of one day (because January 31 and February 28 are
Sundays)
8
Penalties
•
In general, if fail to file or fail to provide correct statements or returns,
penalty is $100 for each return / statement
– Capped at $1.5 million per year
•
•
•
Penalties can increase if “intentional disregard”
Some waivers and relief available
Form reports filed in 2016 (relating to 2015 coverage) no penalty if
“good faith” efforts to comply
– Must file something though (ignoring whole issue is not good faith)
9
Who is Responsible?
•
MEC Report:
– If fully-insured, health insurers responsible
– If self-insured, plan sponsor responsible
– Plan sponsor generally the employer / board of trustees (multiemployer
plan)
– Note: Typical controlled group rules do not apply – each employer reports
on their own (even if part of controlled group)
– But, guidance indicates that one member can assist another member (but
no automatic transfer of IRS-related liability)
•
ALE Report:
– Plan sponsor responsible
– Similarly, one controlled group member can assist another
10
What Coverage is Reported (MEC)?
•
In general, major medical coverage of an employer
– Are additional categories unrelated to employer coverage (e.g., Medicaid
and Exchange coverage)
•
MEC generally must be a “group health plan”
– Can be grandfathered or non-grandfathered; self-funded or fully-insured
•
Excepted benefits are NOT MEC
– E.g., most dental, vision, health FSAs, EAPs avoid this reporting rule
•
Health reimbursement arrangements exempt if they simply
“supplement” the major medical coverage
– What if employee elects COBRA for HRA but not major medical?
•
Health savings accounts (“HSAs”) are not group health plans and no
reporting required for them
11
How is MEC Report Made?
•
•
Forms 1094-B, 1095-B and 1095-C, Part III
If file 250 or more returns during calendar year, must file electronically
– Others can choose to do so
•
Electronic furnishing of statements to individuals possible BUT:
– Individual must affirmatively agree and be allowed to withdraw agreement
– State various details, such as hardware and software requirements
– Need to obtain consent even from employees
• More stringent than other rules (e.g., many ERISA-required documents)
•
For MEC and ALE reporting purposes, first determine which
“categories” you fall into:
–
–
–
–
ALE v. non-ALE
Self-funded? Fully-insured? Offer both types of plans? No health plan?
Single employer v. multiemployer (“M’E”)?
Do “non-employees” receive coverage?
• Non-employees include directors. Does it also include former employees who
elected COBRA? When does former employee become “non-employee”?
12
How is MEC Report Made?
Category
MEC-Related Forms to Complete
Non-ALE, fully-insured, non-M’E, active
employees
Insurer (not employer) completes Form
1095-B (return) along with Form 1094-B
(transmittal)
ALE, fully-insured, non-M’E active
employees
Insurer (not employer) completes Form
1095-B (return) along with Form 1094-B
(transmittal)
Non-ALE, self-funded, non-M’E, active
employees
Appears that employer completes Form
1095-B (return) along with Form 1094-B
(transmittal)
ALE, self-funded, non-M’E, active
employees
Employer completes Form 1095-C (return)
along with Form 1094-C (transmittal)
13
How is MEC Report Made?
Category
MEC-Related Reporting
Non-ALE or ALE, self-funded, “nonemployees”, non-M’E
Employer completes Form 1095-B (return)
and Form 1094-B (transmittal) for these
non-employees
Fully-insured, active employees, M’E
coverage
Appears insurer (not M’E plan) completes
Form 1095-B (return) and Form 1094-B
(transmittal)
Self-funded, active employees, M’E
coverage
M’E plan (not employer) completes Form
1095-B (return) and Form 1094-B
(transmittal)
Non-ALE, no health plan coverage
Nothing to report (MEC or ALE)
ALE, no health plan coverage
No MEC-related report. But, will still
complete Form 1095-C (return) and Form
1094-C (transmittal) per ALE reporting
rule
14
How is MEC Report Made? Observations
•
For fully-insured plans, appears to always be insurer’s responsibility to
complete MEC-related forms
– Regardless of whether employer is ALE or non-ALE; whether covering
active or non-employees; whether M’E or non-M’E
– Easiest category for employers
•
For self-funded plans, first determine your ALE or non-ALE status
– Having ALE status triggers Form 1095-C (return) and Form 1094-C
(transmittal) requirements
– Why? Because the “C Forms” have the dual purpose of (1) reporting that
MEC was provided; and (2) informing IRS that you complied (or did not
comply) with Pay or Play Rule (ALE reporting)
•
Reports drill down to employee level
– So, if Joe Smith is unionized employee and receives coverage through selffunded M’E plan, that plan (not the employer) reports on Joe Smith
– But employer (or insurer) reports on Alex Jones, if Alex is non-union
employee
– What if employee switches in middle of year?
15
How is MEC Report Made?
•
Transmittal form is a single form filed with IRS
16
How is MEC Report Made?
•
•
•
“Responsible Individual” is generally policyholder (if fully-insured) or
employee through whom coverage was selected
Most employers will have “responsible individual’s” SSN
Line 8: Code “A” for SHOP coverage; Code “B” for “employersponsored” coverage; Code “E” for M’E coverage
17
How is MEC Report Made?
•
•
If insurer enters Codes “A” or “B” on line 8 (prior slide), insurer
completes Part II
If employer happens to be filling out Form 1095-B (rare event?)
employer enters Code “B” on line 8 but does NOT complete Part II if
coverage is self-funded
– Instead, skip Part II and go to Part III
18
How is MEC Report Made?
•
Most of this should be relatively clear
– Presumably address is headquarters address or similar
•
Note that need to include telephone number “an individual seeking
additional information may call to speak to a person”
– Could a TPA or other vendor provide this service?
– Any requirements for how it is staffed? Hours of operation?
19
How is MEC Report Made?
•
•
Note detail – covered person by covered person, month-by-month
Social Security numbers for each covered person
– Is a process where date of birth can be used after a few documented
attempts to obtain the SSN
20
ALE Reporting Details
•
ALE member is generally an employer with 50+ full-time or full-time
equivalent employees in prior year
– “Convert” part-time and seasonal employees into full-time equivalents
– Special rule – not an ALE if go over the limit only due to seasonal
employees
•
Compliance with Pay or Play Rule depends on size of employer, in
general:
– < 50 = no issues
– 50-99 = Pay or Play generally delayed by one year (2016), but NOT ALE /
MEC reporting
– 100 or more = generally comply in 2015
21
ALE Reporting Details
•
•
Hours of service generally actual hours worked
Equivalences possible
– Tend to be favorable to employees (e.g., 8 hours if work 1)
– Special rules for adjunct professors and other “difficult to track” professions
•
•
•
Other special rules also (vacation; jury duty; FMLA)
Whether employee is “full-time” depends on selected method of
measuring
Monthly Measurement Method – “snapshot” test each month – 130 or
not?
22
ALE Reporting Details
•
Difficulty with Monthly Measurement Method is that it does not “sync
up” with health plan eligibility
– E.g., Ed works 130 hours in March 2015. But Employer does not know that
until April 2015. Too late to offer coverage at that point
•
Look-Back Measurement Method is likely more popular
– Employer chooses time period (3-12 months) then measures hours over
that time period
– Employee can be “locked in” as a full-time employee (or “locked out”)
during subsequent “Stability Period”
23
ALE Reporting Details
•
“Hours” will be reported for ALE purposes
– Actual hours, month-by-month
•
“Employee” does not include sole proprietor, partner in a partnership or
2% S corporation shareholder
24
How is ALE Report Made?
•
Form 1094-C (transmittal)
25
How is ALE Report Made?
•
•
•
Note that one transmittal must be “authoritative”
Note that “controlled group” test must be run
Special certification rules can apply
26
How is ALE Report Made?
•
Part III: Verify if “offer” of “minimum essential coverage” was made on
month-by-month, employee by employee basis
27
How is ALE Report Made?
•
•
Part III: Note total employee count
Instructions provide transitional relief “indicators”
– E.g., for 50-99 size employers
28
How is ALE Report Made?
•
Details of “controlled group” must be listed
– Note that rules can be complicated
29
How is ALE Report Made?
•
•
1095-C is the return
Again, note contact telephone number
30
How is ALE Report Made?
•
•
Complete for all full-time employees (even if full-time for short period
such as one month)
Various “codes” for each line; e.g., for Line 14:
– Code “1A” = Affordable, minimum value, full-time E’ee
– E.g., Code “1H” = No offer of coverage
31
How is ALE Report Made?
•
Line 16 Codes include:
– 2A = Employee not employed in that month
– 2C = Employee enrolled in minimum essential coverage
– 2E = Multiemployer plan relief
32
How is ALE Report Made?
•
This part is a bit odd – really relates to MEC reporting
– Employer notes who had coverage (full-time or not)
– Similar to Form 1095-B
33
Strategies for Reporting
•
•
•
This is a lot to track!
Examine internal resources, software, budget
Prepare a “spreadsheet” of all information to be tracked
– Verify who has it – you? Broker? TPA?
– Verify the “flow” of information and who will coordinate
•
Verify if collect SSNs
– Consider adding to this year’s open enrollment materials?
34
Strategies for Reporting
•
Time is likely of the essence
– So, even though forms are still draft, likely need to move ahead
•
Verify communication issues
– E.g., who will take phone calls?
•
Verify “controlled group” status
– Will one member assist others?
35
Thank You!
© 2014 Quarles & Brady LLP - This document provides information of a general nature. None of the information
contained herein is intended as legal advice or opinion relative to specific matters, facts, situations or issues.
Additional facts and information or future developments may affect the subjects addressed in this document.
You should consult with a lawyer about your particular circumstances before acting on any of this information
because it may not be applicable to you or your situation.
31555374
36