by Alice Helle Cynthia Lande >
2016 ACA Update (Download a PDF of this article)
For several years, new requirements under the Affordable Care Act’s (“ACA’s”) phased implementation have been a top concern for employers. In that respect, 2016 is no different than prior years. A handful of new requirements took effect at the beginning of the year, and some requirements still remain to take effect in future years.
Beginning in 2016, the employer mandate will apply to all employers with at least 50 full-time employees, including full-time equivalents. Under the employer mandate, these “applicable large employers,” or “ALEs” must offer all full-time employees coverage that is affordable and provides minimum value. Coverage is affordable if the employee’s cost of employee-only coverage does not exceed 9.5% of the employee’s household income. Coverage provides minimum value if the policy pays at least 60% of covered costs. Failure to offer coverage, or offering coverage that is not affordable or does not provide minimum value, could subject employers to penalties. Prior to 2016, the employer mandate applied only to ALEs with at least 100 full-time employees, including part-time equivalents.
ALEs (including those with 50 to 100 full-time employees) must begin reporting their offers of coverage to the IRS and their employees this year. Initially the deadline for these reporting requirements was set to coincide with W-2 reporting deadlines. However, in December of last year, the IRS delayed the ACA reporting requirements for 2016. ALEs must now provide Form 1095-C to employees by March 31, 2016. ALEs must file Form 1095-C with the IRS by May 31, 2016 if filing on paper, or June 30, 2016 if filing electronically. Employers filing 250 or more Form 1095-Cs must file electronically.
Employee Insurance Reimbursement
Employers who are reimbursing employees for individual policies are now subject to penalties of $100 per employee, per day. This practice violates two of the market reforms under the ACA: (1) the prohibition on annual limits; and (2) the requirement to provide preventive services without cost sharing. The IRS previously issued transition relief from these penalties for certain small employers. The transition relief has now expired, and any employers offering this type of an arrangement could be subject to significant penalties.
The “Cadillac Tax” was initially set to take effect in 2018, but many employers were already concerned about how it would impact them. In December of last year, Congress delayed the effective date of the Cadillac Tax until 2020. The Cadillac Tax is a 40% tax on the cost of employee coverage in excess of certain threshold amounts. The IRS is continuing to draft regulations that address the specifics of the tax.
If you have any questions about the ACA changes described in this article or other ACA requirements, please contact Alice Helle or Cindy Lande.
Alice E. Helle is a member at BrownWinick and practices in the employee benefits areas, including both ERISA and governmental plans. She also practices in the area of adoption and surrogacy law. Alice can be reached at (515) 242-2407 or firstname.lastname@example.org.
Cynthia Boyle Lande is an associate with BrownWinick. Cindy represents clients in the areas of taxation, employee benefits and general business transactions. You can reach Cindy at (515) 242-2476 or email@example.com