Reform Q&A

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Question: I’m reaching out to you in hopes that you can answer a question for us as it relates to ACA compliance.  If an employee typically works less than 30 hours a week but does a 3 month period in which he works more than 30 hours a week, how does this affect our 6055 filing for 2016.  Does the look-back period in 2015 average hours over a year, over a quarter, by pay period?  Also, I believe I read that there is a ‘de minimus’ threshold for compliance which indicates that if less than 5 employees or 5% of workforce is not in compliance with the obligation to offer benefits for workers exceeding 30 hours in a work week, the penalty for non-compliance would not be imposed on these individuals.

 

If your plan is fully insured, the 6055 is filed by the insurer.  If your plan is self-insured, the plan sponsor that establishes and maintains the plan must file the §6055 report.  So if minimum essential coverage is provided under your self-funded plan, you must file a §6055 annual return with the IRS for every primary insured employee covered under the plan.

It depends on the stability/measurement period you are using.   For purposes of the employer mandate penalties, the guidance permits you to use two methods to determine if an employee is a full time employee.  The first is a “look-back measurement period/stability period” method where you may use a standard measurement/stability period for ongoing variable hour employees, while using a different initial measurement/stability period for new variable hour and seasonal employees.  The second method is the “monthly” method where full-time employee status is determined on a month-to-month basis.

The group may not be penalized but every individual must have health insurance or will be penalized.

Question: While meeting with a large group client this morning,  I brought up the importance of the new ACA rehire rules.  They asked me something that I could not answer and I'm hoping you know or you can direct me.   

They are a home healthcare business.  They have nurses that have worked full time and have been covered by their health plan and then their hours reduce and go down to a part time status.  They are then offered COBRA if covered on benefits,  due to a reduction in hours.  The question is if they begin working full time again (demand gets high and they need them to work more hours) and it's been less than 13 weeks since they went part time, do they immediately become eligible as of the first of the month following a week of full time duty?  Or is there a time frame measurement for them to be back full time i.e. 1 week, 1 month? 

 

It will depend on the length of the non-employment period.  If the period of non-employment is at least 13 weeks, you may treat the rehired employee as a new employee. 

You can also use the “rule of parity” that says an employee may be treated as a new employee if the period of non-employment of less than 13 weeks is at least four weeks long and is longer than the employee’s period of employment immediately preceding the period of non-employment.  For example, if an employee works six weeks, terminates employment, and is rehired ten weeks later, that rehired employee is treated as a new employee because the ten-week period of non-employment is longer than the immediately preceding six-week period of employment. 

For employees that are treated as continuing employees (as opposed to an employee who is treated as terminated and rehired), the measurement and stability period that would have applied to the employee had the employee not experienced the period of non-employment would continue to apply upon the employee’s resumption of service. For example, if the continuing employee returns during a stability period in which the employee is treated as a full-time employee, the employee is treated as a full-time employee upon return and through the end of that stability period and must be offered coverage again as of the first day that employee is credited with an hour of service, or, if later, as soon as administratively practicable (i.e., March 1 hired F/T 90 day WP, April1 P/T, May 1 F/T, June 1 Benefits) and (i.e., March 1 hired F/T 90 day WP, April1 P/T, June 1 F/T, September 1 Benefits).  For this purpose, offering coverage by no later than the first day of the calendar month following resumption of services is deemed to be as soon as administratively practicable.

Form 1095-C is filed and furnished to any employee of an ALE member who is a full-time employee for one or more months of the calendar. ALE Members must report that information for all twelve months of the calendar year for each employee.

The 1094-C is the transmittal form that must be filed with the Form 1095-C.

Form 1095-B is used to report certain information to the IRS and to taxpayers about individuals who are covered by minimum essential coverage and therefore are not liable for the individual shared responsibility payment.

The 1094-B is the transmittal form that must be filed with the Form 1095-B.

The employer files 1094-C and 1095-C to report the information under sections 6055 and 6056.  The 1094-C will be used to report the summary information for each employer and to transmit 1095-C to the IRS.  The two forms are also used to determine whether the employer owes a payment under the employer shared responsibility provisions under section 4980H.  

Employers who offer an employer-sponsored self-insured plan also use Form 1095-C to report information to the IRS and to employees about individuals who have minimum essential coverage under the employer plan.

The 1094-B and 1095-B is also for self-insured plans but for small groups not subject to the employer shared responsibility provisions.  In addition, the health insurance issuers or carriers must file Form 1095-B for most health insurance coverage, including individual market coverage and insured coverage sponsored by employers.  

Controlled group rules determine if two or more companies are treated as one for employee benefit purposes.

Controlled Groups Defined

Parent-subsidiary: Companies owning 80% or more of another company, have a parent-subsidiary relationship. This relationship is more common among larger companies.

Brother-sister: Brother-sister relationships, more common among small businesses, involve two or more companies. Five or fewer individuals own 80% or more of each company and the same five or fewer individuals effectively own over 50% of each entity.  This is determined by adding up the lowest ownership percentage for each owner.

Businesses that don’t fall within the constructs of controlled groups still need to be cautious.  If they share services or employees with one another, they may be treated as one employer under the affiliated service group rules.

Companies big or small could fall within the boundaries of these rules.  Not only do they extend to corporations, but they also apply to other business forms including sole proprietorships, partnerships and limited liability companies.

ACA Implications

In counting employees, the ACA applies IRS and controlled group rules for compliance determination.  In other words, parent-subsidiary and brother-sister companies are considered when determining employee thresholds. If two separate businesses each have 25 full-time equivalent employees and ownership consists of a parent/subsidiary or brother/sister controlled group, those businesses meet the 50 full-time employee thresholds.

 

Cancelling COBRA coverage is not a qualifying event for a Special Enrollment Period (SEP).  Therefore, they will not be able to apply for coverage in the Marketplace until open enrollment, or, until their COBRA expires, or, they qualify for a SEP in another way, whichever occurs first.

A full-time employee is defined differently by ACA than other state and federal laws.  Under ACA, a full-time employee is one who works an average of thirty (30) hours a week or more. A salaried employee is usually deemed as a full-time employee.

 

Question: ”It starts with a large group, 400 total (150FT/250PT). We have done our look back test, determined which PT employees will be offered converge and are enrolling them. My question is regarding an "Ongoing Full Time" employee.  When we ran the ongoing test, he was considered FT and he worked enough hours to move into the stability period.  However, since then he has had some personal problems and has missed a considerable amount of work using up his FLMA. The employer would like to move him from FT to PT.  The question is What happens if the job class changes during the stability period?  I have looked at a number of IRS & DOL documents and they all seem to discuss and have examples of people moving from PT to FT.  I haven't found much info on folks going from FT to PT.”

Where the look back stability period is being used and an employee moves from full time to part time they are typically still in a stability period, which would mean they need to be covered through the end of the plan year.  However, there is an exception that can be used where an employee moves from full time to part time.  Under this rule, they can lose eligibility as of the first day of the fourth full month following their change in status, provided coverage is offered during the three interim months.

No, it is not in compliance.  If you have at least 50 full-time employees (if you did not meet the criteria for the 2016 delay) and you offer coverage to at least 95% (70% for the 2015 plan year if certain criteria are met) of your full-time employees (and dependents), you are still subject to a penalty if: 

1. A full-time employee’s contribution for employee-only coverage exceeds 9.5% of the employee’s household income or the plan’s value is less than 60%; and 

2. The employee’s household income is less than 400% of the federal poverty level; and 

3. The employee waives your coverage and purchases coverage at a Marketplace exchange with premium tax credits. 

The penalty will be calculated separately for each month in which the above applies. The amount of the penalty for a given month equals the number of full-time employees who receive a premium tax credit for that month multiplied by 1/12 of $3,000 (or $250 per month). This amount will also be adjusted annually for inflation. 

 

We have a large group with 300 employees that has been hit with a large increase to their group plan. Their plan meets MV and Affordability guidelines, as far as we know (they have not provided wages on the lowest earning employees). 

 

1)      Our individual health insurance expert told us that an employer’s open enrollment is NOT a qualifying event for an employee to drop coverage for themselves or their dependents and enroll on the Exchange or through an individual plan. I looked at Healthcare.gov, BCBS of TX and Humana, and their sites seemed to back that up.  Can you confirm if this is true? (BenefitMall Compliance Service Team) This is true; dropping coverage is not a qualifying event.

 

2)      The group has told me that employees have been dropping coverage for themselves and/or dependents and enrolling in individual coverage. They said the carriers are asking if you “lost coverage,” but not much more than that. My thought is that this could be true, but that if it’s not a true qualifying event, it could come back to haunt the employee when they do their taxes, and also the employer with the new 6056 reporting. Have y’all heard anything about carriers or the IRS coming back to ask for proof of the qualifying event? (BenefitMall Compliance Service Team) No, we have not heard anything to that effect.  However, the question and answer listed on Healthcare.gov, with regard to losing your coverage, explicitly states that voluntarily giving up coverage doesn’t qualify as a special enrollment period (SEP).

 

3)      The employer has stated that the cost increase to the insurance will basically take the whole paycheck for some lower paid employees that cover dependents. Is there any sort of hardship qualifying event that could apply here? I don’t see that on healthcare.gov or the carrier websites. ? (BenefitMall Compliance Service Team) None in which we are aware.  However, the employee and his/her dependents may be eligible for Medicaid.