Affordable Care Act Checklist: Is Your Business Ready For 2015?
November 17th, 2014
As 2014 comes to a close, employers should double check their compliance with the Affordable Care Act (ACA). Many new provisions impacting employers become effective in 2015 and employers who are unprepared may face hefty monetary penalties. Below is a checklist of some of the notable items for employers to review before 2015.
- Cafeteria Plans
- New "Change in Status" Rules and Permitted Mid-Year Election Changes: The IRS recently released IRS Notice 2014-55, which expands the definition of a change in status event. Now, employers can also allow employees to make mid-year election changes to cafeteria plan elections when an employee experiences a change in status event related to, among other things, obtaining coverage through a state (or federal) exchange.
- This is an optional change, but if employers want to implement it, they will need to update their plans documents to include a provision explicitly allowing this new change in status event.
- New "Change in Status" Rules and Permitted Mid-Year Election Changes: The IRS recently released IRS Notice 2014-55, which expands the definition of a change in status event. Now, employers can also allow employees to make mid-year election changes to cafeteria plan elections when an employee experiences a change in status event related to, among other things, obtaining coverage through a state (or federal) exchange.
- "Pay vs. Play" Requirements
- Large Employer: For the purposes of the "Pay vs. Play" rule, large employers have 50 or more full-time employees plus full-time equivalent employees (FTEs). However, employers with 50-99 employees will not be assessed a "Pay vs. Play" penalty until 2016.
- It is important for employers to know their size for ACA purposes. In addition to "Pay vs. Play" requirements, all large employers (50+ Full-time plus FTEs) will have additional IRS reporting requirements in 2015.
- Compliance Date: Employers who sponsor non-calendar year plans may not have to offer affordable, minimum value coverage until the first day of their 2015 plan year.
- There are strict requirements that employers must meet to take advantage of this delay in compliance.
- Determining Full-Time Employees: Large employers will be penalized if they do not offer their full-time employees the opportunity to enroll in affordable, minimum value coverage. Full-time employees are those who average 30 or more hours of service per week.
- Employers should decide how they are going to determine who is a full-time employee. Remember, the look-back measurement method is optional.
- Affordable: Large employers must offer affordable coverage to their full-time employees in order to avoid a penalty.
- Employers can calculate the affordability of their plan by using the W-2 method, Rate of Pay method, or the Federal Poverty Line method. Employers should determine which method works best for their business.
- Minimum Value: A large employer must offer its full-time employees a plan that has a minimum value of at least 60%. The IRS and Department of Health and Human Services issued IRS Notice 2014-69 in November, stating their intention to amend the rules and regulations regarding minimum value to require employer-sponsored plans to offer coverage of hospitalization and physician services that some "skinny plans" are currently not covering.
- Employers should evaluate their plans to make sure they meet minimum value and cover hospitalization and physician services, or that the plan meets an exception to the hospitalization and physician services requirement.
- Transition relief: There are a variety of different "transition relief" rules in 2015 to help employers ease into the "Pay vs. Play" requirements.
- Employers only need to offer coverage to 70% of full-time employees (generally the requirement is 95%).
- The penalty for not offering coverage in 2015 is: (# of full-time employees) - 80 x $2000. The monthly penalty is 1/12 of that. Generally, the equation is: (# of full-time employees) - 30 x $2000.
- Generally, employers must offer coverage to dependents (children under 26) of full-time employees. If employers did not offer coverage to dependents in 2013 or 2014, the employer may not be liable for a penalty just because they did not offer coverage to dependents in 2015.
- Large Employer: For the purposes of the "Pay vs. Play" rule, large employers have 50 or more full-time employees plus full-time equivalent employees (FTEs). However, employers with 50-99 employees will not be assessed a "Pay vs. Play" penalty until 2016.
- IRS Reporting
- Large Employer Reporting Requirements: Separate from the "Pay vs. Play" rule, large employers will be required to report certain information about their employer-sponsored coverage (such as which employees were covered and the cost of coverage) to the IRS beginning in 2016.
- Employers should review IRS Form 1095-C, which will be used to report this information. A draft version of the form is available to www.irs.gov/draftforms.
- Reporting Requirements for Providers of Minimum Essential Coverage: All size employers who provide minimum essential coverage in the form of self-insured plans (Cafeteria Plans, HRAs, FSAs) must report certain information about their employer sponsored coverage (such as which employees were covered) to the IRS.
- Employers should review IRS Form 1095-C, which will be used to report this information. A draft version of the form is available to www.irs.gov/draftforms.
- Large Employer Reporting Requirements: Separate from the "Pay vs. Play" rule, large employers will be required to report certain information about their employer-sponsored coverage (such as which employees were covered and the cost of coverage) to the IRS beginning in 2016.
For more information about ACA requirements, or if you need help with any of the items on this checklist, contact Caitlin M. Gadel at cgadel@seatonlaw.com, 952-896-1700, or any of the other Peters, Revnew, Kappenman & Anderson, P.A. attorneys.
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