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Employers Get Relief as IRS Extends Due Dates for 2015 ACA Reporting

The IRS has extended the 2015 information reporting requirements for self-insured employers, insurers and other providers of minimum essential coverage under both Sections 6055 and Section 6056.

  • The deadline for sending forms to covered employees/subscribers is now March 31, 2016.
  • The deadline for filing transmittals to the IRS is now May 31, 2016 if not filing electronically; and June 30, 2016 if filing electronically.
Under the ACA, applicable large employers must provide their employees with an annual statement outlining the availability of employer-sponsored health insurance. Additionally, self-funded employers (both small and large) must provide employees with information regarding their enrollment in coverage in 2015.

  The Cadillac Tax: What We Know & Don’t Know

The Patient Protection and Affordable Care Act (the “ACA”) introduced a new term into our benefits lexicon: the “Cadillac Tax.” Beginning in 2018, the ACA imposes a nondeductible excise tax (the “Cadillac Tax”) on employers, health insurance issuers, and/or entities administering plan benefits if the aggregate value of applicable employer-sponsored coverage exceeds the specified threshold limit. The Cadillac Tax is equal to 40% of the aggregate value in excess of the threshold limit. In 2018, the threshold limit is set to be $10,200 for individual coverage and $27,500 for family coverage.

With 2018 fast approaching and in response to growing questions from employers, insurers and practitioners, on February 23, 2015 the Department of the Treasury and the IRS (“IRS”) finally released guidance on the Cadillac Tax, in the form of Notice 2015-16 (the “Notice”). The Notice is less guidance from the IRS and more of a solicitation of comments to the IRS. Notice 2015-16 describes the approaches IRS is considering with regard to implementation of the Cadillac Tax rules and requests comments on many aspects of the law. Comments must be submitted by May 15, 2015.

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Reminder: Large Self-Insured Plans Must Register for an HPID by November 5, 2014

As part of the Affordable Care Act’s (“ACA”) Administrative Simplification provision, all “controlling health plans” (defined below) must obtain a 10-digit numeric identifier known as a Health Plan Identifier, or HPID. The HPID is part of a project that federal agencies, health insurers and health care provider groups have been working on for years, as final rules for the HPID requirement were published in the Federal Register.

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IRS to Amend Cafeteria Plan Regulations to Facilitate Enrollment in Marketplace Coverage

On Thursday, September 18, 2014, the Internal Revenue Service (“IRS”) released Notice 2014-55, which expands the cafeteria plan “change in status” rules to allow plans to offer employees an option to revoke their elections for employer-sponsored health coverage to purchase a qualified health plan through a Health Insurance Marketplace (“Marketplace”). The notice is effective immediately and will appear in IRB 2014-41, to be published Oct. 6, 2014.

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Latest News on the ACA

It was a busy week for news regarding the Affordable Care Act (ACA). Courts issued conflicting rulings on ACA subsidies, the IRS raised the threshold for “affordable coverage” under the employer mandate, and the IRS released drafts of forms related to the new employer reporting requirements for 2015.

Conflicting Court Rulings on ACA Subsidies

On July 22, two different federal appeals courts ruled on whether subsidies are available through all ACA insurance exchanges or only through state-run exchanges. The two rulings are mirror opposites so further appeals are expected. In the meantime, subsidies continue to be available in all states.

Exchange subsidies are an important issue for large employers due to the ACA’s “play or pay” provision (employer mandate). Starting in 2015, large employers may be assessed penalties for failure to offer health coverage to their full-time employees. The penalty mechanism is not triggered, however, unless at least one full-time employee receives an exchange subsidy for an individual insurance policy. For this reason, the availability of subsidies can have significant impact on employers.

By way of background, the ACA provides for establishing health insurance exchanges (or marketplaces) in each state. States have the option of establishing and running the exchanges. For any state that is unable or unwilling to establish a state-run exchange, the ACA provides for Health and Human Services to operate a federally-facilitated exchange (FFE) for the state in compliance with its state insurance laws.

The ACA also provides for subsidies in the form of premium tax credits, based on household income, to help individuals and families purchase insurance through an exchange. The plain text of the ACA refers to subsidies in connection with an exchange “established by the State.” The two appeals courts separately considered whether the current practice of extending subsidies to all states is consistent with the law:

  • D.C. Circuit Court: A three-judge panel, in a split 2-1 decision, held that the ACA restricts subsidies to insurance purchased on state-run exchange established by the state and prohibits subsidies through FFEs. The ruling is available at Halbig v. Burwell.

  • 4th Circuit Court: The court unanimously held that ACA subsidies are available both in states with state-run exchanges and in states with FFEs. The ruling is available at King v. Burwell.

At this time, the rulings have no immediate impact. Subsidies remain available in all states.

IRS Increases “Affordable Coverage” Threshold for 2015

On July 24, the IRS released Rev. Proc. 2014-37 providing indexing adjustments for several dollar amounts and percentages under the ACA. Large employers becoming subject to the ACA’s “play or pay” provision (employer mandate) in 2015 will welcome the news that the affordable coverage threshold is increasing slightly from 9.5 percent to 9.56 percent.

Under the play or pay rules, large employers may be assessed penalties for failure to offer full-time employees minimum value coverage that is affordable. “Affordable” generally means the employee’s contribution for self-only coverage (if elected) does not exceed 9.5 percent of the employee’s income from that employer. Although 9.5 percent was the 2014 amount written into the original law, it is subject to change each year for inflation. For 2015, the affordability limit will be 9.56 percent.

IRS Releases Draft Forms for ACA Reporting

The ACA added two health coverage reporting requirements to the Internal Revenue Code. Both take effect for 2015, with the first reports due in early 2016:

  • IRC § 6056 requires large employers (50 or more full-time employees including full-time equivalents) to file annual reports detailing the health coverage they offer to full-time employees. Information will include employee names and SSNs, along with indicators (codes) about the type of health coverage offered. Large employers will give a Form 1095-C to each employee, and also file these forms with the IRS using transmittal Form 1094-C.
    Caution: Large employers are those with 50 or more full-time employees (including full-time-equivalents). Although some mid-size (50-99) employers and/or some employers with non-calendar year plans may qualify for short-term transition relief under the ACA’s “play or pay” rules, the ACA’s reporting requirements still apply for 2015.

  • IRC § 6055 requires insurers and self-funded plan sponsors to file annual reports detailing the health coverage provided to each individual. This includes any employer, large or small, that sponsors a self-funded health plan. For this purpose, employers will provide Form 1095-B to plan enrollees and members, and also file these forms with the IRS using transmittal Form 1094-B.

Large employers that also sponsor a self-funded health plan can use Form 1095-C to satisfy both the § 6056 and 6055 reporting requirements.

On July 24, the IRS posted preliminary drafts of Forms 1094-B, 1094-C, 1095-B, and 1095-C. Draft instructions will not be posted until next month, but the forms (with indicator codes) seem self-explanatory. The IRS expects to finalize the forms and instructions later this year.


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