It seems as though there is a change made to the Affordable Care Act (ACA) every day. Even with the transition relief and recent clarifications, complying with the ACA is a challenge. Below is a summary of the major recent clarifications, upcoming due dates and updates made to the ACA that will help guide you regarding where it stands today.
Transition relief – Employers that have 50-99 full-time employees are not subject to the employer mandate, which requires applicable large employers to pay a penalty for not providing minimum essential health coverage to a certain percentage of full-time employees, until 2016. (The effective date for employers with 100 or more full time employees is 2015.) In addition, the percentage of employees required to have health coverage will be phased in. In 2015, the percentage will be 70 percent, and in 2016 and thereafter the percentage will be 95 percent.
Seasonal worker exception – Final regulations released in February clarified what is known as the seasonal worker exception. The seasonal worker exception states that an employer is not an applicable large employer if it had 50 or more employees for less than 120 days for the year (essentially four months of the year), and the employees in excess of the 50 mark during that 120-day period were seasonal workers. The 120-day period is not a consecutive period. Employers starting their businesses in 2015 without a preceding year baseline period should use 2015 as their baseline period, basing it on their reasonable expectations of whether or not they expect to meet the seasonal worker exception in 2015.
Businesses that do not fall clearly above or below the 50 mark should implement a process to properly count both the number of full-time employees and full-time equivalent employees today, since the determination of whether or not you are an applicable large employer is based on the prior year. Therefore, businesses will be deemed to be an applicable large employer in 2015 based on the number of employees they have in 2014.
Monthly measurement method and look-back measurement method – Nuances of the monthly measurement method and the look-back measurement method were further detailed. Only the monthly measurement method can be used by an employer to count the number of full-time employees to decipher whether or not the employer is an “applicable large employer.” Both methods may be used to determine the penalty. Further clarification was also made with regard to how to treat an employee who is absent for a temporary period. The look-back measurement method allows employers to select the period of time that they will measure whether or not ongoing employees (as opposed to new hires) are considered full-time employees. The period of time must be a consecutive period of at least three months, but not more than 12 months. Once an ongoing employee is deemed to be a full-time employee, then that ongoing employee will always be deemed a full-time employee regardless of whether he or she would meet the test in a subsequent period. In addition, the measurement period used by the employer may differ based on the employee category.
Employer information reporting requirements due out in March 2016 simplified – In March, the U.S. Treasury Department simplified the rules for employers with regard to their reporting requirements. Every applicable large employer is required to report information about their healthcare plans to both the Internal Revenue Service and to their employees. The reports are due March 2016. Although employers who have 50-99 full-time employees are not subject to the aforementioned penalty for 2015, these employers are still subject to the employer information reporting requirements.
Reminder – The individual mandate became effective January 1, 2014. Individuals must report on their 2014 tax returns whether or not they had minimum essential coverage to qualify for any of the exemptions, reconcile premium tax credits (if applicable) and assess individual shared responsibility payments (if applicable). Individuals may receive questions from their CPAs as to who their insurance providers were in 2014; whether or not the insurance was provided through their employers, government or other sources; months covered by health insurance in 2014; and they may be asked to provide copies of their health insurance cards. In addition, individuals who have a Form 1095-A, Health Insurance Marketplace Statement, because they received coverage through the Health Insurance Marketplace (public exchange) should submit them to their CPAs. The extent of questioning will vary among tax preparers. In 2015, further probing may not be as necessary because employers will be required to file information returns on the health insurance they are providing to their employees through Form 1095-B and Form 1095-C.
Relief for individuals who enrolled in ineligible government programs in 2014 – In Notice 2014-10, individuals who enrolled in certain government programs that do not meet the minimum essential healthcare coverage requirements were exempt from the penalty. These government healthcare programs include state Medicaid programs, healthcare programs under Section 1115 of the Social Security Act and medical care provided under the military health system.
Health insurance premium tax credit and victims of domestic violence – Individuals who purchase their health insurance through the Health Insurance Marketplace may be eligible for the health insurance premium tax credit. One of the eligibility requirements to qualify for this credit is the taxpayer cannot use the filing status “married filing separately.” Notice 2014-23 clarifies that an exception to this rule is if the spouse is a victim of domestic violence. Certain victims of domestic violence that fall under this exception may claim the health insurance premium tax credit – provided the other requirements are met – and file as married filing separately.
Patient-Centered Outcomes Research Institute Fee Due July 31, 2015
Plan sponsors of small or large businesses with an applicable self-insured health plan and health insurance companies (e.g., UnitedHealthcare, Cigna, etc.) will be subject to the Patient-Centered Outcomes Research Institute (PCORI) fee due July 31, 2015. If a business has a third-party administrator who administers its applicable self-insured health plan, then the business should coordinate with the third-party administrator to ensure compliance and avoid inadvertently paying the fee twice. The PCORI fee will fund research on the effectiveness of the healthcare system conducted by the Patient-Centered Outcomes Research Institute established under the ACA. The PCORI fee is the average number of lives covered multiplied by a fixed dollar amount. The PCORI fee is reported annually on Form 720 and is deductible as an ordinary and necessary business expense.
About the Author: Alyssa Rausch, CPA, M.B.A., is a tax manager at Smolin, Lupin & Co., PA. She is a member of the New Jersey Society of CPAs State Taxation and Federal Taxation interest groups. Contact her at email@example.com or 862-881-4748.