Recently, the Affordable Care Act (ACA) survived a judicial challenge when the US. Supreme Court ruled in King v. Burwell that individuals who reside in states that have federal exchange programs are eligible for ACA tax credits.
Although this ruling changed nothing for employers, many slowed down or held off implementing changes, while waiting to see the outcome of the case.
Listed below are a few things employers should be thinking about now relating to the ACA:
The shared responsibility section of the ACA, also known as “play or pay,” does not require employers to provide health care insurance for their employees. Rather, it requires employers to share health care responsibility by offering coverage or paying a penalty.
Under this provision, large employers with between 50 and 99 employees may face penalties beginning in 2016. Employers should review their health plan options now to avoid penalties in the future.
The ACA has prompted changes to the Internal Revenue Code to require reporting that will allow the IRS to collect data and enforce the “play or pay” provision. IRC Section 6055 is used for reporting by providers that offer minimum essential coverage to individuals, including, in some cases, employer-sponsored plans.
If the employer is not considered a large employer, and only sponsors a fully-insured plan, they are not subject to reporting under IRC 6055. Section 6056 applies to large employers who offer health insurance under employer-sponsored plans.
Large employers offering a self-insured health plan must provide an individualized statement to each covered employee enrolled in a healthcare plan during the 2015 tax year. In some cases, insurers are responsible for issuing the statements for fully-insured plans.
The Cadillac Tax, effective in 2018, is a 40 percent, non-deductible excise tax imposed on company-sponsored plans with total values exceeding $10,200 for single coverage and $27,500 for family coverage. The tax will be based on the total cost of coverage that exceeds the threshold, and includes employer and employee contributions toward the cost of coverage.
Employers would calculate the tax for fully-insured plans and the insurer would pay. Under a self-insured plan, the employer would calculate and pay the tax. According to the IRS notice released in February 2015, additional regulatory clarification may be provided in the future.
As we all know, the ACA is ever-changing and can sometimes seem overwhelming, especially for small employers with limited resources. All employers should be planning how to address these changes and will need to closely monitor ACA regulation changes to ensure that they remain compliant.
BCN Services is here to help. If you would like more information or have questions or concerns on ACA, please contact us.
Danette Townsend, Benefits Administration Manager