Blog Archives

ACA Update: Feds Prohibit All Employer Reimbursement of Individual Premiums

Due to the rising costs of providing group health insurance, some employers have considered helping employees pay for individual health coverage instead of offering an employer-sponsored group plan. However, these employer reimbursement arrangements do not comply with Affordable Care Act (ACA) requirements.

On Nov. 6, 2014, the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury issued FAQs clarifying that all individual premium reimbursement arrangements are prohibited. Despite the previously widespread understanding that only pre-tax reimbursement arrangements are prohibited, the clarification includes pre-tax and post-tax premium reimbursements and cash compensation for individual premiums.

An employer arrangement that provides cash reimbursement for an individual market policy is considered to be part of a plan, fund or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax for the employee. Therefore, the arrangement is group health plan coverage subject to the ACA’s market reform provisions.

In addition, the Nov. 6 FAQs clarify that an employer cannot offer a choice between enrollment in the standard group health plan or cash only to employees with a high claims risk. This practice constitutes unlawful discrimination based on one or more health factors, which violates federal nondiscrimination laws.

Violation of this guidance by offering prohibited individual premium reimbursement arrangements to employees may trigger penalties. Under Code Section 4980D, an employer could be fined an excise tax of $100 per day for each applicable employee ($36,500 per year per employee).

The information contained in this newsletter is not intended as legal advice. Please consult a professional for more detailed analysis and specific information.

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Self-Insurance Update: PCORI Fee Amount Adjusted for 2014

The Affordable Care Act (ACA) imposes a fee on health insurance issuers and self-insured plan sponsors in order to fund comparative effectiveness research. These fees are widely known as Patient-Centered Outcomes Research Institute fees (PCORI fees).

On Sept. 18, 2014, the Internal Revenue Service (IRS) published Notice 2014-56, which provides the adjusted PCORI fee amount for plan years ending on or after Oct. 1, 2014, and before Oct. 1, 2015 (that is, 2014 for calendar year plans). For plan years ending on or after Oct. 1, 2014, and before Oct. 1, 2015, the PCORI fee amount is $2.08 multiplied by the average number of lives covered under the plan.

In the future, the IRS will publish the adjusted PCORI fee amount for plan years ending on or after Oct. 1, 2015, and before Oct. 1, 2019.

Overview of PCORI Fees

The PCORI fees apply for plan years ending on or after Oct. 1, 2012, but do not apply for plan years ending on or after Oct. 1, 2019. For calendar year plans, the fees will be effective for the 2012 through 2018 plan years.

Issuers and plan sponsors must pay PCORI fees annually on IRS Form 720 by July 31 of each year. The fee will generally cover plan years that end during the preceding calendar year.

PCORI Fee Amounts

The PCORI fees are calculated by multiplying an applicable rate for each tax year by the average number of lives covered under the plan. The applicable rate for each tax year is as follows:

  • $1 for plan years ending before Oct. 1, 2013 (that is, 2012 for calendar year plans); and
  • $2 for plan years ending on or after Oct. 1, 2013, and before Oct. 1, 2014.

For plan years ending on or after Oct. 1, 2014, the PCORI fee amount will increase based on increases in the projected per capita amount of National Health Expenditures.

Under Notice 2014-56, for plan years ending on or after Oct. 1, 2014, and before Oct. 1, 2015, the adjusted PCORI fee amount is $2.08 multiplied by the average number of lives covered under the plan. This amount was calculated based on the percentage increase in the projected per capita amount of the National Health Expenditures published by the U.S. Department of Health and Human Services on Sept. 3, 2014 (Table 3).

As always, call us today for a full analysis of your employee benefit structure and options!

IRS Announces New Mid-Year Cafeteria Plan Changes: What Businesses Should Know

IRS Expands Rules for Mid-Year Health Plan Election Changes_Page_1IRS Expands Rules for Mid-Year Health Plan Election Changes_Page_2IRS Expands Rules for Mid-Year Health Plan Election Changes_Page_3

Benefits Buzz: A Monthly Employee Benefits Newsletter from CIBC of Illinois, Inc.

BenefitsBuzz-CIBC Newsletter

Medicare Part D Notices Due: Compliance Tips for HR Professionals

Annual Medicare Part D Notices Are Due By Oct. 14, 2014 09 10 14_Page_1 Annual Medicare Part D Notices Are Due By Oct. 14, 2014 09 10 14_Page_2 Annual Medicare Part D Notices Are Due By Oct. 14, 2014 09 10 14_Page_3

Open Enrollment Checklist From CIBC of Illinois, Inc.

To prepare for open enrollment, health plan sponsors should become familiar with the legal changes affecting the design of their plans for the 2015 plan year. These changes are primarily due to the Affordable Care Act (ACA). Employers should review their plan documents to confirm that they include these required changes.

In addition, any changes to a health plan’s benefits for the 2015 plan year should be communicated to plan participants. Health plan sponsors should also confirm that their open enrollment materials contain certain required participant notices, such as the summary of benefits and coverage (SBC).

There are also some participant notices that must be provided annually or upon initial enrollment. To minimize cost and streamline administration, employers should consider including these notices in their open enrollment materials.

 

Grandfathered Plan Status

A grandfathered plan is one that was in existence when the ACA was enacted on March 23, 2010. If you make certain changes to your plan that go beyond permitted guidelines, your plan is no longer grandfathered. Contact CIBC of Illinois, Inc. if you have questions about changes you have made, or are considering making, to your plan.

  • If you have a grandfathered plan, determine whether it will maintain its grandfathered status for the 2015 plan year. Grandfathered plans are exempt from some of the ACA’s requirements. A grandfathered plan’s status will affect its compliance obligations from year to year.
  • If your plan will lose grandfathered status for 2015, confirm that the plan has all of the additional patient rights and benefits required by the ACA. This includes, for example, coverage of preventive care without cost-sharing requirements.

Cost-sharing Limits

Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered health plans are subject to limits on cost-sharing for essential health benefits (EHB). As enacted, the ACA included an overall annual limit (or an out-of-pocket maximum) for all health plans and an annual deductible limit for small insured health plans. On April 1, 2014, the ACA’s annual deductible limit was repealed. This repeal is effective as of the date that the ACA was enacted, back on March 23, 2010.

The out-of-pocket maximum, however, continues to apply to all non-grandfathered group health plans, including self-insured health plans and insured plans. Effective for plan years beginning on or after Jan. 1, 2015, a health plan’s out-of-pocket maximum for EHB may not exceed $6,600 for self-only coverage and $13,200 for family coverage.

  • Review your plan’s out-of-pocket maximum to make sure it complies with the ACA’s limits for the 2015 plan year ($6,600 for self-only coverage and $13,200 for family coverage).
  • If you have a health savings account (HSA)-compatible high deductible health plan (HDHP), keep in mind that your plan’s out-of-pocket maximum must be lower than the ACA’s limit. For 2015, the out-of-pocket maximum limit for HDHPs is $6,450 for self-only coverage and $12,900 for family coverage.
  • If your plan uses multiple service providers to administer benefits, confirm that the plan will coordinate all claims for EHB across the plan’s service providers, or will divide the out-of-pocket maximum across the categories of benefits, with a combined limit that does not exceed the maximum for 2015.
  • Be aware that the ACA’s annual deductible limit no longer applies to small insured health plans.

Health FSA Contributions

Effective for plan years beginning on or after Jan. 1, 2013, an employee’s annual pre-tax salary reduction contributions to a health flexible spending account (FSA) must be limited to $2,500. On Oct. 31, 2013, the Internal Revenue Service (IRS) announced that the health FSA limit remained unchanged at $2,500 for 2014. However, the $2,500 limit is expected to be adjusted for cost-of-living increases for later years. The IRS is expected to release the health FSA limit for 2015 later this year.

  • Work with your advisors to monitor IRS guidance on the health FSA limit for 2015.
  • Once the 2015 limit is announced by the IRS, confirm that your health FSA will not allow employees to make pre-tax contributions in excess of that amount for 2015. Also, communicate the 2015 health FSA limit to employees as part of the open enrollment process.

Transition Policy for Small Group Health Plans

Some non-grandfathered health plans in the small group market were allowed to renew for 2014 without adopting all of the ACA’s market reforms under a temporary transition policy adopted by the Obama Administration. The transition policy was originally a one-year reprieve from certain ACA market reforms; however, it was later extended for two more years, to policy years beginning on or before Oct. 1, 2016.

The transition relief is not available to all small group health plans. It only applies to small businesses with coverage that was in effect on Oct. 1, 2013. Also, because the insurance market is primarily regulated at the state level, state governors or insurance commissioners must allow for the transition relief. In addition, health insurance issuers are not required to follow the transition relief and renew plans.

Even if transition relief was available for a small group plan in 2014, it may not be available in 2015 and later years due to insurance market regulations or issuer decisions. If the transition relief no longer applies to your small group plan, confirm that your plan includes the following ACA market reforms for 2015:

  • Pre-existing Condition ExclusionsThe ACA prohibits health plans from imposing pre-existing condition exclusions (PCEs) on any enrollees. (PCEs for enrollees under 19 years of age were eliminated by the ACA for plan years beginning on or after Sept. 23, 2010).
  • Coverage for Clinical Trial ParticipantsNon-grandfathered health plans cannot terminate coverage because an individual chooses to participate in a clinical trial for cancer or other life-threatening diseases or deny coverage for routine care that would otherwise be provided just because an individual is enrolled in a clinical trial.
    • Comprehensive Benefits PackageInsured plans in the individual and small group market must cover each of the essential benefits categories listed under the ACA. Each state has a specific benchmark plan for determining the essential health benefits for insurance coverage in that state.

Employer Penalty Rules

Under the ACA’s employer penalty rules, applicable large employers (ALEs) that do not offer health coverage to their full-time employees (and dependent children) that is affordable and provides minimum value will be subject to penalties if any full-time employee receives a government subsidy for health coverage through an Exchange. The ACA sections that contain the employer penalty requirements are known as the “employer shared responsibility” provisions or “pay or play” rules. These rules were set to take effect on Jan. 1, 2014, but the IRS delayed the employer penalty provisions and related reporting requirements for one year, until Jan. 1, 2015.

On Feb. 10, 2014, the IRS released final regulations implementing the ACA’s employer shared responsibility rules. Among other provisions, the final regulations establish an additional one-year delay for medium-sized ALEs, include transition relief for non-calendar plans and clarify the methods for determining employees’ full-time status.

To prepare for the employer shared responsibility requirements, an employer should consider taking the following key steps:

  • Determine ALE status for 2015, including eligibility for the one-year delay for medium-sized ALEs;
  • For sponsors of non-calendar year plans, determine whether you qualify for the transition relief that allows you to delay complying with the pay or play rules until the start of your 2015 plan year;
  • Establish a system for identifying full-time employees (those working 30 or more hours per week);
  • Document plan eligibility rules; and
  • Test your health plan for affordability and minimum value.

HSA Limits for 2015

If you offer a high deductible health plan (HDHP) to your employees that is compatible with a health savings account (HSA), you should confirm that the HDHP’s minimum deductible and out-of-pocket maximum comply with the 2015 limits. Also, the 2015 increased HSA contribution limits should be communicated to participants. The following table contains the HDHP and HSA contribution limits for 2015.

HDHP Minimum Deductible Amount                                                                                                                             Individual                                                        $1,300

Family                                                              $2,600

 

            HDHP Maximum Out-of-Pocket Amount

Individual                                                         $6,450

Family                                                               $12,900

 

            HSA Maximum Contribution Amount

Individual                                                         $3,350

Family                                                               $6,650

           

            Catch-up Contributions (age 55 or older)   $1,000

 

  • Summary of Benefits and Coverage

The ACA requires health plans and health insurance issuers to provide a summary of benefits and coverage (SBC) to applicants and enrollees to help them understand their coverage and make coverage decisions. Plans and issuers must provide the SBC to participants and beneficiaries who enroll or re-enroll during an open enrollment period. The SBC also must be provided to participants and beneficiaries who enroll other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees).

Federal agencies have issued a template for SBCs, which should be used for 2015 plan years. The template includes information on whether the plan provides minimum essential coverage and meets minimum value requirements. The SBC template (and sample completed SBC) are available on the Department of Labor (DOL) website.

In connection with your plan’s 2015 open enrollment period, the SBC should be included with the plan’s application materials. If plan coverage automatically renews for current participants, the SBC must generally be provided no later than 30 days before the beginning of the new plan year.

For self-funded plans, the plan administrator is responsible for providing the SBC. For insured plans, both the plan and the issuer are obligated to provide the SBC, although this obligation is satisfied for both parties if either one provides the SBC. Thus, if you have an insured plan, you should work with your health insurance issuer to determine which entity will assume responsibility for providing the SBCs. Please contact your CIBC of Illinois, Inc. representative for assistance.

  • Grandfathered Plan Notice

If you have a grandfathered plan, make sure to include information about the plan’s grandfathered status in plan materials describing the coverage under the plan, such as summary plan descriptions (SPDs) and open enrollment materials. Model language is available from the DOL.

  • Notice of Patient Protections

Under the ACA, non-grandfathered group health plans and issuers that require designation of a participating primary care provider must permit each participant, beneficiary and enrollee to designate any available participating primary care provider (including a pediatrician for children). Also, plans and issuers that provide obstetrical/gynecological care and require a designation of a participating primary care provider may not require preauthorization or referral for obstetrical/gynecological care.

If a non-grandfathered plan requires participants to designate a participating primary care provider, the plan or issuer must provide a notice of these patient protections whenever the SPD or similar description of benefits is provided to a participant, such as open enrollment materials. If your plan is subject to this notice requirement, you should confirm that it is included in the plan’s open enrollment materials. Model language is available from the DOL.

 

Group health plan sponsors should consider including the following enrollment and annual notices with the plan’s open enrollment materials.

  • Initial COBRA Notice

Plan administrators must provide an initial COBRA notice to participants and certain dependents within 90 days after plan coverage begins. The initial COBRA notice may be incorporated into the plan’s SPD. A model initial COBRA Notice is available from the DOL.

  • Notice of HIPAA Special Enrollment Rights

At or prior to the time of enrollment, a group health plan must provide each eligible employee with a notice of his or her special enrollment rights under HIPAA.

  • Annual CHIPRA Notice

Group health plans covering residents in a state that provides a premium subsidy to low-income children and their families to help pay for employer-sponsored coverage must send an annual notice about the available assistance to all employees residing in that state. The DOL has provided a model notice.

  • WHCRA Notice

Plans and issuers must provide notice of participants’ rights under the Women’s Health and Cancer Rights Act (WHCRA) at the time of enrollment and on an annual basis. Model language for this disclosure is available on the DOL’s website in the compliance assistance guide.

  • Medicare Part D Notices

Group health plan sponsors must provide a notice of creditable or non-creditable prescription drug coverage to Medicare Part D eligible individuals who are covered by, or who apply for, prescription drug coverage under the health plan. This creditable coverage notice alerts the individuals as to whether or not their prescription drug coverage is at least as good as the Medicare Part D coverage. The notice generally must be provided at various times, including when an individual enrolls in the plan and each year before Oct. 15 (when the Medicare annual open enrollment period begins). Model notices are available at www.cms.gov/creditablecoverage.

  • Michelle’s Law Notice

Group health plans that condition dependent eligibility on a child’s full-time student status must provide a notice of the requirements of Michelle’s Law in any materials describing a requirement for certifying student status for plan coverage. Under Michelle’s Law, a plan cannot terminate a child’s coverage for loss of full-time student status if the change in status is due to a medically necessary leave of absence.

  • HIPAA Opt-out for Self-funded, Non-federal Governmental Plans

Sponsors of self-funded, non-federal governmental plans may opt out of certain federal mandates, such as the mental health parity requirements and the WHCRA coverage requirements. Under an opt-out election, the plan must provide a notice to enrollees regarding the election. The notice must be provided annually and at the time of enrollment. Model language for this notice is available for sponsors to use.

This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

 

Draft Instructions for Employer Reporting of Health Coverage Released

The Affordable Care Act (ACA) created new reporting requirements under Internal Revenue Code (Code) Sections 6055 and 6056. Under these new reporting rules, certain employers must provide information to the IRS about the health plan coverage they offer (or do not offer) to their employees.

On Aug. 28, 2014, the Internal Revenue Service (IRS) released draft instructions for the forms that employers will use to report under Code Sections 6055 and 6056.

  • Instructions for Forms 1094-B and 1095-B: These forms will be used by entities reporting under Section 6055 as health insurance issuers, sponsors of self-insured group health plans that are not reporting as applicable large employers (ALEs), sponsors of multiemployer plans and providers of government-sponsored coverage.
  • Instructions for Forms 1094-C and 1095-C: These forms will be used by ALEs that are reporting under Section 6056, as well as for combined reporting by ALEs who report under both Sections 6055 and 6056.

These instructions are draft versions only, and should not be relied upon for filing. The IRS may make changes to the instructions prior to releasing final versions.

Draft versions of Forms 1094-B, 1095-B, 1094-C and 1095-C were released in July 2014. The IRS expects both the forms and instructions to be finalized later this year.

Overview of Sections 6055 & 6056

The Code Sections 6055 and 6056 reporting requirements are intended to promote transparency with respect to health plan coverage and costs. They will also provide the government with information to administer other ACA mandates, such as the employer and individual mandates.

Code Section 6055 requires health insurance issuers, self-insured health plan sponsors, government agencies that administer government-sponsored health insurance programs and any other entity that provides minimum essential coverage (MEC) to report information on that coverage to the IRS and covered individuals.

Code Section 6056 requires ALEs subject to the employer shared responsibility rules to report information on the health coverage offered to full-time employees to the IRS and covered individuals.

Filing Requirements

Under both Sections 6055 and 6056, each reporting entity will be required to file all of the following with the IRS:

  • A separate information return for each individual who is provided MEC (for ALEs, this includes only full-time employees); and
  • A single transmittal form for all of the returns filed for a given calendar year.

Filing Due Dates

Under both Sections 6055 and 6056, the return and transmittal forms must be filed with the IRS on or before Feb. 28 (March 31, if filed electronically) of the year following the calendar year of coverage. However, if the regular due date falls on a Saturday, Sunday or legal holiday, entities should file by the next business day. For calendar year 2015, these forms must be filed by Feb. 29, 2016, (or March 31, 2016, if filing electronically).

These forms are not required to be filed for 2014. However, in preparation for the first required filing (in 2016 for 2015 coverage), reporting entities may voluntarily file in 2015 for 2014 in accordance with the draft forms and instructions. More information about voluntary filing is available on the IRS website.

Statements Furnished to Individuals

All entities reporting under Section 6055 or 6056 must furnish a copy of Form 1094-C or 1095-C, as applicable, to the person identified as the responsible individual named on the form. Statements must be furnished by mail, unless the recipient affirmatively consents to receive the statement electronically.

The statement must be furnished on or before Jan. 31 of the year following the calendar year of coverage. The first statements are due to individuals by Feb. 1, 2016.

 

 

Where To File

Any reporting entity that is required to file at least 250 returns under Section 6055 or 6056 must file electronically. The 250-or-more requirement applies separately to each type of return and separately to each type of corrected return.

Reporting entities that are filing on paper will send paper returns to the address provided in the instructions, based on where their principal business, office or agency (or legal residence, in the case of an individual) is located.

Instructions for Forms 1094-B and 1095-B

Under Section 6055, every person that provides MEC to an individual during a calendar year must file Forms 1094-B (a transmittal) and 1095-B (an information return). This includes:

  • Health insurance issuers or carriers;
  • Self-insured health plan sponsors;
  • Government agencies that administer government-sponsored health insurance programs; and
  • Any other entity that provides MEC.

However, ALEs subject to the employer shared responsibility rules that sponsor self-insured group health plans will report information about the coverage in Part III of Form 1095-C, instead of on Form 1095-B. In general, an employer with 50 or more full-time employees (including full-time equivalents) during the prior calendar year is considered an ALE.

Instructions for Forms 1094-C and 1095-C

All ALEs subject to the employer shared responsibility rules must file Form 1094-C (a transmittal) and Form 1095-C (an information return) for each full-time employee for any month.

  • Form 1094-C is used to report summary information for each employer to the IRS and to transmit Forms 1095-C to the IRS.
  • Form 1095-C is used to report information about each employee.

These forms help the IRS determine whether an ALE owes penalties under the employer shared responsibility rules, as well as whether an employee is eligible for premium tax credits.

How to Complete Forms

ALEs that sponsor a self-insured health plan must also complete Form 1095-C, Parts I and III, for any individual (including any full-time employee, non-full-time employee, family members and others) who enrolled in the self-insured health plan. If the employee is full-time for any month, the ALE must also complete Part II. If the employee is not full-time for all 12 months of the calendar year, the ALE must complete only Part II, line 14, by entering code 1G in the “All 12 Months” column.

For other types of coverage, the issuer or plan sponsor will provide the information about their health coverage to any enrolled employees. The employer should not complete Form 1095-C, Part III, for those employees.

An employer that sponsors self-insured health coverage but is not subject to the employer shared responsibility rules is not required to file Forms 1094-C and 1095-C. Instead, these employers report on Forms 1094-B and 1095-B for employees who enrolled in the employer-sponsored self-insured health coverage.

Authoritative Transmittal for ALEs Filing Multiple Forms 1094-C

A Form 1094-C must be attached to any Forms 1095-C filed by an ALE. An ALE may submit multiple Forms 1094-C, each accompanied by Forms 1095-C, for some of its employees, provided that Forms 1095-C are filed for each employee for whom the ALE is required to file.

ALEs must file a single Form 1094-C reporting aggregate employer-level data for all full-time employees, identifying the form, on line 19 of Part II, as the Authoritative Transmittal. One Authoritative Transmittal must be filed for each ALE, even if multiple Forms 1094-C are filed by and on behalf of the ALE. For example, if an employer has prepared a separate Form 1094-C for each of its two divisions to transmit Forms 1095-C for each division’s full-time employees, one of the Forms 1094-C filed must be designated as the Authoritative Transmittal and report aggregate employer-level data for all full-time employees (for both divisions).

One Form 1095-C for Each Employee of Each ALE

There must be only one Form 1095-C for each full-time employee of an ALE. For example, if an ALE separately reports for the full-time employees of its two divisions, the ALE must combine the information for any employee who worked at both divisions during the year so that there is only a single Form 1095-C for that employee which reports information for all 12 months of the calendar year.

In contrast, a full-time employee who works for more than one ALE that is a member of the same aggregated ALE group (that is, works for two separate ALE members) must receive a separate Form 1095-C from each ALE member.

More Information

Please contact CIBC of Illinois, Inc. for more information on reporting under Code Sections 6055 and 6056.

Affordable Care Act Pay or Play Penalties—Helpful Look-back Measurement Examples

The Affordable Care Act (ACA) imposes a penalty on applicable large employers (ALEs) that do not offer health insurance coverage to substantially all full-time employees and dependents. Penalties may also be imposed if coverage is offered, but is unaffordable or does not provide minimum value. The ACA’s employer penalty rules are often referred to as “employer shared responsibility” or “pay or play” rules.

On Feb. 12, 2014, the IRS published final regulations on the ACA’s employer shared responsibility rules. The final regulations provide an optional safe harbor method that employers can use for determining full-time status, called the look-back measurement method. The look-back measurement method involves a measurement period for counting hours of service, a stability period when coverage may need to be provided, depending on an employee’s average hours of service during the measurement period, and an administrative period that allows time for enrollment and disenrollment.

This Legislative Brief provides examples of potential measurement, administrative and stability periods for plan years beginning in each month throughout the 2015 and 2016 calendar years. These examples assume that the employer will be using a 12-month standard measurement period, a two-month administrative period and a 12-month stability period.

It also provides examples of optional transition measurement periods in 2015, if allowed for the plan year. The final regulations allow employers to use shorter measurement periods for stability periods starting in 2015 under the look-back measurement method. For 2015, employers can determine full-time status by reference to a transition measurement period in 2014 that:
• Is shorter than 12 consecutive months, but not less than six consecutive months long; and
• Begins no later than July 1, 2014, and ends no earlier than 90 days before the first day of the first plan year beginning on or after Jan. 1, 2015.

If permitted under the employer shared responsibility rules with respect to their plan years, employers can choose to use either the standard measurement period or the transition measurement period for stability periods beginning in 2015.

PLAN YEAR SELECTION
The final rules state that the plan year must be 12 consecutive months, unless a short plan year of less than 12 consecutive months is permitted for a valid business purpose. A plan year may begin on any day of a year and must end on the preceding day in the following year (for example, a plan year that begins on Oct. 15, 2015, must end on Oct. 14, 2016).

Once established, a plan year is effective for the first plan year and for all subsequent plan years unless it is changed, provided that such change will only be recognized if made for a valid business purpose. Note that a change in the plan year is not permitted if the principal purpose of the change in plan year is to avoid the employer shared responsibility requirements.

CALENDAR-YEAR PLANS
A calendar-year plan is a health plan that has a plan year running on the calendar year. Thus, the plan year of a calendar-year plan is a period of 12 consecutive months beginning on Jan. 1 and ending on Dec. 31 of the same calendar year.

Plan Year: Jan. 1 — Dec. 31
  Standard Measurement Period (optional for 2015) Transition Measurement Period (optional for 2015) Administrative Period Stability Period
2015 Plan Year Nov. 1, 2013 — Oct. 31, 2014 May 1, 2014 — Oct. 31, 2014 Nov. 1, 2014 — Dec. 31, 2014 Jan. 1, 2015 — Dec. 31, 2015
2016 Plan Year Nov. 1, 2014 — Oct. 31, 2015 N/A Nov. 1, 2015 — Dec. 31, 2015 Jan. 1, 2016 — Dec. 31, 2016

 

NON-CALENDAR-YEAR PLANS
A non-calendar-year plan is a health plan that has a plan year that does not run on the calendar year. Thus, the plan year of a non-calendar-year plan is a period of 12 consecutive months beginning in any month after Jan. 1. As a result, the plan year of a non-calendar-year plan will run during parts of two consecutive calendar years.

Plan year: Feb. 1 — Jan. 31
  Standard Measurement Period (optional for 2015) Transition Measurement Period (optional for 2015) Administrative Period Stability Period
2015 Plan Year Dec. 1, 2013 — Nov. 30, 2014 June 1, 2014 — Nov. 30, 2014 Dec. 1, 2014 — Jan. 31, 2015 Feb. 1, 2015 — Jan. 31, 2016
2016 Plan Year Dec. 1, 2014 — Nov. 30, 2015 N/A Dec. 1, 2015 — Jan. 31, 2016 Feb. 1, 2016 — Jan. 31, 2017
Plan year: March 1 — Feb. 28 (or Feb. 29, during a leap year)
  Standard Measurement Period (optional for 2015) Transition Measurement Period (optional for 2015) Administrative Period Stability Period
2015 Plan Year Jan. 1, 2014 — Dec. 31, 2014 July 1, 2014 — Dec. 31, 2014 Jan. 1, 2015 — Feb. 28, 2015 March 1, 2015 — Feb. 29, 2016
2016 Plan Year Jan. 1, 2015 — Dec. 31, 2015 N/A Jan. 1, 2016 — Feb. 29, 2016 March 1, 2016 — Feb. 28, 2017
Plan year: April 1 — March 31
  Standard Measurement Period (optional for 2015) Transition Measurement Period (optional for 2015) Administrative Period Stability Period
2015 Plan Year Feb. 1, 2014 — Jan. 31, 2015 July 1, 2014 — Jan. 31, 2015 Feb. 1, 2015 — March 31, 2015 April 1, 2015 — March 31, 2016
2016 Plan Year Feb. 1, 2015 — Jan. 31, 2016 N/A Feb. 1, 2016 — March 31, 2016 April 1, 2016 — March 31, 2017
Plan year: May 1 — April 30
  Standard Measurement Period (optional for 2015) Transition Measurement Period (optional for 2015) Administrative Period Stability Period
2015 Plan Year March 1, 2014 — Feb. 28, 2015 July 1, 2014 — Feb. 28, 2015 March 1, 2015 — April 30, 2015 May 1, 2015 — April 30, 2016
2016 Plan Year March 1, 2015 — Feb. 29, 2016 N/A March 1, 2016 — April 30, 2016 May 1, 2016 — April 30, 2017
Plan year: June 1 — May 31
  Standard Measurement Period (optional for 2015) Transition Measurement Period (optional for 2015) Administrative Period Stability Period
2015 Plan Year April 1, 2014 — March 31, 2015 July 1, 2014 — March 31, 2015 April 1, 2015 — May 31, 2015 June 1, 2015 — May 31, 2016
2016 Plan Year April 1, 2015 — March 31, 2016 N/A April 1, 2016 — May 31, 2016 June 1, 2016 — May 31, 2017
Plan year: July 1 — June 30
  Standard Measurement Period (optional for 2015) Transition Measurement Period (optional for 2015) Administrative Period Stability Period
2015 Plan Year May 1, 2014 — April 30, 2015 July 1, 2014 — April 30, 2015 May 1, 2015 — June 30, 2015 July 1, 2015 — June 30, 2016
2016 Plan Year May 1, 2015 — April 30, 2016 N/A May 1, 2016 — June 30, 2016 July 1, 2016 — June 30, 2017
Plan year: Aug. 1 — July 31
  Standard Measurement Period (optional for 2015) Transition Measurement Period (optional for 2015) Administrative Period Stability Period
2015 Plan Year June 1, 2014 — May 31, 2015 July 1, 2014 — May 31, 2015 June 1, 2015 — July 31, 2015 Aug. 1, 2015 — July 31, 2016
2016 Plan Year June 1, 2015 — May 31, 2016 N/A June 1, 2016 — July 31, 2016 Aug. 1, 2016 — July 31, 2017
Plan year: Sept. 1 — Aug. 31
  Standard Measurement Period (optional for 2015) Transition Measurement Period (optional for 2015) Administrative Period Stability Period
2015 Plan Year July 1, 2014 — June 30, 2015 N/A July 1, 2015 — Aug. 31, 2015 Sept. 1, 2015 — Aug. 31, 2016
2016 Plan Year July 1, 2015 — June 30, 2016 N/A July 1, 2016 — Aug. 31, 2016 Sept. 1, 2016 — Aug. 31, 2017
Plan year: Oct. 1 — Sept. 30
  Standard Measurement Period (optional for 2015) Transition Measurement Period (optional for 2015) Administrative Period Stability Period
2015 Plan Year Aug. 1, 2014 — July 31, 2015 N/A Aug. 1, 2015 — Sept. 30, 2015 Oct. 1, 2015 — Sept. 30, 2016
2016 Plan Year Aug. 1, 2015 — July 31, 2016 N/A Aug. 1, 2016 — Sept. 30, 2016 Oct. 1, 2016 — Sept. 30, 2017
Plan year: Nov. 1 — Oct. 31
  Standard Measurement Period (optional for 2015) Transition Measurement Period (optional for 2015) Administrative Period Stability Period
2015 Plan Year Sept. 1, 2014 — Aug. 31, 2015 N/A Sept. 1, 2015 — Oct. 31, 2015 Nov. 1, 2015 — Oct. 31, 2016
2016 Plan Year Sept. 1, 2015 — Aug. 31, 2016 N/A Sept. 1, 2016 — Oct. 31, 2016 Nov. 1, 2016 — Oct. 31, 2017
Plan year: Dec. 1 — Nov. 30
  Standard Measurement Period (optional for 2015) Transition Measurement Period (optional for 2015) Administrative Period Stability Period
2015 Plan Year Oct. 1, 2014 — Sept. 30, 2015 N/A Oct. 1, 2015 — Nov. 30, 2015 Dec. 1, 2015 — Nov. 30, 2016
2016 Plan Year Oct. 1, 2015 — Sept. 30, 2016 N/A Oct. 1, 2016 — Nov. 30, 2016 Dec. 1, 2016 — Nov. 30, 2017

MORE INFORMATION
Please contact CIBC of Illinois, Inc. for more information on the employer shared responsibility rules.

IRS Increases ACA Affordability Percentage: What Employers Need to Know

Starting in 2015, the Affordable Care Act (ACA) requires applicable large employers to offer affordable, minimum value health coverage to their full-time employees (and dependents) or pay a penalty. The employer penalty rules are also known as the employer mandate or the “pay or play” rules.

Also, effective for 2014, affordability of health coverage is used to determine whether an individual is:

  • Eligible for a premium tax credit for a health plan purchased through an Exchange; and
  • Exempt from the penalty for not having minimum essential coverage.

On July 24, 2014, the IRS released Revenue Procedure 2014-37 to index the ACA’s affordability percentages for 2015.

For plan years beginning in 2015, an applicable large employer’s health coverage will be considered affordable under the pay or play rules if the employee’s required contribution to the plan does not exceed 9.56 percent of the employee’s household income for the year.

Applicable large employers can use one of the IRS’ affordability safe harbors to determine whether their health plans will satisfy the 9.56 percent requirement for 2015 plan years, if requirements for the applicable safe harbor are met.

This adjusted affordability percentage will also be used to determine whether an individual is eligible for a premium tax credit for 2015. Individuals who are eligible for employer-sponsored coverage that is affordable and provides minimum value are not eligible for a premium tax credit.

Also, Revenue Procedure 2014-37 adjusts the affordability percentage for the exemption from the individual mandate for individuals who lack access to affordable minimum essential coverage. For plan years beginning in 2015, coverage is unaffordable for purposes of the individual mandate if it exceeds 8.05 percent of household income.

EMPLOYER MANDATE

The pay or play rules apply only to applicable large employers. An “applicable large employer” is an employer with, on average, at least 50 full-time employees (including full-time equivalents) during the preceding calendar year.

Many applicable large employers will be subject to the pay or play rules starting in 2015. However, applicable large employers with fewer than 100 full-time employees may qualify for an additional year, until 2016, to comply with the employer mandate.

Affordability Determination

The affordability of health coverage is a key point in determining whether an applicable large employer will be subject to a penalty.

For 2014, the ACA provides that an employer’s health coverage is considered affordable if the employee’s required contribution to the plan does not exceed 9.5 percent of the employee’s household income for the taxable year. The ACA provides that, for plan years beginning after 2014, the IRS must adjust the affordability percentage to reflect the excess of the rate of premium growth over the rate of income growth for the preceding calendar year.

As noted above, the IRS has adjusted the affordability percentage for plan years beginning in 2015 to 9.56 percent. This adjusted affordability percentage will also be used to determine whether an individual is eligible for a premium tax credit for 2015.

The affordability test applies only to the portion of the annual premiums for self-only coverage and does not include any additional cost for family coverage. Also, if an employer offers multiple health coverage options, the affordability test applies to the lowest-cost option that also satisfies the minimum value requirement.

Affordability Safe Harbors

Because an employer generally will not know an employee’s household income, the IRS created three affordability safe harbors that employers may use to determine affordability based on information that is available to them.

The affordability safe harbors are all optional. An employer may choose to use one or more of the affordability safe harbors for all its employees or for any reasonable category of employees, provided it does so on a uniform and consistent basis for all employees in a category.

The affordability safe harbors are:

  • The Form W-2 safe harbor (affordability determined based on Form W-2 wages from that employer)
  • The rate of pay safe harbor (affordability determined based on an employee’s rate of pay)
  • The federal poverty line (FPL) safe harbor (affordability determined based on FPL for a single individual)

INDIVIDUAL MANDATE

Beginning in 2014, the ACA requires most individuals to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty. This rule is often referred to as the “individual mandate.” Individuals may be eligible for an exemption from the penalty in certain circumstances.

Under the ACA, individuals who lack access to affordable minimum essential coverage are exempt from the individual mandate. For purposes of this exemption, coverage is affordable for an employee if the required contribution for the lowest-cost, self-only coverage does not exceed 8 percent of household income. For family members, coverage is affordable if the required contribution for the lowest-cost family coverage does not exceed 8 percent of household income. This percentage is to be adjusted annually after 2014.

For plan years beginning in 2015, Revenue Procedure 2014-37 increases this percentage from 8 percent to 8.05 percent.

As always, contact your CIBC Consultant for help with this, or any other part of Group Benefits Management and The Affordable Care Act. We provide Solutions…that Work!

Weeding Through the Conflicting Rulings on Subsidies in Federal Exchanges

Several lawsuits have been filed by individuals and employers to challenge the ability of the federal government to provide tax credits under the Affordable Care Act (ACA) to individuals in states that did not establish their own Exchanges (that is, in states with federally-facilitated exchanges, or FFEs). These lawsuits were filed in response to an Internal Revenue Service (IRS) rule that authorizes subsidies in all states, including those with FFEs.

On July 22, 2014, two federal appeals courts—the District of Columbia Circuit Court and the 4th U.S. Circuit Court—issued inconsistent rulings on the availability of subsidies in states with FFEs.

In Halbig v. Burwell, the D.C. Circuit Court held that the IRS rule authorizing subsidies in states with FFEs is invalid. In a 2-1 opinion, the court ruled that the text of the ACA clearly restricts the subsidies to individuals in states that established their own Exchanges.

In King v. Burwell, the 4th Circuit Court unanimously upheld the availability of the ACA’s subsidies in states with their own Exchanges and in states with FFEs.

Health Insurance Subsidies

The ACA created health insurance subsidies to help eligible individuals and families purchase health insurance through an Exchange. The subsidies are designed to make coverage through an Exchange more affordable by reducing taxpayers’ out-of-pocket premium costs.

There are two federal health insurance subsidies available with respect to coverage through an Exchange: premium tax credits and cost-sharing reductions. Both of these subsidies vary in amount based on the taxpayer’s household income, and they reduce the out-of-pocket costs of health insurance for the insured.

Premium tax credits are available for people with somewhat higher incomes (up to 400 percent of the federal poverty level (FPL)), and reduce out-of-pocket premium costs for the taxpayer.

Reduced cost-sharing is available for individuals with lower incomes (up to 250 percent of the FPL). Through cost-sharing reductions, these individuals will be eligible to enroll in plans with higher actuarial values and have the plan, on average, pay a greater share of covered benefits. This means that coverage for these individuals will have lower out-of-pocket costs at the point of service (for example, lower deductibles and copayments).

Health Insurance Exchanges

Effective for 2014, the ACA requires each state to have an Exchange for individuals and small businesses to purchase private health insurance. According to the Department of Health and Human Services (HHS), the Exchanges allow for direct comparisons of private health insurance options on the basis of price, quality and other factors, and they coordinate eligibility for subsidies and other insurance affordability programs.

The ACA delegated primary responsibility for establishing the Exchanges to individual states. However, because the U.S. Congress cannot require states to implement federal laws, the ACA provides that HHS will operate the FFE in any state that refuses or is unable to set up an Exchange.

For 2014, only 16 states and the District of Columbia established their own Exchanges. HHS operates the FFEs in the remaining 34 states (in some cases with state assistance, but in most cases not).

Of the approximately 8 million people who selected private health plans from October through mid-April, over 5 million obtained coverage through an FFE. In addition, more than 4.5 million people have been determined eligible for subsidized insurance in the FFE.

Court Decisions

The lawsuits in Halbig v. Burwell and King v. Burwell were filed by individuals and employers in states that have FFEs. They argued that the IRS rule authorizing subsidies in all states conflicts with the text of the ACA. They assert that, according to the law’s plain language, the ACA only authorized subsidies to be provided in states that have established their own Exchanges.

In Halbig v. Burwell, a three-judge panel from the D.C. Circuit Court struck down the IRS’ rule that authorizes subsidies in all states, including those with FFEs. The court concluded that the ACA “unambiguously restricts” the subsidies to insurance purchased on Exchanges established by the states. Thus, the court said that subsidies are only available to individuals who obtain insurance through state-based Exchanges.

In King v. Burwell, the 4th Circuit Court ruled that the text of the ACA is ambiguous and subject to multiple interpretations. The court upheld the IRS’ rule that authorizes subsidies in all states, including those with FFEs, as a permissible exercise of the agency’s discretion. Thus, the court said that the subsidies are available to individuals who obtain insurance through either state-based Exchanges or through FFEs.

The Obama administration disagrees with the D.C. Circuit Court’s ruling and intends to seek further review of the decision. It is anticipated that the Justice Department will ask the entire 11-person D.C. appeals court to review the decision. In the meantime, a Justice Department spokesperson has stated that the subsidies will continue to remain available.

Impact on Employers

Following the appellate court rulings, the Obama administration indicated that federal subsidies will continue to be available to eligible individuals in all states, including those with FFEs.

This availability of subsidies may have significant implications for employers as a result of the ACA’s employer mandate. Under the employer mandate, large employers may face penalties if they do not offer coverage that meets certain requirements to their full-time employees.

However, penalties apply only if an employee receives a subsidy to buy coverage through an Exchange. If the subsidy is available only in state-based Exchanges, employers would not be subject to penalties for employees living in states with an FFE.

Other Lawsuits

Other lawsuits challenging the subsidies in states with FFEs are still pending in federal courts.

In addition, although the U.S. Supreme Court has not yet agreed to consider it, it may decide to take up the issue in the future.

More Information

Please contact CIBC of Illinois, Inc. for more information on the ACA’s federal subsidies or the employer mandate.

 

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