ACA Compliance Roundtable Series
Affordability
Offers of Coverage
IRS Reporting Update
Welcome to the ACA Compliance
Roundtable Series!!!
 Monthly discussion of specific health care reform related
topics
 Small group discussions
 Address individual questions or concerns
 Possible session topics:
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Transition Relief
Change in Employment Status
Related Entity Status
Offers of Coverage
Break in Service rules
Tracking/recordkeeping Application
ACA Compliance Continuum
Penalty
Assessment
Affordability
Tracking
Coverage
Status
Monitoring
Reporting
Agenda
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Affordability
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Offers of Coverage
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Requirements
Methods
Requirements
Rules
IRS Reporting update
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Review of newly released forms
Affordability Requirements
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Plans offered to eligible employees must meet the affordability
standard – 9.5%.
If plans do not meet affordability standard employer could face penalty
of $3,000/year X the number of employees who enroll in an Exchange
plan.
Affordability is determined by looking at the employee’s contribution for
single coverage under the least expensive plan available to that
employee ONLY.
Contributions for the actual plan the employee elects and for
dependent or family coverage are not included.
Affordability Requirements
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Three methods of determining affordability – W-2 Wages, Rate of Pay
and Federal Poverty Level.
Employer may elect to use one method for all employees or different
methods for different groups of employees (hourly/salary, different
locations, different departments).
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Must use same method for all individuals in a category
May not use a different method for each individual
Affordability Requirements
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July 24, 2014 – IRS changes rate to 9.55% for 2015 for individuals
receiving tax credit from the Exchange.
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Some question as to applicability in employer calculations
May be reconciled at a later time
Affordability Methods
Rate of Pay
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Cannot be used for employees paid on commission or tips or nonhourly employees whose pay is reduced during the year.
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Must use lowest rate of pay for the employee during the month.
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Determined on a monthly basis.
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If coverage is offered for even one day during a month, must determine
affordability for that month.
Affordability Methods
Rate of Pay
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Hourly employee formula – Lowest monthly single contribution
Hourly rate of pay X 130
Non-hourly employee formula – Lowest monthly single contribution
Monthly salary
Affordability Methods
W-2 Wages
 Use wages from box 1 of the W-2
 Affordability is determined at the end of the calendar year
 Affordability is determined on an employee by employee basis
 May not use this method if employee contribution (for lowest single
coverage available) changes during the plan year
Affordability Methods
W-2 Wages
 Salary amount pro-rated if coverage not offered for the entire
calendar year.
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Example, employee was employed from May 15 – December 31 and is
offered coverage from August 1-December 31
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Wages found in Box 1 would be prorated (5/8) to determine if coverage was
affordable
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If employed or offered coverage for one day in the month it is included in the
proration calculation
Affordability Methods
W-2 Wages
•
Hourly and non-hourly employee formula
Full amount of employee contribution (annual or prorated)
Amount from Box 1 of W-2 (or prorated amount)
Affordability Methods
Federal Poverty Level
•
Cost for lowest cost single only coverage does not
exceed 9.5% of single individual Federal Poverty
Level.
•
Federal Poverty Level for 2014 = $11,670
•
9.5% of $11,670 = $1,108.65/year
•
$1,108.65/12 = $92.39/month
Affordability Methods
Federal Poverty Level
•
If the employee contribution for lowest cost single
coverage available is $92.39 per month or less the
plan is deemed to be affordable REGARDLESS OF
AN EMPLOYEE’S ACTUAL WAGES
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FPL is released each January/February
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Employer can rely on figures in force up to 6 months
before the start of the plan year
Affordability
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Perform calculation using all three methods
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Determine which calculation has the most
advantageous result
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Must use FPL method if attempting to report using
“Qualified Offer Method.”
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May use any affordability method if using General or
98% reporting methods
Group Discussion
Offer of Coverage Requirements
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Coverage must be offered to at least 95% of “full-time”
employees
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70% in 2015
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Employers with 50-99 FTE do not need to comply until 2016
•
ACA does not require employers to actually cover employees –
only require coverage to be offered
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An offer of coverage from one ALE member of a controlled group
is considered an offer by all members of the controlled group
Offer of Coverage Requirements
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If the plan meets MV and the employee’s cost of coverage
(lowest cost single coverage) is equal to or less than 9.5% of the
FPL it will be assumed that coverage has been offered
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Offer for coverage made to a union during negotiations is not
considered an offer of coverage
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If offer of coverage is made by a staffing firm on behalf of an
employer the fee paid to the staffing firm must be higher than the
normal fee.
Offer of Coverage Rules
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Employee must have the opportunity to enroll in coverage at least
once per year
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If coverage does not provide minimum value or is not affordable,
employee must be given the opportunity to decline coverage at
least once per year
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Continuing previous year’s election qualifies as an offer of
coverage if the employee does not elect to opt out
Offer of Coverage Rules
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Employer not required to obtain a signed statement from the
employee
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Employer may want to consider requiring a signed statement
Coverage must be offered to employee and certain dependents
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Spouse – not required
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Children up to age 26 and Adopted Children – required
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Stepchildren and Foster Children – not required
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Children must be offered coverage for the entire month in
which they reach age 26
Group Discussion
Reporting Forms
Reporting Forms
• Draft forms released on July 24, 2014
• 5 forms released
• Form 1095-A only used by insurance carriers on the Exchange
• Forms were released without instructions
• Instructions currently scheduled to be released during August 2014
• Same forms required regardless of Reporting Method used
Reporting Forms
• Employers having over 50 FTE and offering fully insured
coverage will be required to file Forms 1094–B and 1095–B
• May be completed by the insurance carrier
Reporting Forms
Reporting Forms
Reporting Forms
• Self funded employers with over 50 FTE will be required to
complete Forms 1094 – C and 1095 – C.
• Unless a “Simplified Reporting Method” is used.
Reporting Forms
Reporting Forms
Reporting Forms
Reporting Forms
Group Discussion
Questions