Affordable Care Act

W-2 Reporting Requirement

Summary: Employers must report the cost of employer sponsored health benefits.

Effective Date: 2012 tax year Forms W-2 issued in January 2013

Responsible Party: Employer

Comments: This is a reporting obligation only and does not change the current tax-free nature of the benefit.

Recommended Action: Make sure your payroll department or vendor is prepared for W-2 reporting.

Comparative Effectiveness Research Fee (CER)

Summary: This fee funds research on the effectiveness, risks and benefits of medical treatments through the Patient Centered Outcomes Research Institute

Effective Date: Plan/policy years that end after 9/30/2012 and beginning before 10/1/2013

Responsible Party: Employer is responsible for self- funded plans; built into the premium on fully insured plans. The Boon Group® can assist with reporting membership numbers to employers

Comments: Fees are paid per member (employee + dependents) per year. Proposed guidance is that fees are filed with Form 720 “Quarterly Federal Excise Tax Return” on an annual basis by July 31st of the year following the end of the plan year (ex: First payment is due by 7/31/13 for a plan year that ends Dec 31st).
• For plan years that end during October 1, 2012 through September 30, 2013, this fee is $1 per participant per year.
• For plan years that end during October 1, 2013 through September 30, 2014, the fee increases to $2 per participant per year.
• After that, the rate increases each year by the medical inflation rate.

Recommended Action: Monitor due date and provide membership numbers to employer groups.

Notification Requirements

Summary: Employers will have to notify employees about health insurance exchanges and premium subsidies.

Effective Date: Undetermined; originally estimated - March 2013 but delayed by the DOL per FAQ dated 1/24/2013

Responsible Party: Employer

Comments: HHS has not issued guidance on the specific requirements of this provision.

Recommended Action: Notify employees as required in the federal guidance.

Employer Responsibility to Offer Coverage

Summary: Employers must offer essential coverage to active full-time employees and their dependents (not including spouses).

Effective Date: January 1, 2014; Transition rule allows delay to the first day of the ERISA Plan year (not the insurance policy year) if not based on a calendar year

Responsible Party: Employer

Comments: Rules requirement determination of full-time status of all employees, including variable hour and seasonal employees (which are more difficult to measure). Full-time employment is defined as 30+ hours per week calculated on specified measurement periods, and benefits must be provided for specified stability periods. Employers under the same control group are considered together for determining the number of full-time employees, with apportionment rules for payment of penalties.

Failure To Offer At All
Large employers (50 full-time employees) that fail to offer “minimum essential coverage” to substantially all (95%) “full-time employees” and their dependents (excluding spouses) are subject to a penalty if any full-time employee qualifies for a premium subsidy and obtains coverage through an Insurance Exchange. “minimum essential coverage” is not yet fully defined.
Penalty A: The penalty is $2,000 per employee (minus the first 30 employees). If the offer is to 95% of employees, the employer is are still subject to the penalty for the remaining 5% of employees.

Failure to offer coverage that meets Affordable and Minimum Value Tests
If large employer offers “minimum essential coverage” to full time employees, such coverage must be “affordable” and meet “minimum value” or the employer will be subject to a penalty.
Penalty B: The penalty is the lesser of $3,000 per employee who obtains a subsidy or $2,000 for each full-time employee (minus the first 30 employees). Penalty B cannot exceed the amount of Penalty A.
To be considered “affordable”, the employee’s premium cost to for employee-only coverage can be no more than 9.5% of household income (there are several alternative “safe harbors” to measure this, including using employee’s W-2 wages). To meet “minimum value,” Plan must provide 60% actuarial value (AV) minimum – essentially, cover at least 60% of covered health care costs.

90 day limit on waiting periods. No annual dollar limits on essential health benefits. Coverage of routine patient costs for clinical trials of life-threatening diseases. 30% incentive cap for wellness programs. Exchanges initially only apply to individuals and small employers.

Note: Final regulations from HHS (expected in the near future) will define minimum essential coverage, minimum value measurements, and to what extent affordability requirement applies to dependent coverage.

Recommended Action: Watch for additional guidance.

Automatic Enrollment

Summary: Employers must automatically enroll new and existing full-time employees in health insurance plans.

Effective Date: To be determined

Responsible Party: Employer

Comments: Employees may opt out. This provision of ACA will not be implemented on 1/1/14 (i.e. it has been delayed), however a new effective date has not yet been established.

Recommended Action: Watch for guidance.

Employer Reporting Requirements

Summary: Employers will be required to report certain information to the IRS annually.

Effective Date: To be determined

Responsible Party: Employer

Comments: Information expected to be reported includes matters such as employees who were offered coverage, the coverage offered, who was covered under the employer sponsored coverage, etc. Waiting on regulations for this provision.

Recommended Action: Watch for guidance. Determine how data will be gathered and tracked.

Tax on High Earners and Unearned Income

Summary: An annual tax on wages or unearned income of more than $200,000 for singles and $250,000 for married couples

Effective Date: Tax years beginning 1/1/2013 and later

Responsible Party: Individual taxpayers

Comments: 0.9% Medicare surtax on wages in excess of $200,000 single/$250,000 married couples. 3.8% tax on unearned income for taxpayers with modified adjusted gross income in excess of $200,000 single/$250,000 married couples.

Recommended Action: Make sure your payroll department or payroll vendor is aware of this tax provision and the effective date.

High-Cost Insurance Tax

Summary: An annual excise tax on high-cost health plans

Effective Date: Tax years beginning 1/1/2018 and later

Responsible Party: Employer

Comments: Tax of 40% on health plan costs that exceed “Cadillac” plan thresholds of $10,200 for single coverage or $27,500 for family coverage.

Recommended Action: Monitor plan costs if needed, implement cost savings measures early.