The Affordable Care Act (ACA) is finally in full swing for all large employers.
Upshot: Employers with at least 50 full-time employees, including full-time equivalent employees, must offer 95% of those full-time employees and their nonspouse dependents affordable group health benefits that provide minimum value or pay a free-rider penalty if even one full-time employee buys health insurance on the individual exchanges and qualifies for a premium tax credit. Here’s what you need to know now.
1. Auto-enrollment repealed. The Bipartisan Budget Act of 2015 (P.L. 114-53) repeals an amendment to the Fair Labor Standards Act that required employers with more than 200 employees to automatically enroll new full-time employees into the group health plan. This provision never became effective because the Department of Labor never issued regulations.
Note: The repeal of this provision doesn’t impact employers with auto-enrollment plans that meet the requirements the IRS established in Rev. Rul. 2002-27.
Warning: Employees must still be given an effective opportunity to opt out of the coverage.
2. Exchange notices. The individual exchanges must notify you when one of your employees buys individual health insurance and qualifies for an advance premium tax credit or other cost-sharing reduction. You then have 90 days to appeal the employee’s eligibility for the credit. Fail to answer and you may in line for a free-rider penalty.
Beginning in 2016, exchanges operating through healthcare.gov are phasing in this notification requirement by notifying employers for whom they have a complete address that an employee is eligible for an advance premium tax credit for at least one month.
Key: You’ ll need three key pieces of information to dispute the employee’s eligibility for the credit: proof that the employee doesn’t work full time; the employee’s signed waiver of benefits, which shows that you made an offer of coverage for benefits that are affordable under your chosen safe harbor; or that the employee earns too much under any circumstances to qualify for the credit.
NO NOTICE ≠ NO LIABILITY: The exchanges didn’t send out notices last year and aren’t sending notices to all employers this year. Not receiving a notice isn’t a reprieve. The IRS will independently assess whether you’re liable for a free-rider penalty after it reconciles the employee’s 1040 and 1095-C forms with your 1094-C form.
Strategy: If you can’t appeal the marketplace’s notices within 90 days, say, because you have many notices to deal with, you can wait for the IRS’ assessment. There is no downside to waiting until you hear from the IRS.
3. Affordable coverage. For the 2016 plan year, your group coverage is affordable if it doesn’t exceed 9.66% of employees’ household income (9.56% for the 2015 plan year).