Three key facts you need to know about the ACA in 2018

The IRS has released some key information regarding the Affordable Care Act for the coming plan year. If you operate on a calendar year basis, that’s now fewer than three months away.

Fact No. 1: Changes to forms and instructions

Neither the forms nor the instructions have changed very much. The draft 2017 Form 1094-C, which is the transmittal, again reflects the expiration of some transition relief.

The draft instructions to the 1094-C/1095-C make these clarifications:

  • The de minimis safe harbor rule applies to errors on line 15 of Form 1095-C. Under the de mimimis safe harbor, you don’t have to correct an error that’s not more than $100. Even better: You don’t have to inform recipients of your de minimis error. Caution: You remain on the hook for penalties for failing to filing incorrect information returns if recipients do request corrected forms.
  • Reporting COBRA. The IRS has included a link in the draft instructions to its FAQs on reporting COBRA coverage. Warning: The IRS has issued guidance to revenue agents that reminds them that they can’t rely on FAQs that appear on www.irs.gov, unless those FAQs explicitly indicate otherwise or the IRS has indicated otherwise in a press release, notice or announcement. It appears that the COBRA FAQs don’t fall under this exception.
  • Line 16 coding. You indicate whether you qualify for safe harbor or other relief from free-rider penalties on Line 16. The instructions clarify that there is no specific code to enter on Line 16 to indicate that a full-time employee offered coverage either didn’t enroll in the coverage or waived the coverage.
  • Plan start month. Part II of the draft Form 1095-C solicits information on the first month of your plan year. It was optional for 2016 reporting and remains optional for 2017 reporting. The IRS notes, however, that it may become mandatory with 2018 reporting.

Fact #2: Affordability determination

You may need to rejigger your offer of group health benefits to full-time employees to ensure that it remains affordable.

For the 2018 plan year, your offer of group benefits will be considered affordable (thus allowing you to escape free-rider penalties) if employees’ monthly premiums don’t exceed 9.56% of your chosen safe harbor:

  • W-2, Box 1 safe harbor
  • Rate of pay a safe harbor
  • Federal poverty line safe harbor.

The affordability percentage for 2017 is 9.69%.

If you use the federal poverty line safe harbor, you may use the amount in effect six months before the start of the plan year. For 2017, the federal poverty line is $12,060, so the affordable monthly premium is $96.08 ($12,060 × 9.56% ÷ 12).

Fact #3: Free-rider penalties

There are two free-rider penalties for which you may be liable. The IRS inflation adjusts these penalties every year.

  • Failure to offer any insurance. Under tax code Section 4980H(a), you will be liable for a free-rider penalty if you fail to offer your full-time employees any group health benefits and one employee obtains health insurance on the exchange and receives a premium tax credit. For the 2018 plan year, the adjusted penalty is $2,320 ($193.33 a month).
  • Failure to offer affordable insurance. Under tax code Section 4980(b), you will be liable for a free-rider penalty if you fail to offer affordable group benefits or the offered benefits don’t provide minimum value to your full-time employees and, again, one employee obtains health insurance on the exchange and receives a premium tax credit. For the 2018 plan year, the adjusted penalty is $3,480 ($290 a month).