Health Insurance – Setnor Byer Insurance & Risk

ACA reporting and filing activity intensifies as deadline approaches

By Anita Byer, Setnor Byer Insurance & Risk

The beginning of the new year means that it is time for Applicable Large Employers to turn their attention to the Affordable Care Act’s annual information reporting requirements. Employers with 50 or more full-time or full-time equivalent employees during the preceding calendar year are generally considered Applicable Large Employers (ALEs) under the ACA. As such, they are required to furnish and file information statements relating to health insurance that was offered to their full-time employees during the preceding calendar year.

To comply with the ACA’s reporting requirements, ALEs are generally required to furnish a Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) to each full-time employee. Applicable Large Employers must also file every Form 1095-C with the IRS, along with Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns). The deadlines to furnish and file these forms for 2023 occur in early 2024, but this year will be a little different because it is a leap year.

Furnish Information Statements to Full-Time Employees. The original deadline for ALEs to furnish each year’s Form 1095-C to full-time employees was January 31 of the following year, but this deadline was extended annually by the IRS. In 2022, the IRS permanently extended the deadline by granting ALEs an automatic 30-day extension to furnish Forms 1095-C to full-time employees. With the automatic extension, the deadline would be March 2, but since 2024 is a leap year, the deadline to furnish the 2023 Form 1095-C to full-time employees is March 1, 2024.

Electronically File Information Returns and Transmittals with the IRS. Applicable Large Employers are required to file every Form 1095-C, along with Form 1094-C, with the IRS. (This deadline was not extended by the IRS.) The normal deadline to electronically file these forms is March 31, but because this date falls on a Sunday this year, the deadline for ALEs to electronically file their 2023 forms with the IRS is April 1, 2024.

Note that there is a separate deadline for forms submitted to the IRS on paper, which is February 28, 2024. However, to encourage the electronic filing of these forms, the IRS decreased the electronic-filing threshold from 250 forms to ten forms. As a result, ALEs filing ten or more forms in the aggregate must do so electronically.

Applicable Large Employers must take their ACA reporting obligations seriously. The penalty for failing to properly file the required ACA reporting forms can be up to $630 per form. The deadlines are approaching quickly, so there is no time to waste. Please contact us if you would like to learn more about ACA-compliant group health plans.

ACA’s affordability threshold will be lower than ever before in 2024

By Anita Byer, Setnor Byer Insurance & Risk

The Affordable Care Act’s affordability threshold will be lower in 2024 than ever before. The Internal Revenue Service recently announced that the affordability threshold for employer-sponsored group health plans that begin in 2024 will be 8.39 percent. The affordability threshold, which is currently 9.12 percent, affects an employer’s potential liability for shared responsibility assessments (the pay-or-play penalty) under the ACA. The decreasing threshold means that an affordable group health plan in 2023 could become “unaffordable” in 2024, despite identical pricing and employee contribution requirements. So, employers with 50 or more full-time or full-time equivalent employees (Applicable Large Employers or ALEs) must review, and possibly adjust, employee cost and contribution requirements for group health insurance coverage in 2024.

Applicable Large Employers are generally required to offer full-time employees “affordable” minimum essential health care coverage to avoid an ACA shared responsibility assessment (penalty). Affordability is calculated as a percentage of household income. To be affordable in 2024, an employee’s required contribution for the lowest-cost, self-only coverage option offered by their employer (regardless of which coverage option is selected) cannot exceed 8.39 percent of that employee’s household income.

Since employers typically do not know their employees’ household incomes, ALEs can use one of the ACA’s affordability safe harbors to determine the maximum amount an employee can be required to pay without exceeding the affordability threshold. For example, assume Sam works 40 hours per week for 52 weeks, earning $12 per hour. The most Sam can be required to pay for the lowest-cost, self-only coverage option offered by Sam’s employer during the 2024 plan year is:

$174.51 per month (W-2 Safe Harbor Method);
$130.88 per month (Rate of Pay Safe Harbor Method); or
$101.94 per month (Federal Poverty Line Safe Harbor Method [48 Contiguous States 2023]).

If Sam earned $15 per hour, Sam’s required contribution for the lowest-cost, self-only coverage option cannot exceed:

$218.14 per month (W-2 Safe Harbor Method);
$163.61 per month (Rate of Pay Safe Harbor Method); or
$101.94 per month (Federal Poverty Line Safe Harbor Method [48 Contiguous States 2023]).

Note that the basis on which the ACA’s affordability threshold is applied is plan-year, not calendar-year. In other words, next year’s affordability threshold (8.39 percent) will apply on the first day of the new plan year in 2024, which could be January 1, July 1, or any other day in 2024. For non-calendar-year plans, the current affordability threshold (9.12 percent) will continue to apply until the new plan year begins in 2024.

The consequences for failing to satisfy the ACA’s affordability requirement can be severe. Applicable Large Employers need to review, and possibly adjust, next year’s group health plan offerings, pricing options, cost-sharing structure, and in some cases, compensation levels, to ensure compliance with the ACA’s affordability requirement.

Please contact us if you would like to learn more about affordable group health plan options for 2024.

ACA’s affordability threshold will be lower in 2023

By Anita Byer, Setnor Byer Insurance & Risk

The IRS announced that the Affordable Care Act’s affordability threshold for employer-sponsored group health plans will be 9.12 percent in 2023. Employers with 50 or more full-time or full-time equivalent employees (Applicable Large Employers or ALEs) must recognize that next year’s affordability threshold will be lower than this year’s, which is 9.61 percent. This means that a group health plan that was affordable in 2022 may be unaffordable in 2023, despite being exactly the same. Many ALEs will need to adjust their group health plan contribution requirements to avoid potential ACA penalties in 2023.

ALEs are generally required to offer full-time employees “affordable” minimum essential health care coverage to avoid the ACA’s employer shared responsibility (pay-or-play) penalty. Affordability is calculated as a percentage of household income. To be affordable in 2023, an employee’s required contribution for the lowest-cost, self-only coverage option offered by their employer (regardless of which coverage option is actually selected) cannot exceed 9.12 percent of that employee’s household income.

Since employers typically do not know their employees’ household incomes, ALEs can use one of the ACA’s affordability safe harbors to determine the most employees can be required to pay without exceeding the affordability threshold. For example, let’s assume Jordan works 40 hours per week for 52 weeks, earning $10 per hour. The most Jordan can be required to pay for the lowest-cost, self-only coverage option offered by Jordan’s employer in 2023 is:

$158.08 per month (W-2 Safe Harbor Method);
$118.56 per month (Rate of Pay Safe Harbor Method); or
$103.28 per month (Federal Poverty Line Safe Harbor Method—2022).

If Jordan earned $15 per hour, Jordan’s required contribution for the lowest-cost, self-only coverage option cannot exceed:

$237.12 per month (W-2 Safe Harbor Method; “Box 1”);
$177.84 per month (Rate of Pay Safe Harbor Method); or
$103.28 per month (Federal Poverty Line Safe Harbor Method—2022).

The affordability threshold for group health plans beginning in 2023 is only a fraction of a percent lower than 2022’s threshold, but the consequences for ALE’s that fail to adapt accordingly can be substantial. To ensure compliance with the ACA’s affordability requirement in 2023, ALEs need to evaluate and possibly adjust their health plan pricing options, cost-sharing structure, and in some cases, compensation levels.

Please contact us if you would like to learn more about affordable group health plan options for 2023.

Affordable Care Act: Will Your Group Health Plan be “Affordable” in 2022?

By Anita Byer, Setnor Byer Insurance & Risk

The IRS announced that the Affordable Care Act’s affordability threshold for employer-sponsored group health plans will be 9.61 percent in 2022. Employers with 50 or more full-time or full-time equivalent employees (Applicable Large Employers or ALEs) must recognize that next year’s affordability threshold will be lower than the 9.83 percent used in 2021. This means that a group health plan that was affordable in 2021 may be considered unaffordable in 2022, despite being exactly the same. As a result, many ALEs will need to make adjustments to avoid potential ACA penalties in 2022.

ALEs are generally required to offer full-time employees “affordable” minimum essential health care coverage to avoid the ACA’s employer shared responsibility (pay-or-play) penalty. Affordability is calculated as a percentage of household income. Since employers typically do not know their employees’ household income, ALEs can use one of the ACA’s affordability safe harbors to determine the most employees can be required to pay without exceeding the affordability threshold.

For example, let’s assume Sam worked 40 hours per week for 52 weeks in 2022. If Sam earned $10 per hour, the most Sam can be required to pay for the lowest-cost, self-only coverage option offered by Sam’s employer is:

$166.57 per month (W-2 Safe Harbor Method);
$124.93 per month (Rate of Pay Safe Harbor Method); or
$103.15 per month (Federal Poverty Line Safe Harbor Method—2021).

If Sam earned $15 per hour, Sam’s required contribution for the lowest-cost, self-only coverage option cannot exceed:

$249.86 per month (W-2 Safe Harbor Method);
$187.39 per month (Rate of Pay Safe Harbor Method); or
$103.15 per month (Federal Poverty Line Safe Harbor Method—2021).

The affordability threshold for group health plans beginning in 2022 is only a fraction of a percent lower than this year’s threshold, but the consequences for ALE’s that fail to adapt accordingly can be substantial. To ensure compliance with the ACA’s affordability requirement in 2022, ALEs need to evaluate and possibly adjust their health plan pricing options, cost-sharing structure, and in some cases, compensation levels.

Please contact us if you would like to learn more about ACA-compliant group health plan options for 2022.

COVID-19 Update: FFCRA’s Mandatory Paid Leave Provisions Expiring December 31st; Tax Credits Extended Until March 31, 2021

Setnor Byer Insurance & Risk

On December 27, 2020, the second major coronavirus stimulus package was signed into law. The COVID-Related Tax Relief Act of 2020 includes a number of relief measures to address the health and economic impacts of the COVID-19 pandemic. But, what about the Families First Coronavirus Response Act’s mandatory paid leave requirements? Have they been extended or will they expire on the last day of the year? Congress, it seems, agreed to compromise. Although the final bill did not extend the FFCRA’s mandatory paid leave requirements, it did extend the payroll tax credit for employers opting to voluntarily provide paid COVID-19 leave until March 31, 2021.

The FFCRA’s two paid sick leave laws—the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act–generally require employers with fewer than 500 employees to provide paid leave to employees who are unable to work for qualifying reasons related to COVID-19. Eligible employees may receive up to 80 hours of paid sick leave and up to 10 weeks of paid family and medical leave. To offset the cost of providing paid COVID-19 leave, the FFCRA includes a payroll tax credit equal to 100 percent of the qualifying wages paid by employers to eligible employees.

As of January 1, 2021, the FFCRA’s paid leave provisions will be voluntary, not mandatory. Employers, however, have been given an incentive in the form of dollar-for-dollar payroll tax credits to continue providing paid leave pursuant to the FFCRA until March 31, 2021.

Employers considering this option must note that the extended tax credits are only available for paid leave that meets all the requirements of the FFCRA. Employers, for example, cannot claim tax credits for paid leave that is given for reasons other than those allowed under the FFCRA or that exceeds the limits set forth in the FFCRA (amount, duration, etc.). Additionally, the final bill does not refresh or replenish the amount of paid leave an employee can take under the FFCRA, so employers cannot claim tax credits for wages paid to an employee in excess of 80 hours or 10 weeks.

It’s unclear whether interpretive regulations will be issued in the near future. Nevertheless, employers must now decide whether to continue providing paid COVID-19 leave under the FFCRA beyond December 31, 2020. As always, employers should proceed cautiously to avoid harmful and costly errors. Employers should also have Employment Practices Liability Insurance to protect against various employment-related claims. Please contact us to learn more about EPLI coverage.

Affordable Care Act Update: IRS Extends ACA Reporting Deadline and Good-Faith Relief from Penalties

Setnor Byer Insurance & Risk

This seemingly endless year is almost over…finally. That means it’s time for Applicable Large Employers (ALEs) to start focusing on the Affordable Care Act’s annual information-reporting requirements. Fortunately, the Internal Revenue Service extended the deadline for ALEs to furnish 2020 information statements to employees. However, the deadline for ALEs to file information returns with the IRS has not been extended.

Applicable Large Employers, which are generally employers with 50 or more full-time or full-time equivalent employees in the previous year, must do the following to comply with the ACA’s annual reporting requirements.

Furnish Information Statements to Employees. The IRS extended the deadline to furnish 2020 Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) to employees from January 31, 2021 to March 2, 2021. This is the sixth consecutive year the IRS has extended this deadline.

File Information Returns and Transmittals with the IRS. Each 2020 Form 1095-C must also be filed with the IRS on or before February 28, 2021 (March 31, 2021, if filed electronically). The IRS did NOT extend this filing deadline. However, employers may request an automatic 30-day extension by filing Form 8809 before the ACA filing deadline.

The IRS also extended the good-faith relief from penalties that may be levied against ALEs for failing to comply with the ACA’s filing and furnishing requirements, which can be up to $280 per form. To be eligible for this relief, employers must make a good-faith effort to comply. In determining good faith, the IRS will consider whether reasonable efforts were made to prepare the required reports.

It’s important to note that this relief applies to forms with missing or inaccurate information. ALEs that fail to timely file or furnish the required reports are not eligible. According to the IRS, this is the last year they intend to provide good-faith relief from the ACA’s penalties.

Please contact us if you would like to learn more about ACA-compliant group health plans.

Affordable Care Act: Will Your Group Health Plan be Affordable in 2021?

The Affordable Care Act’s affordability threshold for employer-sponsored group health plans will increase to 9.83 percent in 2021. The affordability threshold is currently 9.78 percent. The impending increase primarily affects employers with 50 or more full-time or full-time equivalent employees. The ACA generally requires these Applicable Large Employers (ALEs) to offer full-time employees “affordable” minimum essential health care coverage; otherwise, they may have to pay the ACA’s employer shared responsibility (pay-or-play) penalty.

Affordability is calculated as a percentage of household income. In 2021, the amount an employee must pay (required contribution) for the lowest-cost, self-only coverage option offered by their ALE cannot be more than 9.83 percent of the employee’s household income. If it is, the employee’s offer of health coverage is not considered affordable and the ALE may be assessed a penalty under the ACA.

ALEs can use one of the ACA’s affordability safe harbors to determine the most employees can be required to pay without exceeding the affordability threshold. For example, if Sam earned $12 per hour in 2021 and worked 40 hours per week for 52 weeks, Sam’s monthly required contribution for coverage under the ALE’s 2021 calendar year group health plan cannot exceed:

— $204.46 per month, if using the W-2 Safe Harbor Method;
— $153.35 per month, if using the Rate of Pay Safe Harbor Method; or
— $104.53 per month, if using the Federal Poverty Line Safe Harbor Method.

Even though the affordability threshold for group health plans beginning in 2021 is only .05 percent higher than the year before, the difference can be consequential. To ensure compliance with the ACA’s affordability requirement in 2021, ALEs need to evaluate and possibly adjust their health plan pricing options, cost-sharing structure, and in some cases, compensation levels.

Please contact us if you would like to learn more about ACA-compliant group health plan options for 2021.

Mandatory Paid Coronavirus-Related Sick Leave Starts April 1, 2020

In a bipartisan effort, Congress passed the Families First Coronavirus Response Act to address the health and economic impacts of the coronavirus disease 2019 (COVID-19) pandemic. This federal law includes a new paid sick leave requirement to help employees who miss work due to COVID-19. It’s called the Emergency Paid Sick Leave Act (the Act).

When can employees start taking paid sick leave under the Act? April 2, 2020*, regardless of how long they have been employed.

*EFFECTIVE DATE UPDATE: Pursuant to the Act, the paid sick leave requirements “shall take effect not later than 15 days after the date of enactment.” On March 24, 2020, the Department of Labor announced that the Act will become effective April 1, 2020, which is only 14 days after the date of enactment.

Which employers are required to provide paid sick leave? The Act applies to employers with fewer than 500 employees. However, the Secretary of Labor has the authority to exempt businesses with fewer than 50 employees if paying sick leave would jeopardize the viability of the business as a going concern.

Which employees are eligible for paid sick leave? Employees who are unable to work or telework because they:

are subject to a Federal, State or local quarantine or isolation order related to COVID–19;
have been advised by a health care provider to self-quarantine due to concerns related to COVID–19;
are experiencing symptoms of COVID–19 and seeking a medical diagnosis;
are caring for an individual who has been ordered to quarantine or advised to self-quarantine;
are caring for a son or daughter whose school or child care provider is closed or unavailable due to COVID–19 precautions; or
are experiencing any other substantially similar condition specified by the Departments of Health and Human Services, Treasury and Labor.

How many hours of paid sick time does the Act provide? Full-time employees are entitled to 80 hours of paid sick time. Part-time employees are generally entitled to the average number of hours worked over a 2-week period, though special rules are used for part-time employees who work irregular hours.

How much must employees be paid while out on sick leave? Employees must be paid no less than their regular rate of pay or the applicable minimum wage, whichever is greater. Those taking leave for reasons 4, 5 or 6 above are entitled to two-thirds of such amount. Employees taking leave for reasons 1, 2 or 3 above cannot be paid more than $511 per day ($5,110 in the aggregate). Those taking leave for reasons 4, 5 or 6 cannot be paid more than $200 per day ($2,000 in the aggregate).

What are some other significant provisions in the Act?

Employers cannot require employees to use other types of paid leave before using the paid leave provided by the Act.
Employers may not retaliate or discriminate against employees who take leave pursuant to the Act.
Violations of the Act will be enforced like violations of the Fair Labor Standards Act’s minimum wage requirement.
The Secretary of Labor is required to create a model notice about the Act’s requirements that employers will be required to post in a conspicuous place.
The Act automatically expires December 31, 2020.

Employers and employees alike are awaiting the Secretary of Labor’s regulations, particularly those pertaining to potential exemptions from the Act’s paid sick leave requirements for employers with fewer than 50 employees. Until then, employers are encouraged to get familiar with the Act’s requirements and consult with legal counsel if necessary.

Affordable Care Act Update: IRS Announces Affordability Threshold for 2020

The Internal Revenue Service announced that the Affordable Care Act’s affordability threshold will be 9.78 percent in 2020. This is important because employers with 50 or more full-time or full-time equivalent employees in the preceding calendar year (Applicable Large Employers or ALEs) must offer their full-time employees minimum essential health care coverage that is affordable. Otherwise, they may have to pay the ACA’s employer shared responsibility (employer mandate) penalty.

Affordability under the ACA is calculated as a percentage of household income. So, to satisfy the ACA’s affordability requirement in 2020, the lowest-cost, self-only coverage option offered by Applicable Large Employers may not exceed 9.78 percent of an employee’s household income. The affordability threshold is adjusted annually. In 2019, it was 9.86 percent.

ALEs can use one of the ACA’s affordability safe harbors to determine the most employees can be required to pay without exceeding the affordability threshold. For example, if Pat earned $10 per hour in 2020 and worked 40 hours per week for 52 weeks, Pat’s monthly payment cannot exceed:

W-2 Safe Harbor: $169.52 ($170.91 in 2019);
Rate of Pay Safe Harbor: $127.14 ($128.18 in 2019); or
Federal Poverty Line Safe Harbor: $101.79 ($99.75 in 2019).

Despite being small, these changes can still be significant. To ensure compliance with the ACA’s affordability requirement in 2020, ALEs need to evaluate and possibly adjust their health plan pricing options, cost-sharing structure, and in some cases, compensation levels.

Please contact us if you would like to learn more about ACA-compliant group health plans.

Affordable Care Act: Will Your Group Health Plan be Affordable in 2019?

Unlike the Individual Mandate, the Affordable Care Act’s Employer Mandate isn’t going anywhere in 2019. Employers with 50 or more full-time and full-time equivalent employees will still have to offer “affordable” health coverage to avoid ACA penalties. But, there is a sliver of good news. Next year, employers will be able to increase the required employee contribution for coverage under their group health plans.

To satisfy the ACA’s initial affordability requirement, an employee’s required contribution for the lowest cost, self-only coverage could not be more than 9.5 percent of the employee’s household income. However, the initial affordability percentage is adjusted annually by the Internal Revenue Service. In 2019, the affordability percentage will be 9.86 percent.

When compared to prior years, the 2019 affordability adjustment represents the largest percentage increase under the ACA.

2014 9.5

2015 9.56

2016 9.66

2017 9.69

2018 9.56

2019 9.86

We can use the ACA’s affordability safe harbors to translate this percentage increase into dollars and cents. These safe harbors provide various methods for calculating the most an employer can charge employees for the lowest cost, self-only health coverage option without exceeding the ACA’s affordability threshold.

W-2 Safe Harbor. The maximum monthly contribution for a federal minimum wage employee ($7.25 per hour) who works 40 hours per week for 52 weeks in 2019 will be $123.91 (+ $3.77).
Rate of Pay Safe Harbor. The maximum monthly contribution for a federal minimum wage employee ($7.25 per hour) in 2019 will be $92.93 (+ $2.83).
Federal Poverty Line Safe Harbor. Based on the 2018 single individual FPL of $12,140, the maximum monthly contribution in 2019 will be $99.75 (+ $3.03).

These increases may be modest, but they can add up quickly for very large employers. They can also provide some much-needed wiggle room for employers teetering on the edge of unaffordability. The ultimate impact of the 2019 affordability percentage increase can be inconsequential or substantial. Employers will need to reevaluate their cost-sharing structure to find out.

Please contact us if you would like to learn more about ACA-compliant group health plans.