Leo Ortega Paylocity Senior District Sales Manager - - PowerPoint PPT Presentation

Leo Ortega Paylocity Senior District Sales Manager lortega@paylocity.com 512.667.4843

Driving Better Outcomes

Disclaimer

• The information in this presentation is based on

IRS guidance and form instructions as of 2/21/2015

• It may subject to further regulatory clarification
• This presentation is not professional, legal, tax,

accounting or benefit advice. You are encouraged to engage a professional in these areas

• This presentation may not be appropriate for all
• employers. Some employers, such as those with

multi-employer plans, government entities and educational institutions, may have additional scenarios not covered in this presentation

ACA Dashboard & Analytics

Paylocity’s innovative ACA Dashboard and comprehensive analytics allows companies to easily manage ACA complexity. Armed with Paylocity’s ACA tools employers and their trusted brokers have access to real time data for powerful strategic data driven decisions.

Affordable Health Care Act

COMPLIANCE

It is constantly evolving … how has your application adapted?

74%

Of companies biggest concern is that Healthcare Reform is constantly evolving

Cryptic? We’ll sort it out!

6055 6056 1094-C 1095-C MEC MV 1A 1B 1C 1D 1E 1F 2A 2B 2C 2D 2E 4980(h)

Shared Responsibility Requires…

large employers must

• ffer an affordable

health plan providing minimum value to a percentage of all full- time employees or face a penalty.

Refresh me on affordability…

Affordability safe harbors

• Box 1 W-2 Wages
• Federal Poverty

Level (Single)

• Full-time equivalent

wages – (Employee Rate x 130 hours per month ) Cost of single coverage in the least expensive plan providing minimum essential coverage cannot exceed 9.5% of…

The affordability test means single coverage in an employer’s least expensive plan that provides minimum essential coverage cannot exceed 9.5% of “income.” There are multiple safe harbor methods to determine “income” for this test:

How do I know who is “full-time”?

Who is full-time?

Under ACA, an employee is considered full-time of they work on average 30 hours per week or 130 hours per month. If, by the nature of the employees position, he or she is reasonably expected to work on average 30 hours per week or 130 hours per month, they should be classified as full-time for benefit eligibility purposes and must be offered benefits subject to a maximum 90-day waiting period If the employee is definitely not full-time, there is no requirement to offer coverage If it is unknown whether the employee is full-time or part-time, they are known as a variable hour employee

What is a “measurement period”?

A measurement period is a company selected 3-12 month timeframe that is used to determine whether a variable-hour employee is full-time for benefit eligibility. If the employee averages 30 hours per week or 130 hours per month or more in this period they are considered full-time employees and must be offered insurance coverage.

What is a “measurement period”?

There are two types of measurement periods. The standard measurement period is applied to all employees in a group (more on that later) and begins and ends on the same date for all employees in the group. The initial measurement period is applied per newly hired variable hour employee and generally coincides with the beginning of employment.

What is a “stability period”?

If they are determined to be full-time in the measurement period, their full- time status and eligibility for benefits is locked in for the following stability period. In general, the stability period is the same length as the measurement period, but cannot be less than 6 months long.

What is an ‘administrative period’?

Employers may elect to use an administrative period up to 90 days between the measurement period and the stability period to determine who is eligible for coverage and to notify and enroll employees. To prevent gaps in coverage, this must overlap with the prior stability period.

Examples

Special rules for new hires

For newly hired variable-hour employees, the initial measurement period combined with the administrative cannot extend beyond “the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date”

Special rules for new hires

For newly hired variable-hour employees, the initial measurement period combined with the administrative cannot extend beyond “the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date”

Mar. April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. April May

Hired March 15 Anniversary End of Measurement and Admin Period Coverage Begins

Denise F.

Hired March 15

Special rules for new hires

For newly hired variable-hour employees, the initial measurement period combined with the administrative cannot extend beyond “the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date”

Mar. April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. April May

Hired March 15 Anniversary End of Measurement and Admin Period Coverage Begins

Denise F.

Hired March 15

Employers with an 11 or 12 month measurement period cannot use a 90 day administrative period with new hires

ACA Reporting Requirements

Why is reporting required?

The filing of informational returns to support enforcement of the individual mandate and employer mandate are authorized by section 6055 and 6056 of the Internal Revenue Code

Section 6055

Section 6055 reporting is required by “providers of coverage”. It details all the individuals covered by that provider and which months in the calendar year they were covered. This information is instrumental to the IRS to administer the individual mandate. “Providers of coverage” includes private insurers (think BCBS, Kaiser etc.) public programs (such as VA, Medicare and SCHIP programs). Employers that self-insure are ALSO considered “providers of coverage”. As a convenience to employers that self –insure, the information required by this section can be combined with the reporting required under section 6056.

Section 6056

Section 6056 reporting has a number of objectives:

• It provides the IRS with the data needed to administer the employer

shared responsibility provisions of the ACA

• It provides employees with new data needed to determine eligibility for

premium tax credits when purchasing exchange coverage

• For employers with a self-insured offering, the associated return can

also include the “who’s covered” information otherwise required by section 6055

Section 6056

Section 6056 reporting introduces two new tax forms to the employer:

• 1095-C is a new tax document the employer must issue to the

employee and file with the IRS outlining details of the coverage offered by the employer, and the status of the employer’s offer of coverage to that employee by month.

• The 1095-C is issued only to employees that were full-time for one or

more month in the previous calendar year.

• This document is unique to each employee (just like a W-2 is)
• This document must be furnished to each employee by January 31 for

the previous year.

• Employers issuing more than 250 1095-Cs must file their IRS copies

electronically

Section 6056

Section 6056 reporting introduces two new tax forms to the employer:

• 1094-C is a what is called a “transmittal”. It sums up the information

from the individual 1095-C forms (much like the W-3 is a transmittal of all the employer’s form W-2s)

• It also provides employer-specific details such as the number of full-

time employees and total employees per month, and also whether the employer is eligible for other relief criteria

• This filing is due to the IRS by March 31 for the previous year’s

information if filing electronically (February 28th if filing on paper)

Which employers must file?

• All applicable large employers (50 or more full-time employees and

equivalents employed per month on average in a calendar year) must file forms 1094-C and 1095-C.

• This must be done regardless of whether the employer offers insurance

coverage.

What about employers with < 100 FTEs?

The IRS introduced transition relief for 2015 which excuses penalties for employers with fewer than 100 full-time employees and equivalents. Even through these employers would not face a penalty for failing to offer coverage (or for offering unaffordable coverage) this transition relief is NOT automatic. These employers must still comply with the aforementioned reporting requirements.

ALE Group Reporting Considerations

For ALE Groups

• An employer can choose to file multiple 1094-Cs (one for each

division for example). If they do this, ONE of the 1094-Cs must be designated the authoritative transmittal.

• The authoritative transmittal reports aggregate information for parts

II-IV of the 1094-C (total 1095-Cs, monthly employee counts)

• An employee that works for multiple employers in the same ALE

group must be issued a separate 1095-C from each employer.

A look at the final form…

Form 1095-C

Identifying information for the employee and employer

Form 1095-C

Line 14 identifies if there was an offer

• f coverage, whether it provides

minimum essential coverage, and who it covers

Form 1095-C

Line 14 “Code Series 1” for each month…

• If the employee wasn’t offered coverage for a

month whatever the reason – code 1H

• If the employee was offered MEC coverage

providing minimum value- – Employee only – code 1B – Employee + Dependents – code 1C – Employee + Spouse – code 1D – Employee + Spouse + Dependents – code 1E

• If the employee was offered MEC coverage

NOT providing minimum value – code 1F

Line 15 shows the monthly employee premium for single coverage in the least expensive minimum essential coverage plan.

Form 1095-C

ONLY complete if the corresponding line 14 code is 1B, 1C, 1D or 1E

Form 1095-C

Line 16 identifies employer safe harbors for coverage and affordability

Form 1095-C

Line 16 “Code Series 2” for each month…

• If the employee was enrolled in coverage – code 2C
• If the employee was not employed in the month – code 2A
• If the employee was not a full-time employee – code 2B
• If a variable-hour employee is in their initial measurement
• r administrative period – code 2D
• If the employee is eligible but in a waiting period – code 2D
• If the employee was hired other than the 1st of the month –

2D

• If the employer used an affordability safe harbor (and no
• ther codes apply)

2F – W-2 method, 2G – Federal Poverty Level method, 2H – Rate of Pay method

“Covered Individuals” information for employees enrolled in self-insured coverage

Form 1095-C

1095-C Examples

Blue Sun Corporation

• Offers affordable MEC, MV coverage to all full-time employees only.

New hires are eligible for coverage the first of the month after 30

• days. The lowest cost option is a HDHP plan costing $55.85 per

month

• Adelei Niska is a newly hired (On February 5, 2015) full-time

employee that enrolls himself only in a self-insured PPO plan for $88.25 a month.

Blue Sun Corporation

Blue Sun Corporation

Adelei was hired in February, and with his waiting period, coverage is not offered until April1, so code 1H signifies that no coverage was offered.

Blue Sun Corporation

Even though coverage was not offered for Jan-March, the reason for not offering coverage changed from ‘he wasn’t employed in this month’ (2A) to ‘he is in his waiting period…aka a “limited non- assessment period”’ (2D)

Blue Sun Corporation

Even though Adelei enrolled in a more expensive PPO plan option at $88.25 a month, the 1095-C line 15 still reflects the cost of single coverage in the least expensive MEC plan offered (a HDHP in this case) priced at $55.85

Blue Sun Corporation

Because the plan Adelei actually enrolled in was self-insured, Part III is required to be completed for each individual covered under the plan (just him in this example)

Barron’s Burger Barn

• Offers affordable MEC, providing MV to the employee and

dependents only (not to spouses). Variable hour employees are subject to a 12 month measurement period. Barron’s Burger Barn uses the rate-of-pay affordability safe harbor. The cost of single- coverage in the most affordable plan option is $110.00

• Robert Belcher Jr. is a variable hour employee hired on February 5,
• 2014. His initial measurement period and initial administrative

period end March 31, 2015. He is offered MEC coverage but declines to enroll.

Barron’s Burger Barn

Barron’s Burger Barn

Because Robert was in his initial measurement or initial administrative period, we use code 1H to signify that he was not yet offered coverage

Barron’s Burger Barn

Line 16 clarifies that for those months, the reason he was not offered coverage was because he was in a “Limited non-assessment period” (which an initial measurement and administrative period is)

Barron’s Burger Barn

Since Robert turns out to be full-time as a result of the initial period, he is offered up to employee+dependent coverage (code 1C)

Barron’s Burger Barn

The cost of single coverage in the least expensive plan offered is $110.00 a month and is reflected in line 15

Barron’s Burger Barn

Barron’s Burger Barn has elected to use the rate of pay affordability safe harbor (indicated by code 2H) and that is used here since no other 2-series code trumps it. Had Robert actually enrolled, 2C (employee enrolled in coverage offered) would take precedence

And now the transmittal…

Identifying information for the employer

Identifying information for employer groups

Certifications of eligibility

Full-time and total employee counts by month for the ALE member 50-99 FTE Code A 100+ FTE Cod B

Listing of related companies in the aggregated employer group