Updates on the Affordable Care Act

New guidance on various aspects of the Affordable Care Act has been continuous. In November 2013, Notice 2013-71 was released modifying the "Use It or Lose It" requirements on flexible spending accounts (FSAs). The Affordable Care Act puts a cap on employee FSA contributions starting in 2013 of $2,500. Notice 2013-71 allows $500 of this $2,500 to be carried over to the following plan year and used for qualifying medical expenses incurred in the following year. To comply, employers will need to amend their plan document. The plan can still maintain a "run-out period." This is the period of time in the year following the plan year in which qualified medical expenses of the previous year can be reimbursed. Plans adopting the $500 carryover can no longer have a grace period of up to two months and 15 days immediately following the plan year in which individuals may incur qualified medical expenses and receive reimbursement from the prior year's FSA.

Health Reimbursement Accounts

In September 2013, Notice 2013-54 was issued providing clarification on health reimbursement accounts (HRAs). Starting in 2014, stand-alone HRAs will no longer be in compliance. There are limited exceptions to this rule which include retiree-only HRAs and HRAs that are HIPAA excepted benefits. Many businesses are scrambling since their existing HRA will no longer be in compliance. It is important to note that HRAs that are integrated with a group health plan are not impacted. Also, this new law applies to plan years starting in 2014. Therefore, employers may fully fund their employees' HRA accounts up until the first day of their 2014 plan year.

Reporting Requirements

Also in September 2013, the IRS released proposed Section 6055 and 6056 regulations on the information reporting that large employers and insurance carriers will need to file for calendar years beginning January 2015. It is anticipated that the information for Section 6055 will be reported on Form 1095-B, and Section 6056 on Form 1095-C. These forms will help individuals determine whether or not they can claim a premium tax credit for each month of a calendar year. It will also be used as a tracking system for the IRS.

Employer Mandate Delay

In July 2013, the Treasury Department announced the delay of the employer mandate. This mandate, which was set to begin in 2014 and is now delayed until January 2015, requires employers with 50 or more full-time equivalent employees to offer their full-time employees affordable and adequate health insurance or face potential penalties. Although this mandate has been delayed, businesses need to look at their staffing now as the measurement period for 2015 starts in 2013 (for those employers choosing a 12-month measurement period).

The measurement period is a period of time often referred to as the look-back period, when employers can look at their employees' hours to determine if they meet the definition of a full-time employee. If employees are considered full-time, employers will need to offer these employees adequate and affordable health insurance during the following stability period. The measurement period is a useful tool to help employers with variable-hour employees. There is also an administration period which falls between the measurement period and the stability period. This is the period of time in which the employer is to provide the employees who are deemed full-time in the measurement period the adequate paperwork to sign up for insurance on day one of the stability period. This administration period cannot exceed 90 days.

An example is an employer who chooses a 12-month measurement period, a two-month administrative period and a corresponding 12-month stability period. The 12-month measurement period would run from November 1, 2013 - October 31, 2014; the administration period would run November 1, 2014 - December 31, 2014; and the stability period would run from January 1, 2015 - December 31, 2015. Employees who worked 1,560 hours or more during the measurement period would need to be offered insurance during the following stability period, calendar year 2015, which is when the employer mandate begins. This is a simple example of why businesses need to stay on top of the mechanics of the employer mandate as tracking of these employees has already begun.

Notification of the Exchange

In May 2013, the Department of Labor issued Technical Release 2013-02 detailing the requirements of businesses covered by the Fair Labor and Standards Act (FLSA) to provide a written "Notice of the Exchange" to employees. This requirement was often overlooked by businesses. In September 2013, the DOL announced that although giving this notification is still applicable, there will be no penalty for failure to provide a notification to employees. That said, we still recommend tracking what and how your notification was distributed to employees.

It is critical that businesses understand the impact of the Affordable Care Act. To learn more, please visit our Health Care Reform website.

First published in MN Valley Business magazine, December 2013. Click here to download the issue.