legislative update  
Guidance on Several Important ACA Provisions

 

Recently, the Departments of Health and Human Services and the Internal Revenue Service separately released several new sets of FAQs providing clarification on key provisions in the Affordable Care Act (ACA). At the same time, HHS also released final regulations on the Exchange and insurance market standards for 2015 and beyond.

  

Pay or Play Rules-Dependent Coverage Requirement

On May 13, 2014, the IRS updated its Questions and Answers on the Employer Shared Responsibility Provisions to include further clarification and information for employers. Notably, these Q&As address consequences under the employer shared responsibility rules for applicable large employers that offer health insurance coverage to all full-time employees, but do not offer dependent coverage. In general, an applicable large employer will potentially be liable for a penalty only if:

  • The employer does not offer health coverage to the dependents of its full-time employees (as well as to  those full-time employees themselves); and
  • At least one of its full-time employees receives a subsidy for purchasing individual coverage through an Exchange.

Whether or not one or more of its full-time employees' dependents enrolls through an Exchange and receives a subsidy does not affect an employer's liability. The FAQs also noted that transition relief is available with respect to offering dependent coverage in 2015.

 

Pay or Play - Penalties for Failing to Offer Dependent Coverage

 

Reimbursement to Employees for Individual Insurance Policy Premiums

At the same time, the IRS released a separate set of FAQs addressing the consequences for employers that do not establish a health insurance plan for their employees, but instead reimburse employees on a pre-tax basis for premiums they pay for individual health insurance (either inside or outside of an Exchange). These arrangements are known as "employer payment plans." The FAQs indicate that these arrangements do not comply with the ACA's market reforms, and thus, may be subject to an excise tax of $100 per day for each applicable employee ($36,500 per year per employee) under Code section 4980D. However, premium reimbursement arrangements made on an after-tax basis will still generally be permitted. In addition, this restriction does not apply to individual policies that are limited to coverage that is excepted from the ACA's market reforms, such as retiree-only coverage, or limited-scope dental or vision benefits.

 

Consequences of Reimbursing Individual Insurance Premiums for Employees

 

Other Guidance

The IRS also released a set of FAQs clarifying rules for determining FTEs and average annual wages for purposes of the Small Business Health Care Tax Credit. In addition, HHS released FAQs on health insurance market reforms and Exchange standards, as well as technical FAQs related to federally-facilitated SHOP Exchange enrollments.

 

 

Have Questions?  Contact JA Benefits at 812.279.9500.

  
JA Benefits, LLC
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Bedford, IN 47421
  
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