While plan sponsors of group health plans breathed a little easier this year-end, there are still important action items and reminders to consider as we look to 2016.
ACA Reporting Extension
The IRS granted a 60-day extension for furnishing/filing Affordable Care Act (ACA) reporting forms just as the deadlines drew near for employers to complete Forms 1095-C, 1095-B, and their applicable transmittal forms. The deadline for furnishing 2015 Forms 1095-B and 1095-C to individuals has been extended from February 1, 2016 to March 31, 2016. The deadline for filing 2015 Forms 1094-B and 1094-C with the IRS has been extended from March 31, 2016 to June 30, 2016 (for those filing electronically) and from February 29, 2016 to May 31, 2016 (for those not filing electronically).
Electronic filing is required for all employers filing 250 or more Forms 1095-C. Employers filing 250 or more Forms 1095-C may seek a hardship waiver from the electronic filing requirement by submitting IRS Form 8508 at least 45 days before the due date. If a waiver is not obtained and the employer fails to file electronically, the employer is deemed to have failed to file and may be subject to a penalty of up to $250 per return unless reasonable cause is established.
In order to complete the electronic filing process, employers will need to obtain a transmitter control code (TCC) to access the Affordable Care Act Information Returns System (AIR). If this process has not yet been started, the employer’s responsible official should register using the IRS’s registration services process as soon as possible. A webpage outlining the process is available on the IRS website. Questions about AIR and the electronic filing process may also be submitted via email to email@example.com.
For more information about completing the forms, see Morgan Lewis’s October 2015 webinar “ACA Reporting—Nuts and Bolts.”
2016 Applicable Large Employer Status
Based on 2015 employee data, employers should determine whether they meet the definition of “applicable large employer” (ALE) in 2016 for purposes of the shared responsibility penalty under Code Section 4980H. An employer is deemed an ALE for 2016 if it employed an average of at least 50 full-time employees (as that term is defined under the ACA) on business days in 2015. The calculation includes conversion of part-time employees into full-time equivalents and rules for employment by multiple related ALEs to consider.
2015 Transitional Reinsurance Fee
The 2015 transitional reinsurance fee contribution of $44 per covered life may be paid in full by January 15, 2016, or in two installments—the first installment ($33 per covered life) due on January 15, 2016, and the second ($11 per covered life) due on November 15, 2016.
2015 Patient-Centered Outcome Research Institute (PCORI) Fee
The 2015 PCORI fee of $2.17 per covered life is due on July 31, 2016 for the 2015 plan year. The insurer is required to report and pay the PCORI fee on fully insured products.
“Cadillac Tax” Delay
On December 18, US President Barack Obama signed the Consolidated Appropriations Act, which delays the onset of the ACA "Cadillac Tax" by two years. As a result of the Consolidated Appropriations Act, the Cadillac Tax will not be imposed until 2020. Along with the two-year delay, the Cadillac Tax (if imposed) will now be deductible, indexing of the Cadillac Tax thresholds will start in 2018, and the controller general is ordered to study the underlying age and gender adjustments to the Cadillac Tax.
Apart from the delay and related mechanical changes, Congress also expressed a strong bipartisan desire (through a procedural vote during the legislative process) to eliminate the Cadillac Tax altogether. It remains to be seen whether the Congress and the next president will follow through on this possibility. In the interim, employers should continue planning for the 2020 imposition of the Cadillac Tax. It is unclear whether the delay will slow the growing momentum to adopt high deductible health plans paired with health savings accounts, or to pause changes that replace employer-provided retiree medical coverage with individual Medicare Supplemental policies. Finally, employers may need to revisit the accounting consequences of the delayed (and now deductible) Cadillac Tax, particularly in the context of retiree medical coverage.
Housekeeping for 2016 Changes to Health and Welfare Plans
The days of ever-expanding health benefits are at an end and are quickly being replaced with cutbacks to health benefits, particularly as employers were bracing for the impact of the Cadillac Tax prior to the delay described above. In order to be certain that these cutbacks can be implemented, employers should do the following:
- Amend or restate plan documents in advance of the start of a new plan year
- Have the proper entity adopt the changes in the appropriate fashion and timeframe
- Communicate the changes within the accelerated Summary of Material Modifications (SMM) timeframe if they represent a material reduction
- Revise and distribute an updated or new Summary Plan Description (SPD) in the correct timeframe
- Follow Summary of Benefits and Coverage (SBC) timeframes if the changes occur mid-year
- Be certain that ongoing plan and employee communication material contains strong reservation of rights language