The United States Supreme Court upheld the Affordable Care Act (the "Act") in a recent decision involving the use of the insurance exchanges. Employers are now certain that they must deal with the requirements of the Act including scope and levels of coverage, as well as reporting and disclosure. However, recent events other than the court's decision will have an impact on the implementation of the Act.

Employers know that they must determine their exposure to various requirements based upon whether or not they meet the definition of a "large employer," which means having more than 50 full-time equivalent employees during the preceding calendar year. The definition of employee is critical in addressing the 50 employee test, but it has now been made more challenging by the issuance on July 15, 2015 by the Department of Labor ("DOL") of Administrator's Interpretation 2015-1. In its action, the DOL has effectively expanded the definition of employee which will influence the count of employees for purposes of the Act.

Many employers understandably rely on the use of genuine independent contractors to provide periodic and specified services. The DOL basically takes the position that nearly every person rendering services for an employer is an employee. Now, employers will need to look more closely at their independent contractors and determine how those persons measure up against the six factors in the Interpretation. Typically, an independent contractor is a person who (i) has special skills and uses those skills in an independent manner; (ii) bears his or her own costs in order to conduct the business; and (iii) provides service to more than one service recipient. Independent contractors also have their own liability insurance and pay for their own Social Security and Medicare benefits. Employers will need to revisit those factors, but more importantly, they will also need to ask how long they have used this independent contractor and whether the services been provided for an integral part of their business. While the DOL action pertains to an interpretation under the Fair Labor Standards Act ("FSLA") and the administrative interpretation is not the equivalent of a law, the courts tend to give deference to the agency charged with administering certain laws. Therefore, for purposes of the FLSA and counting employees under the ACA, a review of the definition of employee is well-advised.

The Act has imposed additional reporting and disclosure requirements on large employers which are effective for 2015. These requirements are contained Internal Revenue Code Section 6056 which require employers to report on whether it offers minimum essential coverage and whether the coverage is affordable and provides minimum value. Two new IRS forms must be used to comply with the reporting requirement. The first is Form 1095-B which addresses covered individuals and the second is Form 1095-C which pertains to health insurance offers and coverage. Unfortunately, recently, Congress decided to add a small minefield to the reporting and disclosure requirements. Trade legislation that was signed in June includes substantial increases in penalties for errors on informational returns. For example, the penalty for errors on the Form W-2 which reports compensation and withholding will increase from $100 per failure to $250 per failure for each incorrect information return that is filed with the Internal Revenue Service and for each copy that must be sent to the payee. Therefore, one error on a 2015 information return which would be filed in 2016 may result in a $500 penalty. Fortunately, the penalty can be abated for reasonable cause. However, the exposure to the penalty for an employer will now be increased because of the new Forms 1095 and their respective transmittal forms. These forms must be filed annually. Moreover, they are not simple forms as they address whether an individual has qualifying health insurance coverage and whether the applicable large employer has met the employer shared responsibility requirements under the ACA.

Certainly, the additional reporting requirements are difficult enough, but to increase the penalties for errors on the back of this new requirement is unnecessary, and for Congress to include this in the trade legislation is very troubling. Nonetheless, we recommend that large employers meet with their accountants to establish a procedure for checking the information. We also recommend that a procedure be put in writing as to who has primary responsibility for the preparation of the forms and if possible who has primary responsibility for reviewing the form. Employers may want to check with their payroll service to see how it will be addressing this requirement and whether or not it will attempt to pass the responsibility back to the employer.

Lastly, with the decision of the United States Supreme Court in Obergefell regarding same-sex marriages, employers now need to review the terms of their health care plan if the plan offers spousal coverage. The employer will need to work with its insurance company or third party administrator to make sure that it has a procedure in place for identifying spouses and for making sure that COBRA notices reach the right person.