Individual mandate to expire in 2019.
Beginning January 1, 2019, there will no longer be a penalty on individuals who fail to maintain “minimum essential coverage.”
Employer mandate remains in force.
Applicable large employers (generally speaking, that means a single employer or group of related employers with over 50 employees between them during the previous year) are still required to offer qualifying coverage to their full-time employees in 2018 and beyond, or pay significant penalties.
The “A” Penalty. Applicable large employers who fail to offer coverage to at least 95% of their full-time employees will pay a penalty in 2018, calculated based on the total number of full-time employees (minus a 30 employee allowance) multiplied by $2,320.
The “B” Penalty. A separate penalty applies to applicable large employers who offer coverage, but that coverage is not affordable or does not provide minimum value. This penalty is assessed at $290 per month for each employee who receives a premium tax credit (or other Marketplace subsidies) and is not offered affordable coverage providing minimum value.
What is minimum value? Minimum value means that the coverage is actuarially valued to provide at least 60% of the total cost of medical services to a population.
Large employers still required to submit Forms 1094-C and 1095-C.
Along with the mandate to offer coverage, applicable large employers also need to continue filing the 1094-C and 1095-C reports to the IRS. These employers also need to provide the 1095-C to full-time employees. The deadlines for these reports are:
• Jan. 31 to mail the 1095-C to employees (although a 30-day extension has been granted in prior years)
• Feb. 28 to file the 1094-C and 1095-C forms (if mailing paper returns)
• March 31 to file 1094-C and 1095-C forms (if filing electronically).
Failure to meet these reporting deadlines can result in penalties of $260 per failure to file, and another $260 for failure to mail the report to full-time employees. So employers could pay up to $520 per full-time employee if they do not mail and file the forms as required.
What About Small Employers?
The “employer mandate” to offer coverage only applies to applicable large employers. However, smaller employers who provide self-funded medical coverage (including level-funded plans) also need to file form 1094-C and 1095-C for each covered individual on the plan, and mail a 1095-C report to each covered individual.
Is the IRS Enforcing Penalties?
Beginning last fall, the IRS started issuing penalty notices (known as Letter 226J) to employers whose 1094-C and 1095-C reports showed they owe either the “A” or “B” penalty under the tax code. Employers who receive a 226J letter must respond within 30 days in order to disagree with the penalty, or they will receive a tax bill for the full amount. Other letters have been sent to employers who were required to file, but failed to file, the 1094-C and 1095-C form.
What Should I Do Now?
All employers should be able to answer the following questions:
1. Is our organization an applicable large employer or part of a group of employers that together qualify as an ALE?
2. If so, do we offer affordable coverage to all full-time employees and does that coverage provide minimum value?
3. Are we correctly reporting these offers of coverage on the 1094-C and 1095-C forms and issuing the 1095-C forms to all full-time employees?
4. For small employers, are we offering self-funded (or level funded) medical benefits and if so, are we correctly and timely filing the 1094-B and 1095-B forms and issuing the 1095-B to all covered individuals?
If you are not sure of the answer to any of these questions, please contact your JRG employee benefit advisor for more information! We will be happy to help answer your questions and help you come up with a plan to make sure you are in compliance with the ACA.