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On Friday, March 24, 2017, the U.S. House of Representatives’ Speaker Paul Ryan pulled from the floor the American Health Care Act (AHCA), the proposed legislation to repeal and replace the Affordable Care Act (ACA), once it was clear that the bill was short on votes to pass. Effectively, this means the AHCA will not survive to become law and, at this time, any future efforts to repeal and replace the ACA are uncertain. This may mean, as Speaker Ryan said shortly after the announcement that the bill was withdrawn, “Obamacare is the law of the land. We’re going to be living with Obamacare for the foreseeable future.” However, as of March 28, there have been reports that the House Republican leaders and the Trump administration have started renegotiations on legislation to repeal the ACA. At this time, there are no details about what may be in any renewed repeal legislation or the timing of its release or a vote.

What the AHCA Would Have Done If enacted, the AHCA would have retroactively repealed the individual and employer mandate penalties, delayed the 40% “Cadillac” tax on employer-sponsored health plans, made significant changes to the ACA insurance coverage and marketplace stabilization provisions, enhanced health savings accounts (HSAs), provided relief from many of the ACA’s taxes and fees, and curtailed Medicaid reforms, among other things.

The AHCA was intended to be Phase I of a three-phase approach to repeal and replace the ACA through the budget reconciliation process, which requires a simple majority vote in Congress. Phase II was envisioned to include regulatory relief by Health and Human Services (HHS) Secretary Thomas Price, and in Phase III legislation would be introduced to repeal the ACA market reforms, permit the sale of insurance across state lines, and effectuate other provisions that could not be addressed through the budget reconciliation process because of the Byrd rule, which limits reconciliation provisions in the Senate to provisions that affect government revenues and outlays.

Why it Failed In large part, the bill failed because the more conservative wing of the Republican Party, known as the Freedom Caucus, was against the bill because of its preservation of certain ACA provisions. Prior to the vote on the bill, which was initially scheduled for Thursday, changes were introduced (via what was referred to as the “Manager’s Amendment”) to add concessions (such as accelerating the repeal of most of the ACA tax provisions) in the hope that the Freedom Caucus, representing more than 30 members, would vote in favor of the bill. However, when realizing that even those concessions were not enough, additional concessions, including the repeal of the federal “essential health benefits” definition were added. At that point, more moderate Republicans were voicing concerns. Late Thursday, President Trump issued an ultimatum, demanding a vote on Friday and threatening Republicans that the ACA would remain the law if Republicans did not back the AHCA. By Friday afternoon, it was apparent that a compromise could not be reached, and the bill was withdrawn (at President Trump’s request) without going to a vote.

What Does This Mean for Employers Effectively, at least for the short term, the ACA, including the employer and individual mandates (including associated reporting) remains the law of the land. Until further notice, employers must stay the course on their compliance efforts.

Administrative Relief May Be Forthcoming
Consistent with the President’s Executive Order issued immediately after his taking office, there may be pressure on HHS Secretary Price in the short-term to provide regulatory relief to the extent permitted by the ACA. However, it is unclear whether any such relief will focus on issues facing employer-sponsored group health plans.

Future Legislative Efforts Uncertain
President Trump could remain firm on his ultimatum and not support any future efforts to repeal the ACA and test his theory that it will “explode.” One way the Republicans may help hasten this is by choosing not to pursue a lawsuit filed by Congressional Republicans during the Obama administration that would de-fund the cost-sharing reduction subsidies paid to insurers to reduce out-of-pocket costs for low-income enrollees, which the Republicans have asserted are illegal. In that case, Republicans argued that Congress never actually gave the Obama administration funding for the program that’s being used to pay insurers. A district court judge decided in their favor, but the Obama administration appealed the case. The case was delayed in February and is currently on hold, with an update due in May. Many believe these payments are essential for the stability of the insurance market. It remains to be seen whether the administration will drop the case and Republicans will fund the next round of subsidies in the short-term spending bill due at the end of April in exchange for a commitment by insurance companies not to abandon the market over the next few weeks. Many conservatives may view this course of action as “giving up” on repeal and may not support it unless it is part of a larger repeal and replace effort. Initially, the Trump administration and other Republican leadership stated that they intended to move on to tax reform and other initiatives at the top of the Trump administration’s agenda. However, there is nothing that could stop Republicans from trying to garner support for another repeal effort, and, in fact, there have been recent reports that the House Republicans and the Trump administration are back in negotiations on repeal legislation. The details and timing of such renewed efforts have yet to be released. It is possible that the Republicans may offer piecemeal legislation to address certain components of the ACA, rather than a complete repeal.

ACA Taxes Repeal May Be Left Out of Any Tax Reform
Taxes associated with the ACA will remain untouched while Congressional Republicans work on reforming the rest of the tax code, House Speaker Ryan said following the March 24 decision to pull the AHCA from a planned House vote. According to the latest Congressional Budget Office report, repeal of the ACA taxes would have reduced revenues by nearly $1 trillion over the next ten years. Republicans believed that repealing the ACA taxes first and being able to offset them with ACA spending cuts would have made tax reform easier. According to Ryan, failure to pass the AHCA “just means the Obamacare taxes stay with Obamacare. We’re going to go fix the rest of the tax code.”

ACA Taxes Repeal May be Funded by Cap on Employer Sponsored Health Coverage
However, ACA tax repeals may be part of the larger tax reform effort if other tax expenditures would be used to finance the repeal. One option that has been suggested is instituting a cap on the exclusion for employer-sponsored health coverage. Initial leaked drafts of the AHCA had included such a provision but were not included when the bill was introduced earlier this month after there was political pressure by employer groups to eliminate it. While it is not quite clear yet that the dust has settled, employers should proceed with the expectation that the IRS will begin enforcing the employer mandate via the ACA reporting forms, and prepare for the return of the health insurance industry tax (HIT) in 2018 (the HIT affects fully-insured medical, dental and vision plans but was under a one-year moratorium for 2017). Lastly, the Cadillac tax is expected to be effective in 2020, so employers should also continue evaluating how their plans may be impacted. Of course, it’s certainly possible that the Cadillac tax will be delayed again in the future.

FULL-TIME EMPLOYEE STATUS – IRS NOTICE 2015-87.

Thursday, February 18, 2016
cbeditor @ 01:02 PM

FULL-TIME EMPLOYEE STATUS:

A person’s status as a full-time employee is calculated based on that person’s “hours of service”.  Existing guidance contained some ambiguities regarding the crediting of hours of service in certain circumstances.  The Notice addresses some of those situations.

  • An hour of service does not include (1) an hour for which an employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed if such payment is made or due under a plan maintained solely for the purpose of complying with applicable workmen’s compensation, or unemployment or disability insurance laws; and (2) an hour of service for a payment which solely reimburses an employee for medical or medically related expenses incurred by the employee.
  • However, periods during which an employee is not performing services, but is receiving payments due to short-term disability or long-term disability, do result in hours of service for any part of the period during which the recipient retains status as an employee of the employer. This will include sick leave as a payroll practice and insured or self-insured employer-sponsored disability plans.  It includes arrangements paid for solely by an employee if the payments are made on a pre-tax basis such as through a cafeteria plan.   However, it does not include payments from coverage arrangements to which the employer does not contribute and are purchased on an after-tax basis by an employee.
  • Under existing rules, for an employer that is an educational organization, an employee who resumes providing service to (or is otherwise credited with an hour of service after a period during which the individual was not credited with any hours of service) may be treated as having terminated employment and having been rehired, and therefore may be treated as a new employee upon the resumption of services only if the employee did not have an hour of service for the applicable large employer for a period of at least 26 consecutive weeks immediately preceding the resumption of services. For example, teachers that perform no services during a summer break cannot be treated as new employees for purposes of accumulating hours of service.  The Notice extends this rule to individuals providing services to an educational institution through staffing agencies – for example, bus drivers or cafeteria workers – unless the worker is provided a meaningful opportunity to perform services for the institution during all months of the year.

IRS Releases Final Employer Reporting Forms and Instructions

Friday, February 13, 2015
cbeditor @ 01:02 PM

The Internal Revenue Service (IRS) released final forms and instructions for reporting on individual and employer mandates. The instructions and forms will be used by applicable large employers and employers with self-insured plans.

The Final Rules on Minimum Essential Coverage (MEC) and Large Employer reporting were released in 2014. The first reporting is required in early 2016 for the 2015 calendar year.

EMPLOYER REQUIREMENTS FOR EMPLOYER AND COVERAGE TYPES

Plan Type / Employer Size Less Than 50 FTEs ALE’s
Fully Insured No Employer Reporting 1094-C and 1095-C
Self Insured 1094-B and 1095-B 1094-C and 1095-C1
No coverage No Employer Reporting 1094-C and 1095-C
  1.  ALE’s can use a single combined form for 6055 and 6056 reporting

Required Forms

There are two forms required for each set of information being reported: 1) a transmittal form that serves as a cover letter; and 2) forms providing data on either the individual or employer mandate, or both for self-insured employer sponsors.

  • 1094-C  Transmittal of Employer-Provided Health Insurance offer and coverage information returns

1094c Draft Form

  •  1095-C  Employee-provided Health Insurance offer and coverage

1095c Draft Form

IRS Instructions – “What the Instructions Cover”

The instructions provide an overview of why the forms/reporting are required. They also cover basic information including:

  • who must complete the forms
  • how the transmittal forms need to accompany their respective 1095-B or 1095-C Forms
  • where to mail paper forms; details for filing electronic forms are expected when the IRS posts Publication 5165
  • specific line by line instructions
  • general directions for contact person, signature on form and phone number
  • definitions of various terms used in reporting data
  • minimum guidance on multi-employer arrangements
  • transitional relief for off-calendar year plans

 

Instructions for Filing