Also in this issue...
Healthcare Coverage Timeout
| Corey Connors
>> Published Date: 8/28/2013
Q: Why did the Administration decide to delay when the PPACA was going to go into effect?
It’s important for industry businesses to know that only the enforcement of two very specific ACA provisions were delayed as a result of the IRS announcement on July 9, 2013. Many key ACA provisions that will affect employers remain in effect for full implementation starting later this year. Industry employers are strongly encouraged to continue preparing for ACA compliance requirements that begin on October 1.
To understand why the Administration delayed these two enforcement provisions, let’s look first at what was delayed:
Large Employer Mandate Enforcement: The non-deductible tax penalties for a large employer’s failure to offer coverage that meets the ACA’s affordability and minimum value standards will not be in effect for 2014.
Reporting Requirements: The requirement of employers to provide health coverage reports and certain health plan information to the IRS will also not be in effect in 2014. Specifically, the 6055/6056 provisions would require employers to report their number of full-time employees, whether they offer “minimum essential health benefits” under its health plan and what share the employer pays towards the total cost of benefits under its health plan options.
Though many have pointed to political reasons for the delay (2014 mid-term elections, etc.), the Treasury/IRS was very far behind in the development of mechanisms to facilitate the 6055/6056 reporting that would be required of large employers next year. Without the ability to use the information reported by large employers, IRS enforcement of the large employer mandate made little sense.
In the end, a delay of the employer mandate and reporting requirements buys time for the Treasury/IRS to solicit additional input from the employer community to facilitate reporting. It also gives employers time to conduct a “dry run” based on the ACA’s employer requirements during 2014. Rather than relying on complicated safe harbors and employee measurement guidance provided late last year, 2014 can ultimately serve as a case study to employers to implement their ACA compliance strategy without fear of penalty.
This delay, best characterized as “transition relief,” is something that was sought by SAF and its partners in the Employers for Flexibility in Health Care (E-FLEX) coalition. We were both surprised and pleased with the developments earlier this month.
Q: How long will it be delayed?
The effective date of both the employer mandate and the 6055/6056 reporting requirements will now be delayed until January 1, 2015. But as I mentioned before, there are still several provisions of the law that remain on-track for implementation within the next five months:
Employer Exchange Notification Requirements (Effective Date: 10/1/13)—The requirement for employers to notify employees of the existence of an Exchange and to provide information on how to access it is only weeks away. Though only employers that are subject to the Fair Labor Standards Act are required to provide this notice, all industry employers are advised to provide the notice to all employees because of their employees’ requirement to comply under the ACA’s individual mandate.
Exchange Notices to Employers (Effective Date: 10/1/13)—Open enrollment for individuals and small businesses through the state-based Exchanges is still on track for October 2013. Employers will need to go through a verification process to determine employee eligibility for tax credits if they choose to utilize the Exchange in order to purchase required coverage.
Individual Mandate (Date of Implementation: 1/1/2014)—The mandate requiring individuals (including employees, management and owners) to obtain coverage for themselves and their dependent children remains in effect and is unlikely to be delayed. Failure to obtain coverage that meets minimum standards will result in tax penalties for individuals beginning next year. For 2014, the non-deductible tax penalty is the greater of $95 or 1% of household income for adults and $47.50 for dependent children. The penalty increases in subsequent years.
Individual Tax Credits (Date of Implementation: 1/1/2014)—The opportunity for individuals to receive tax credits for the purchase of coverage in the state-based Exchanges remains. As large employers know, it’s an employee’s purchase of Exchange coverage using a tax credit that would trigger liability under the employer mandate beginning in 2015.
Medicaid Expansion (Date of Implementation: 1/1/2014)—The expansion of Medicaid eligibility in states that have chosen to do so is also on tap for next year. As of July 26, 28 states are moving towards the expansion of Medicaid. For employers in states that expand Medicaid, this potentially reduces the number of employees eligible for individual tax credits by raising the floor to 138% of poverty level. It would also mean more coverage options for your employees.
In addition to these key employer considerations, many of the fees and market reforms associated with final implementation of the ACA remain on target for 2014.
Another question that remains outstanding is how the enforcement delay will impact other employer transition relief (determining full-time employment status, small employer relief for determining business size in 2014, etc.) that was provided for 2014. Rulemaking is expected shortly to address if/how transition relief that was originally slated for next year will remain in effect for 2015.
All of these items underscore the importance of understanding the difference between the reality of two enforcement provisions being delayed as opposed to the myth that the entire law was delayed. There are still several provisions that will dramatically impact employers over the next few weeks and months.
Q: Are there parts of the law that Congress is looking at changing?
Yes. In the wake of failed Congressional efforts to repeal the ACA, or to defund its implementation, several targeted measures intended to provide employers with relief from the law’s individual mandate have started to gain momentum in Congress. Due to persistent feedback from constituent business owners, a handful of elected officials from both parties now believe that the door has been opened to make important changes to some of the employer-mandate provisions.
Based on feedback that SAF has received from members over the past two years, we believe that there are two pieces of legislation that could be of interest to industry
S. 1188, the “Forty Hours is Full Time Act,” was introduced by Senators Susan Collins (R-ME) and Joe Donnelly (D-IN) on June 19, 2013. This bill would change the definition of “full time” in the ACA to 40 hours per week from its current standard of 30 hours. Additionally, S. 1188 would raise the number of hours counted toward a “full-time equivalent” employee from 130 to 174 hours per month.
H.R. 2752 (Untitled) was introduced on July 19, 2013 by Representative Rodney Alexander (R-5-LA). H.R. 2752 would exclude seasonal employees from being added into the calculation to determine ACA business size under the employer mandate. The ACA currently limits the definition of seasonal employees to those who work fewer than 120 days of employment annually.
Prior to introduction, Representative Alexander’s staff reached out to the seasonal employer community to solicit feedback on his legislation. This past July, SAF convened a meeting of representatives that included ANLA, OFA and PLANET (as well as other industries with highly seasonal workforces) to discuss additional challenges with the definitions of seasonal employment contained within the law. This ad-hoc group will work together to make additional recommendations to Congress and the administration on the treatment of seasonal employees regarding the employer mandate provisions of the ACA.
As I mentioned before, these bills are purely the result of members of Congress hearing from business owners back home. Similarly, the potential success of either bill is entirely contingent upon members of Congress hearing from businesses back home.
If there are aspects of ACA compliance that have proven challenging to businesses in the GrowerTalks community, we would recommend that employers contact their Senators and Representative and tell their story. SAF can help industry businesses coordinate in-person meetings with members of Congress. Just give us a call or shoot us an email and we would be happy to provide information and ideas for such a meeting. If you don’t have time to host a meeting at your facility, emails and phone calls to those offices are most certainly encouraged.
Q: What does the delay mean for growers and retailers? What does it mean for employees?
For employers, the delay of certain enforcement provisions provides an opportunity to be proactive in continuing to develop an ACA compliance strategy for their business without fear of penalty. Growers, retailers and suppliers will now be able to use 2014 to examine the true cost of compliance (cost of employer-sponsored coverage versus cost of Exchange-based coverage) in real numbers. They can use measurements of actual household income for 2014 rather than relying on temporary safe harbors. They can determine the actual hours worked for 2014 for each employee rather than relying on complicated calculations to determine whether a seasonal or variable hour employee is full-time.
Perhaps most importantly for employers, they can examine the behavior of their employees with regards to the individual mandate requirements in 2014 and more accurately gauge their interest level in health benefits. Employees are going to have questions and concerns about the ACA. This delay will afford employers the opportunity to educate them on their requirements and to develop systems that support individual compliance. In short, industry employers can use this next year as a trial run to further refine their compliance strategy in order to make things work in 2015 and beyond.
For employees, the only thing that has substantively changed is their options for meeting the law’s individual mandate requirements. If an employee works for a large company that doesn’t currently provide employer-sponsored health benefits, then they may have lost a potential option to comply with the ACA. But the provisions that were not delayed (the opening of Exchanges, the continuation of the individual tax credit and the expansion of Medicaid) will give employees options for individual mandate compliance that they currently don’t have. Employers should be prepared to help employees fully understand their options as soon as possible.
To assist employers in communicating ACA requirements for individuals, SAF’s Health Care Resource Center contains a list of options and considerations for employees. To examine some of those options to educate employees about the ACA, SAF members are encouraged to visit www.safnow.org/your-employees-and-the-individual-mandate. GT
Corey Connors is SAF’s senior director of government relations. He can be reached at email@example.com.
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