Preview of October Compliance Guide: PPACA Reporting

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The Patient Protection and Affordable Care Act (“PPACA”) added Sections 6055 and 6056 to the Internal Revenue Code. Under these provisions, employers and other sponsors of minimum essential coverage must comply with certain reporting and disclosure requirements for coverage provided during the prior calendar year. Accurate reporting can be difficult due to the extensive data required and the complexity of rules governing not only determinations regarding who is a full-time employee, but also how to determine whether coverage provides minimum value. If you are committed to becoming a destination employer, you must keep pace with evolving legislative and regulatory initiatives that may pose risks to meeting cost targets, developing strategic benefits and compensation programs, and attracting and retaining top talent. As a trusted advisor, Arthur J. Gallagher & Co. will help you navigate the ever-changing landscape of employee benefits compliance issues. Check out the critical compliance action steps noted below as you prepare to take off for annual PPACA reporting.

1. Don’t get caught in a holding pattern over PPACA reporting. With efforts in both the House and Senate to repeal and replace PPACA, it may be tempting to disregard PPACA reporting obligations for coverage provided during 2017. However, any legislation is unlikely to repeal the reporting requirements because those requirements do not have a budgetary impact as outlined in the budget reconciliation process and thus would likely remain even if other parts of PPACA are repealed. For that reason, employers should continue their efforts to prepare for PPACA reporting due in early 2018. Is your organization moving forward with 2018 PPACA reporting?

2. Review your data. As we approach the final months of 2017, it’s time to review the data for coverage provided during the year that will be the basis of reporting in early 2018. Review the data to determine whether all applicable Social Security Numbers (“SSNs”) have been collected. If not, then make sure that you follow the rules for soliciting SSNs from individuals. Also, verify that you have accurately captured data to reflect breaks in service and limited non-assessment periods (such as waiting periods and initial measurement periods).Further, check your data to establish that individuals who should have been offered coverage were actually offered coverage. Is your data for PPACA reporting airtight?

3. Verify that Limited Non-Assessment Periods will help your organization avoid Employer Shared Responsibility Penalties. A Limited Non-Assessment Period (“LNAP”) generally refers to a period during which an applicable large employer member (“ALE Member”) will not be subject to an assessable payment under Section 4980H(a), and in certain cases Section 4980H(b), for a full-time employee, regardless of whether that employee is offered health coverage during that period. However, five of the six are LNAPs with respect to sections 4980H(a) and 4980H(b) only if the employee is offered health coverage by the first day of the first month following the end of the period. Also, those five periods are Limited Non-Assessment Periods for section 4980H(b) only if the health coverage offered at the end of the period provides minimum value. Will your offers of coverage ensure that employees in LNAPs are properly handled for reporting purposes?

4. Confirm that affordability safe harbor conditions are met. IRS regulations permit employers to use certain affordability safe harbors when reporting the cost of coverage under Section 6056. However, in order to use affordability safe harbor codes, employers must offer coverage to at least 95% of their full-time employees. Further, there are certain rules concerning the use of the safe harbors. For example, if an ALE Member uses the Form W-2 safe harbor for an employee, it must be used for all months of the calendar year for which the employee is offered health coverage. Additional rules require employers to use different safe harbors for different groups of employees, but employees within the same group must be subject to the same safe harbor. Are you correctly applying affordability safe harbors?

5. Check in on the impact of HRAs and HSAs on your affordability calculations. An employer that integrates an HRA with its own primary group medical plan may include amounts newly made available for the year when calculating minimum value or affordability for that year, but not both. If the employee may only use the funds in the HRA to reimburse cost-sharing for covered expenses under the employer’s primary group medical plan, then that amount may be counted when determining minimum value. If the employee has a choice between using the funds to reimburse cost-sharing expenses or using the funds to pay contributions, then that amount may count toward the affordability requirement. In contrast, HSA contributions only impact minimum value. Under IRS guidance, all funds contributed by an employer to an HSA offered in connection with an eligible employer-sponsored high deductible health plan may be included in the calculation to determine the plan’s share of costs for purposes of meeting the minimum value threshold, and those amounts are treated as available for first dollar coverage. As is evident, these amounts may impact PPACA reporting on employee Forms 1095-C and potential liability for Employer Shared Responsibility penalties. Is your organization correctly determining the impact, if any, that your HRA funds or HSA contributions have on affordability and minimum value?

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Compliance is a journey, not a destination. As a trusted advisor, Arthur J. Gallagher & Co. has developed this Compliance Guide series to help you map a path through employee benefits compliance issues as part of an overall compliance plan. Employers should carefully evaluate their health and welfare plans to determine if they are in compliance with both federal and state law.

This is a preview of the August issue of the Compliance Guide. If you would like the full version of the Compliance Guide or would like additional information on how Gallagher constantly monitors laws and regulations impacting employee benefits and supports employers in their compliance efforts, please contact your Gallagher Benefit Services representative or click here to Contact Us via ajg.com.

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The intent of this analysis is to provide you with general information. It does not necessarily fully address all your organization’s specific issues. It should not be construed as, nor is it intended to provide, legal advice. Questions regarding specific issues should be addressed by your organization’s general counsel or an attorney who specializes in this practice area.