HRB 77 - Employer Shared Responsibility Reporting Requirements Delayed and Final Exchange Regulations
Released July 3, 2013I Download as a PDF July 3, 2013 --
Employer Shared Responsibility Penalty and Reporting Requirements Delayed
Late in the day on July 2, 2013, the Assistant Secretary for Tax Policy at the U.S. Department of the Treasury posted on a blog that the Treasury Department intends to delay, for one year, the shared responsibility penalty that could be imposed on employers employing 50 or more employees if the employer does not offer adequate coverage at an affordable rate.
Also delayed is an employer and plan reporting requirement that was to have commenced in 2014. IRC Code Sections 6055 and 6056 require employers employing 50 or more employees sponsoring a self-funded or insured plan to file a reporting form reflecting certain information about the plan. To date, this form has not been developed. In conjunction with these reporting requirements, a benefit statement with information derived from the report would have to be provided to employees. Guidance on these matters is expected later this summer.
According to the blog, the Treasury Department reports it is delaying this requirement to provide more time to create a more efficient system. Because this reporting requirement is delayed, the government will not have the information it needs to impose the penalty; hence, the shared responsibility penalty is likewise being delayed.
Official guidance on this topic is to be issued in the next week or so; look for an update when this guidance is available.
In the meantime, employers are encouraged to continue to offer and even enhance access to coverage. For employer planning purposes, employers should know that all systems are “go”, at least at the moment, for other requirements of the law including but not limited to the marketplace notice obligation (see CBIZ Health Reform Bulletin, Notice to Employees of Coverage Options; Updated COBRA Model, 5/10/13); and, the requirement for individuals to maintain MEC (see below for additional details). Because the individual shared responsibility requirement remains in effect, employees will still be eager to have information about available employer coverage.
In addition, all of the required health plan changes effective for plan years beginning on or after January 1, 2014 including but not limited to the maximum 90-day waiting period and ban on imposition of preexisting condition exclusion limitations remain in effect.
Exchange Functions, Eligibility for Exemptions and MEC Clarifications
Final regulations relating to Exchange Functions: Eligibility for Exemptions and Miscellaneous Minimum Essential Coverage Provisions were issued on July 1, 2013, together with an HHS Fact Sheet highlighting clarifications of these final regulations. Of particular note to employers, these regulations modify the definition of minimum essential coverage (MEC) and provide guidance on how a plan can become certified as a MEC plan (see below).
Individual Shared Responsibility Requirement – Eligibility for Exemptions
Beginning in 2014, all individuals residing in the U.S. must maintain a minimum level of coverage, or risk a shared responsibility payment. The IRS issued proposed regulations in January, 2013 that set forth the individuals exempt from maintaining MEC, as well as defining what types of coverage qualifies as MEC (see CBIZ Health Reform Bulletin, Individual Minimum Essential Coverage and Affordability Standard, 2/6/13).
One of the exemption categories for individuals is hardship. With regard to the hardship exemption, the final regulations and related HHS Guidance provide for additional exemptions in the following instances:
- Financial or domestic circumstances such that purchasing coverage would cause the individuals to experience a serious deprivation of food, shelter, clothing or other necessities. For example, exemptions would be available for the homeless, impending eviction, foreclosure or bankruptcy, or sudden property loss due to natural disasters such as fire or flood;
- Lack of affordable coverage available through the marketplace based on projected income;
- Ineligibility for Medicaid (in states that have not expanded Medicaid);
- Individuals determined eligible for self-only employer-sponsored coverage, but who cannot afford family coverage through the employer’s plan; and
- Indian tribal members and their dependents eligible for services through an Indian health care provider.
Eligibility for Premium Assistance
To help individuals meet their shared responsibility requirement, government assistance is available to help them. On June 26, 2013, the IRS issued Notice 2013-41 addressing when an individual is deemed eligible for MEC and is not eligible for premium assistance or a cost share.
As background, an individual who is eligible for minimum essential coverage, including government plans, such as Medicare, Medicaid, the Children's Health Insurance Program (CHIP) or TRICARE, is ineligible to receive government assistance for purchasing coverage through the marketplace (previously known as the ‘exchange’). Similar to the rule applicable to the employer shared responsibility requirement, an individual who is eligible for government coverage through such program such as Medicaid or CHIP, for example, will remain ineligible for premium assistance if his/her coverage under that Medicaid or CHIP program is lost due to failure to pay premium.
The Notice goes on to clarify that government-sponsored programs that require individuals to pay a certain premium for participation, such as TRICARE, or in the rare instance that an individual has to purchase Medicare Part A coverage, will only cause disqualification for premium assistance if the individual actually enrolls in that program.
Transition relief to individuals whose employers maintain non-calendar year plan years
IRS Notice 2013-42 provides for transition relief to individuals whose employers maintain non-calendar year plan years. Specifically, if an employer maintains a non-calendar year plan year, and if an individual does not enroll in the coverage during the 2013 enrollment season, the individual will not be subject to the shared responsibility penalty until the plan anniversary occurring in 2014.
In prior IRS guidance, transition relief was provided for non-calendar year cafeteria plans allowing a mid-year cafeteria plan change to accommodate compliance with the individual shared responsibility provisions applicable during 2014. A Section 125 plan is permitted but not required to avail itself to this transition relief. Plan sponsors may be less inclined to allow these mid-year changes since individuals will not be subject to the shared responsibility penalty until the plan anniversary occurring on or after January 1, 2014.
Minimum Essential Coverage Clarifications
For purposes of the individual shared responsibility requirement, MEC generally includes coverage under:
- Employer-sponsored group health plans, whether insured or self-funded, and grandfathered plans, as well as COBRA coverage (if actually elected) and retiree coverage. It also includes group health coverage sponsored by non-profit and for-profit entities, and governmental entities, including local governments. Plans excepted from HIPAA and limited scope benefit plans do not qualify as MEC.
- Government-sponsored plans such as Medicare, Medicaid, Children's Health Insurance Program (CHIP), TRICARE, and various Veteran’s health programs
- Individual health policies, including a qualified health plan offered by an Exchange.
- Other similar types of comprehensive health coverage recognized by HHS as minimum essential coverage
The final regulations modify the MEC status of self-funded student health plans, AmeriCorp plans and state high risk pools. These types of plans only qualify as MEC in 2014; thereafter, the plan would have to file for MEC certification (see MEC Certification Process, below). Refugee Medical Assistance supported by the Administration for Children and Families and Medicare Advantage plans are also deemed as MEC.
MEC Certification Process
To be certified as minimum essential coverage, the plan sponsor would submit the following information to HHS:
- Identity of the plan sponsor and appropriate contact persons;
- Basic information about the plan, including:
- Name of the organization sponsoring the plan;
- Name and contact information of the individual authorized to make certification on behalf of the organization;
- Number of enrollees;
- Eligibility criteria;
- Cost sharing requirements, including deductible and out-of- pocket maximum limit;
- Description of essential health benefits coverage; and
- Certification together with supporting documentation of compliance with the ACA requirements applicable to non-grandfathered plans in the individual market.
Once recognized as minimum essential coverage, a plan must provide notice to all enrollees of its minimum essential coverage status, and must comply with ACA’s information reporting requirement.
About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Leawood, Kansas office.
The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein. As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.