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December 20, 2017

HRB 135 - 1) Repeal of Individual Mandate, 2) Review of Penalties for Compliance Failures, 3) Updates on Women's Preventive Health Services, and 4) Year-End Reminders (Article)

HRB 135 - 1) Repeal of Individual Mandate, 2) Review of Penalties for Compliance Failures, 3) Updates on Women's Preventive Health Services, and 4) Year-End Reminder

Released December 22, 2017 I Download as a PDF

While there has been much energy over the past year focused on repealing, replacing, or repealing and replacing the Affordable Care Act (ACA), the bulk of the law remains in full force and effect. 


This notwithstanding, Congress passed the “Tax Cuts and Jobs Act” (H.R. 1) on December 20, 2017; the President is expected to sign the bill into law. This tax reform bill repeals the individual penalty mandate.  As background, beginning in 2014, all individuals residing in the United States are required to maintain a minimum level of health coverage, or be subject to a tax penalty.  This tax penalty will be repealed, effective for tax years beginning January 1, 2019.   


Even so, employers should continue to be diligent in ensuring compliance with all of the other provisions of the law. The reporting and disclosure obligations and penalties for not offering adequate and affordable health coverage, at least if you are a large employer remain intact. 


As a reminder, the IRS has begun its process for issuing penalty assessments relating to the Affordable Care Act’s employer shared responsibility (ESR) provisions (see Employer Shared Responsibility Penalty Assessment Procedures, CBIZ HRB 134, 11/17/17).  These ESR requirement provides that if an applicable large employer (ALE) fails to offer adequate, affordable coverage to its full time employees, and at least one employee qualifies for premium assistance, then one of two penalties can be assessed: a ‘no coverage’ excise tax (IRC Section 4980H(a)), or an ‘inadequate or unaffordable’ excise tax penalty (IRC Section 4980H(b)).


The initial notification, IRS Letter 226J, would be sent to an ALE explaining a potential penalty assessments based on the 2015 calendar year reporting.  An ALE receiving such Letter 226J should ensure that it responds to the IRS within the timeframe specified in the Letter (generally, within 30 days) either affirming that it agrees that the excise tax is due, or that it does not believe the excise tax is due.  Additional information about this process can be found on the IRS website:

    In addition, there are also penalties applicable to plans that fail to comply with the ACA’s insurance market provisions and internal and external claims review procedures. A plan that fails to satisfy any of these requirements could be subject to an excise tax of $100 per day per affected individual. The self-reporting is done on the IRS Form 8928. The reporting must be done by the employer or other responsible entity’s tax return filing due date, without extensions. Failure to self-report a violation can result in penalties, which can be as much as 25 percent of the tax due, as well as interest. There is a ‘reasonable cause’ and ‘not-willful’ neglect exception available; in which case, interest and penalties would not be imposed as long as a correction of the violation is made within 30 days.

    Updates on Women’s Preventive Health Services

    • Preliminary Court Injunction Issued

      As summarized in our prior Health Reform Bulletin (see Broadened Accommodations for Women’s Health Services, CBIZ HRB 133, 10/16/17), two sets of interim final regulations issued in October significantly broaden the entities entitled to receive an accommodation, or the exemption, from providing certain women’s health preventive services, specifically, coverage for contraceptive services.  The first set of rules provides that virtually any non-government plan, including one sponsored by closely-held and publicly traded entity, private entities, as well as institutions of higher education and private universities offering student health coverage, can either choose the accommodation, i.e., the insurer or third party administrator (TPA) would provide the services at no cost to their population for some or all of the contraceptive services, or choose to be exempt altogether from providing some or all contraceptive services. The second set of rules provides an accommodation or exemption for a slightly narrower group of entities, specifically, all non-government, non-publicly traded entities based on a moral opposition to providing contraceptive services. 

      The issuance of these regulations have resulted in numerous legal challenges, two of which have resulted in a nationwide preliminary injunction.  The first was imposed by the U.S. District Court for the Eastern District of Pennsylvania on December 15, 2017, in the matter of the Commonwealth of Pennsylvania v. Trump by Judge Wendy Beetlestone.  The second preliminary injunction was imposed by the U.S. District Court for the Northern District of California on December 21, 2017, in the matter of the State of California v. HHS by Judge Haywood Gilliam.  According to the nationwide injunction imposed by Judge Gilliam, the Obama era rules are reinstated for the duration of the injunction.  For a preliminary injunction to be issued, the court must determine that the plaintiffs 1) have standing, i.e., the right to bring legal action; and significantly for this action, it must be determined that the plaintiffs would likely succeed on the merits; 2) that irreparable harm would occur in absence of the injunction; 3) that equity would be served by imposing the injunction; and, 4) that the public interest would be served through the imposition of the injunction.  The presiding judges in these cases speak at great length about how each of these standards have been met, thus, resulting in the issuance of the preliminary injunction to block enforcement of the contraceptive coverage rules. 

      Given the unsettled nature of these matters, entities interested in this issue should stay tuned. 

    • CMS Guidance: Notice requirements
      Entities seeking an accommodation from providing coverage for contraceptive services may do so by filing a notice with the insurer, or with the Department of Health and Human Services, stating their objection to providing the services and leaving it to the insurer or third party administrator (TPA) to provide or offer the services to the insureds. As an aside, a TPA can seek an offset on the cost of providing the benefit against its federal exchange user fee. 

      On November 30, 2017, the Centers for Medicare and Medicaid Services released
      guidance to assist employers and plan sponsors seeking an accommodation from providing the objectionable benefit in its group health plan. According to this guidance, the entity must communicate the change to plan participants and beneficiaries. 

      If an entity using the accommodation method described above wishes to revoke the accommodation, CMS provides two methods to accomplish this:

    1.      The general method requires the notice be distributed to plan participants at least 30 days prior to the first day of the plan year for which the revocation will apply. 

    2.      The second method (the 60-day method) requires that if the accommodation is described in the summary of benefits and coverage (SBC), then a 60-day advanced notice of the change to the SBC can be provided to plan participants.  If the accommodation is not described in the SBC, then a 60-day notice method can be used, as long as all plan modification rules, such as the requirement to provide the summary of material modification, is followed.

    Year-end Reminders

    •  Employer Shared Responsibility Provisions
    • Applicability.  For purposes of the ACA’s employer shared responsibility requirement as well as the reporting and disclosure requirements, applicable large employer (ALE) status is determined each calendar year, based on the average size of the employer’s workforce during the prior year.  Thus, if you averaged at least 50 full-time employees, including full-time equivalent employees, during 2016, you are most likely an ALE for 2017 and are subject to the reporting and disclosure requirements due in early 2018.
    • Affordability Standard.  For purposes of determining affordability, coverage under an employer-sponsored plan is deemed affordable if the employee’s required contribution to the plan does not exceed 9.69 percent (indexed for 2017; 9.56 percent in 2018) of the employee’s household income for the taxable year, based on the cost of single coverage in the employer’s least expensive plan. 
    • Increase in Excise Tax Penalties.  The chart below reflects the amount of penalties for purposes of calculating the ‘no coverage’ excise tax pursuant to Code Section 4980H(a), and the ‘inadequate or unaffordable’ excise tax pursuant to Code Section 4980H(b) for 2017 and 2018, as well as the proposed amounts for 2019.  These are the excise taxes that could apply if an applicable large employer is found not to have offered health coverage to a full-time employee.


    ‘No Coverage’ Excise Tax

    IRC § 4980H(a)

    ‘Inadequate or Unaffordable’ Excise Tax

    IRC § 4980H(b)









    2019 (proposed)


    2019 (proposed)



    • Reporting and Disclosure Obligations.  The Forms 1094 and 1095 are used to satisfy the IRC Section 6055 and 6056 reporting requirements. The Form 1094-B and 1095 B-series is used for reporting minimum essential coverage (MEC) by insurers and sponsors of self-funded plans.  The Form 1094-C and 1095-C series is used for reporting employer provided coverage by an applicable large employer subject to the ACA’s shared responsibility requirement.

    • The Forms 1094 and 1095 must be filed with the IRS by February 28, 2018 (by April 2, 2018 if filing electronically)
    • The Form 1095 must be furnished to individuals listed in Forms 1094 and 1095 by January 31, 2018.
    •  2017 Small Business Tax Credit Form.  The IRS has released the 2017 edition of the Form 8941, together with its instructions, for purposes of calculating the small business tax credit (SBTC).  As a reminder, small businesses and tax-exempt employers who provide health care coverage to their employees under a qualified health care arrangement are entitled to a tax credit. 

      To be eligible for the SBTC, the employer must employ fewer than 25 full-time equivalent employees whose average annual wages are less than $53,400 (indexed for 2018; the wage ceiling in 2017 was $52,400).  The tax credit phases out for eligible small employers when the number of its full-time employees (FTEs) exceeds 10; or, when the average annual wages for the FTEs exceeds $26,700 in the 2018 tax year (the phase-out wage limit for 2017 was $26,200). 

      Only qualified health plan coverage purchased through a SHOP marketplace is available for the tax credit, and only for a 2-consecutive year period.  The Form 8941 is filed annually on the employer’s tax return as a general business credit; tax exempt entities would file the Form 8941 with its Form 990-T.
    • Additional ACA-related Fees
      • Patient-Centered Outcomes Research Institute (PCORI) Fees.  For policy and plan years ending between October 1, 2016, and October 1, 2017, the PCORI fee was $2.26.  The fee increases to $2.39 for policy and plan years ending between October 1, 2017 and October 1, 2018, The PCORI fees are paid annually via IRS Form 720 (generally due July 31st of each year).
      • Cadillac tax remains suspended until 2020.
      • Health insurance provider fee was suspended in 2017; this fee becomes applicable again on January 1, 2018.
      • Excise tax on medical devices suspended for sales made from January 1, 2016 through December, 31, 2017; this fee becomes applicable again on January 1, 2018. 
    • ACA Cost-Share Restrictions
      The chart below reflects the 2018 inflationary adjustments applicable to out-of-pocket (OOP) limits including deductibles, co-insurance and co-payments in ACA plans. These cost-share restrictions apply to insured plans offered via the marketplace, and insured and self-funded plans offered outside marketplace.  These amounts differ from the OOP limits applicable to high deductible health plans used in conjunction with a health savings account (HSA).


    2018 Inflationary Adjustments




    ACA Plans - Out-of-Pocket (OOP) Limits

    Note: For 2019, the proposed OOP limits are $7,900 for self-only; $15,800 for family












    Health Savings Accounts









    HDHP Annual Deductible





    HDHP Annual Out-of-Pocket Limit





    Contribution Limit






    ACA-Required Reporting Reminders



    To Whom

    Due Date

    Form W-2. ACA-required reporting includes:

    • Aggregate cost of health coverage (Box 12, using Code DD). Note, employers filing <250 Form W-2s per year remain exempt from reporting the aggregate cost of health coverage on the Form W-2 until future IRS guidance is issued.
    • Total amount of permitted benefits received under a qualified small employer health reimbursement arrangement (QSEHRA) (Box 12 - Code FF)
    • Additional Medicare tax withholding on earnings exceeding $200,000 per calendar year (Box 6)

    Internal Revenue Service (IRS)



    Form W-2 Instructions (2017)

    January 31, 2018


    Form 720 for purposes of Patient Centered Outcome Research (PCOR) fee


    July 31st of each year


    Additional ACA-Related Disclosure Reminders

    Note: This is not an exhaustive list of ACA-required disclosures.  For a more descriptive list of notice obligations relating to the ACA and other welfare benefit plans, ask your CBIZ representative for a Chart of Notice Obligations.



    To Whom

    Due Date

    Summary of Benefits and Coverage (SBC)

    Note: Revised SBC template available from Department of Labor (DOL) and CMS Center for Consumer Information & Insurance Oversight (CCIIO) for use beginning April 1, 2017


    All plan participants

    From Plan Sponsor to Plan Participants:

    1. Upon application

    2. By the first day of coverage

    3. Within 90 days of enrollment by special enrollees

    4. Upon contract renewal

    5. Upon request



    To Whom

    Due Date

    Advanced 60-day Notice of Material Change in Benefits

    All plan participants

    No later than 60 days prior to any material change in any terms of plan affecting Summary of Benefits and Coverage (SBC) content not reflected in the most recently-provided SBC (other than in connection with renewal or reissuance of coverage)

    Notice of Marketplace Options


    • Model notice for use by employers who offer coverage to some or all employees:


    • Model notice for employers who do not offer health coverage:          

    All new hires including full-time and part-time employees, without regard to eligibility status for the health plan

    Within 14 days of date of hire


    Increased Penalties for Certain Compliance Violations

    Certain reporting and disclosure obligations could result in civil penalties assessed by the Departments of Labor, Health and Human Services and Treasury. These civil penalties may be adjusted for annual inflationary reasons due to enactment of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.  The 2017 penalties reflected below take effect on January 13, 2017. 




    2016 Penalty Amount

    2017 Penalty Amount

    Failure to provide Summary of Benefits and Coverage

    Up to $1,087 per failure

    Up to $1,105 per failure


    Failure to provide correct payee statement

    (Examples: Forms 1094/1095 and W-2)

    $260 per statement (total penalty cap of $3,193,000 per calendar year)

    $260 per statement (total penalty cap of $3,218,500 per calendar year)


    Failure to provide correct payee statement

    (Examples: Forms 1094/1095 and W-2)
     $260 per statement (total penalty cap of $3,193,000 per calendar year)


     $260 per statement (total penalty cap of $3,218,500 per calendar year)


    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 Kansas City 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.

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