We asked our National Benefits Manager, “What are the top three things you are having conversations with employers about right now?” She offered these three reminders and what you need to know as we find ourselves in the fourth quarter of yet another year.
#1 Applicable Large Employers Must Continue to “Pay or Play”
The first reminder is directly pointed at employers who are ALE’s (Applicable Large Employers) for ACA and the “Play or Pay” penalties.
If you are an ALE, generally those with 50 or more full-time employees, including full-time equivalent employees, under the “Pay or Play” provisions of the ACA, you may be subject to penalties if you do not offer minimum essential coverage that is affordable and provides minimum value to full-time employees (and their dependents).
There are three ACA terms that you really need to know. Here are their definitions and how they are essential to understanding “Pay or Play” Compliance..
Minimum Essential Coverage: Minimum essential coverage does not include fixed indemnity, life insurance, dental, or vision coverage. It does include, among other things, coverage under an employer-based plan (including self-insured plans, retiree plans, and COBRA coverage). Click here for more on what qualifies as minimum essential coverage.
Affordable Coverage: For plan years beginning in 2016, coverage is generally considered affordable if the employee’s required contribution for the lowest cost self-only health plan is 9.66% or less of his or her household income for the taxable year. Given that employers are unlikely to know an employee’s household income, for purposes of “Pay or Play,” they may use a number of safe harbors to determine affordability, including reliance on Form W-2 wages.
Note: While previously released guidance updates the affordability threshold to 9.69% for plan years beginning in 2017 for purposes of the premium tax credit, the “Pay or Play” regulations regarding penalties for failing to offer health coverage and use of the affordability safe harbors were not updated to reflect this increase. Employers intending to take advantage of one or more of the three affordability safe harbors should therefore consult a knowledgeable benefits attorney or tax specialist for specific guidance on how to proceed.
Minimum Value: An employer-sponsored plan provides minimum value if it covers at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan. Employers generally must use a minimum value calculator developed by the U.S. Department of Health and Human Services (HHS) to determine if a plan with standard features provides minimum value. Plans with nonstandard features are required to obtain an actuarial certification for any nonstandard features. HHS has also proposed regulations for certain safe harbor plan designs that will satisfy minimum value.
#2 Transitional Reinsurance Fees (part of ACA)
First, reporting is due by November 15th to the Department of Health and Human Services (HHS). Plan administrators for self-funded plans must report the average of covered lives over the first 9 months of this year. Second, they must pay a fee in January based on that headcount.
#3 ERISA Required Summary Plan Description
If offering a health plan, make sure you know if there is an ERISA required Summary Plan Description in place. If so, does it contain all of the eligibility rules (new hire, qualifying life events, special enrollments, etc.) and federal required languages? If not, consider a wrap plan summary plan description as well.
The Department of Labor (DOL) has regulatory and enforcement authority with respect to the Employee Retirement Income Security Act (ERISA) and other federal laws governing employee benefit plans. The DOL’s Employee Benefits Security Administration (EBSA) team has published aggressive goals to audit all employee benefit plans, either by means of document requests or onsite interviews.
The importance of having accurate, up-to-date plan documentation and reporting is critical to avoid substantial penalties. Under ERISA, your failure to provide summary plan descriptions (SPDs) and other materials to plan participants can result in penalties of $110 per person per day.