The Affordable Care Act has absorbed too much energy from small business owners over the past several years. 2014 has seen so many aspects of the law take effect that it’s easy for business owners who need to focus on more important things (like making money in their core business) to be overwhelmed by all of the new responsibilities. Then dangerous things can slip through the cracks. So what ACA issues should they actually be concerned about?
This article addresses five of the ten ACA related issues Admin America believes small business owners must be aware of as 2014 winds down. The five items listed here are compliance related and therefore somewhat tactical in nature.
Later this week, we will follow up this article with another post of five additional issues that are much more strategic in nature. We thought we’d get the easier ones out of the way first so business owners could ease into this process.
We’ll present the issues in reverse order in homage to David Letterman…
10. 90 Day Limit on Health Plan Eligibility Waiting Periods
For plan years beginning on or after January 1, 2014, group health plans must limit their eligibility waiting periods to more than 90 days. So many small businesses moved their plan anniversary dates to December 1 last year that this fall’s open enrollment will be the first time that they must comply with this rule.
The date coverage takes effect must be within 90 calendar days of the date any non-time oriented requirements for coverage are met by an employee. Non-time oriented requirements are still allowed. For example, if coverage is restricted to salaried employees, an employee who transitions from hourly wages to salary must be allowed to enroll in coverage effective no later than 90 days after the date of that transition.
It’s critical to remember that 90 days does not equal 3 months under this rule. Also, the practice of using separate eligibility dates and coverage effective dates may not extend the 90 day maximum.
9. New Health FSA Eligibility Restrictions
Also for plan years beginning on or after January 1, 2014, employers who do not provide group health insurance coverage may no longer sponsor Health Flexible Spending Arrangements (FSAs) for their employees.
In addition, employees who are not eligible for coverage under their employer’s group health insurance may not participate in the employer’s Health FSA. However, employees are not required to enroll in the employer’s group health insurance coverage in order to participate in the Health FSA, they merely must be eligible to enroll.
There are some narrow exceptions to these rules for Health FSAs that only provide limited benefits (such as reimbursement of dental and vision expenses only).
8. HRAs Must Be Integrated With Other Group Health Insurance Coverage
One more 2014 plan year limitation applies to Health Reimbursement Arrangements (HRAs).
HRAs can no longer reimburse employees for out of pocket medical expenses except unless the reimbursements are “integrated” with other group health insurance coverage. This means that HRAs are largely restricted to reimbursing employees for deductible, co-insurance and co-payment expenses under the integrated group health plan.
Interestingly, it is possible to integrate HRA coverage with an employee’s coverage under another employer’s group health plan. For example, a HRA could reimburse an employee for expenses paid towards a deductible within a group health plan sponsored by the employee’s spouse that provides coverage to the employee’s child.
HRA coverage can not be integrated with any form of individual market health insurance.
Again, there are some narrow exceptions to these rules for HRAs that only provide limited benefits or that only provide coverage to retirees.
7. PCORI Tax Filings
Employers that sponsor HRAs with plan years that ended any time last year should verify that they have payed their 2014 PCORI Taxes.
The Patient Centered Outcomes Research Institute (PCORI) is funded by a small annual tax on group health plans. For most small businesses, the tax on their group health insurance is paid by their health insurance carrier. However, employers that also have HRAs are also required to pay the PCORI tax on those plans as well.
HRA Plan Sponsors are required to file IRS Form 720 and pay the appropriate annual tax amount to the IRS before the last day of July in the calendar year after the appropriate plan year end date. For plan years that ended any time in 2013, the tax return and payment was due on July 31, 2014.
For plans that failed to file on time, standard tax penalties and interest will apply. The good news is that the tax for plans ending last year were only $1 or $ 2 per covered employee for the year. The amount depends on which month the plan year ended ($1 if the year ended on or before September 30, 2013 and $2 if it ended later in the year).
By the way, employers with HRA plans years that ended in the last quarter of 2012 were also required to file in 2013 so if they weren’t aware of this requirement, they may need to file two separate late returns.
6. Employer Reporting Requirements for 2015
In early 2016, insurance carriers and employers will for the first time report to the federal government information about who is covered under their health plans. However, employers need to understand how this requirement will affect them now as they must begin tracking the reportable information at the beginning of 2015.
Employers that will be required to file are those that either provide group health coverage through a self-funded arrangement and/or those that are considered to be a “member” of an Applicable Large Employer (“ALE”). ALEs are employers or a combination of employers within a control group with 50 or more Full-Time Equivalent employees (“FTEs”).
The purpose of this reporting requirement is to provide the government with the information necessary to enforce PPACA’s individual and employer mandates.
The reports will indicate which individuals were actually covered and during which months. The employers’ reports will also identify employees who had access to group insurance coverage but didn’t take it. Employers will also report information about the quality and employee cost of the coverage the employer sponsors.
The reporting will work much like the current W2 system whereas information will be provided separately to the IRS and to the covered individuals or employees. The information must be provided to the applicable individuals by the last day of January following the year for which it applies. Filings with the IRS will be due either by the end of February or March (the latter date is available if the filing is electronic).
Therefore the first filings will be due to covered individuals and the IRS in the winter of 2016. This is true for ALE members even if they are eligible for the one year transitional relief from the employer mandate (which applies to ALEs with less than 100 full time equivalent employees).
Earlier this summer, the IRS release drafts of the required filing forms and instructions and invited official comments. Final versions of the forms and the instructions should be available by the end of 2014.
But wait, there’s more!
Stay tuned for our next installment where we will cover our Top 5 ACA Related Issues for Small Business Owners.
In the meantime, if you have questions about any of the items posted above, please contact one of Admin America’s compliance experts via e-mail or toll free at 1-800-366-2961.