Month: April 2014

Most employee benefit plans are required to file a Form 5500 annually, and penalties for not meeting this obligation can be costly. Tuesday, May 13, 2014 – 2:00 p.m. ET / 11:00 a.m. PT

On February 10, 2014, the IRS issued final regulations on the employer shared responsibility requirements, often known as “play or pay.”  The play or pay requirements originally were to take effect in 2014, but on July 2, 2013, the White House announced that compliance would be delayed until 2015.

These requirements apply to “applicable large employers,” which the law defines as an employer that has 50 or more full-time or full-time equivalent employees within its controlled group.  However, the final regulations provide a transitional rule that will give many employers an additional year before they need to comply. While employers with 100 or more full-time or full-time equivalent employees will still need to meet the play or pay requirements in 2015, those with 50 to 99 full-time or full-time equivalent employees do not have to comply until 2016 if they meet certain requirements.  For these mid-size employees to be eligible for the delay, the employer will have to certify that:

• It has not reduced the size of its workforce or the overall hours of service of its employees so that it could qualify for this delay; and
• It has not eliminated or materially reduced any coverage it had in effect on February 9, 2014.  A material reduction means that:
  • The employer’s contribution is less than 95% of the dollar amount of its contribution for single-only coverage on February 9, 2014, or is a smaller percentage than the employer was paying on February 9, 2014;
  • Any change that was made to the benefits in place on February 9, 2014, will not cause the plan to fall below minimum value; or
  • The class of employees or dependents eligible for coverage on February 9, 2014, has been reduced.

This certification will be part of the reporting form that all applicable large employers will need to file early in 2016. 

The delayed play or pay compliance date does not affect the effective date of the other changes that apply in 2014 – most employers still must implement the 90-day maximum for waiting periods, discontinue pre-existing condition limitations, remove annual dollar maximums, and apply cost-sharing (out-of-pocket) limits.  Small insured groups still need to offer the 10 essential health benefits at the metal levels (i.e., platinum, gold, silver, and bronze) and use community ratings starting in 2014.

Large Employer Responsibilities and Potential Penalties

If an employer is large enough for the play or pay requirements to apply, two separate requirements, and potential penalties, apply.

The first requirement is that the large employer offer “minimum essential” (basic medical) coverage to most of its employees.  For 2015, “most” means 70%.  For 2016 and later, “most” means 95%. If the employer does not meet this requirement, it will owe $2,000 per full-time employee, even on employees who are offered coverage.  However, for 2015 the first 80 employees are excluded from this calculation.  Beginning in 2016, the first 30 employees are excluded.

Beginning in 2016, the requirement to offer minimum essential coverage includes dependent children (up to age 26).  An employer that offered coverage for dependent children in 2013 or 2014 is expected to maintain that eligibility.  Coverage does not have to be offered to stepchildren, foster children, or spouses to meet play or pay requirements.  However, employers will still need to offer coverage to stepchildren and foster children to meet the requirement to offer coverage to dependents to age 26.

The second requirement is that the large employer offer coverage that is both “affordable” and “minimum value” to its full-time (30 or more hours per week) employees or pay a penalty of $3,000 per year for each full-time employee who receives a premium tax credit/subsidy.  Therefore, an employer that provides minimum essential coverage to most of its employees and avoids the $2,000 per employee penalty still will have to pay the $3,000 penalty on an employee who is either in the group that is not offered coverage or who is offered coverage that is not both affordable and minimum value if the employee receives a premium tax credit. 

Note that these penalties are indexed, so the actual penalties will increase each year based on cost-of-living adjustments.  This adjustment may occur as early as 2015.

Coverage is considered affordable for purposes of the play or pay requirement if the cost of single coverage for the least expensive plan option that provides minimum value does not exceed 9.5% of the employee’s safe harbor income or Federal Poverty Level (FPL).  The cost of single coverage is always the measure of affordability, even if the employee has family coverage.  An employer may use any of three safe harbors when measuring the employee’s income:

• The employee’s Box 1 W-2 income for the current year
• The employee’s rate of pay on the first day of the plan year, multiplied by 130 for hourly employees to create the employee’s assumed monthly income
• The most recently published FPL for a single person (for 2014, FPL for a single person in the 48 contiguous states is $11,670; for Alaska it is $14,580 and for Hawaii it is $13,420)

Coverage is considered minimum value if the actuarial value of the coverage is at least 60%.

Additional information is available through a Treasury Department fact sheet and an IRS Questions and Answers sheet. 

For more help making your “Play or Pay” decision, Download UBA’s “Employer’s Guide to ‘Play or Pay'”.

04.27.2014

The IRS has released the 2015 minimums and maximums that apply to health savings accounts (HSAs) and related high-deductible health plans (HDHPs). These increases occur annually based on a cost-of-living formula.  Because the inflation rate is fai…

Most people today have at least one — if not more — mobile devices. Smartphones, full-size tablets, mini tablets, “phablets” (smartphones that are usually larger in size and can do more functions than a typical phone), hand-held computers, and wearable technology are fully integrated into most people’s lives. Desktops and even laptops are considered relics nowadays by the up-and-coming college graduates.

Employers of all sizes are challenged to rethink employee benefits in this new world of health care reform. Tight budgets and a still-recovering economy are spurring benefits managers to think beyond health insurance and look at their benefits as a whole.

United Benefit Advisors and Colonial Life are hosting a WisdomWorkplace webinar for HR professionals and employers, titled “Managing Benefit Costs – A Top Business Priority” on Wednesday, April 23, 2014 at 2:00 p.m. ET. 

Although the employer-based benefits landscape is radically changing, several truths are certain:

• Employees will need reliable, actionable information to make wise decisions about benefits.
• Voluntary offerings that are mostly untouched by the hand of health care reform are more attractive tools than ever to enhance employment recruitment and retention.
• Voluntary benefits continue to offer valuable and affordable financial protection for working Americans.
• Benefits communication that is meaningful and personalized provides an effective means to combat the confusion of health care reform and create an environment of choice, value and security.

Join Belinda Maffei, Director of Broker Market Development at Colonial Life, for a webinar on how voluntary benefits and benefits education & communication can be tremendous assets to employers looking for a cost-effective way to offer a competitive benefits package.

To register for the webinar, visit UBA WisdomWorkplace webinars and enter code “COLUBA” to receive the complimentary $149 discount. This webinar has been submitted to the Human Resource Certification Institute to qualify for 1.25 recertification credit hours.