The IRS is coming, what to do before, during and after and ACA audit

Over the last 6 years, the Affordable Care Act (ACA) has dramatically changed the employee benefits landscape across the country for employers and employees alike. As the first year of ACA reporting deadlines have just passed, they first wave of IRS audits, as specified in the ACA, will begin.

The government views the ACA as a huge revenue source and they have pushed a lot of their resources to develop an auditing system. The federal agencies are becoming quite aggressive, especially when it comes to protecting participants, as they are charged by the law to have regular enforcement efforts.

There are many triggers that could prompt a potential ACA audit, here are 5 examples:

  1. Employee complaints
  2. Reporting failures
  3. Failures of IRS control group employers
  4. Other agencies identifying issues – (Agencies like the Department of Labor (DOL) and the Internal Revenue Service (IRS) will have a cross-referral agreement where they are required to share information about businesses not in compliance, thus triggering audits from multiple agencies.)
  5. Media reports – (Media coverage on an organization’s business not in compliance, thus triggering audits from multiple agencies.)

While you may not be able to totally avoid every trigger. The best way to avoid a full-fledged audit is to keep good records. Proper documentation is key to both avoiding and surviving an audit.

Lowering your chances of an ACA audit is key, here are 6 ways to help your organization look its best:

  1. Document good faith compliance on questionable issues – (This includes reviewing and adopting corresponding wording in all internal and employee-facing materials.)
  2. Compliance review – (Focus on administrative practices and make sure they are in compliance.)
  3. Correct failures found. (Make sure administrative processes are in order but when you discover an issue, hold internal compliance discussions to correct your failures.)
  4. Designate employee status. (Create realistic benefits expectations for employees by communicating their employee status and eligibility.)
  5. Train managers well. (Beware of practices to terminate or limit hours for employees to prevent them from eligibility levels. Understand the law and work within it for hiring, firing and scheduling practices.)

If your business is subject to an audit, knowing what it will look like and how to handle it will be key to passing with flying colors. Contact FreedomCare to help maintain your compliance and minimize your risk of an ACA audit.

Will you have to prove your compliance?

Last November, a few weeks after the national election, the Internal Revenue Service (IRS) began to issue notices to employers who may have failed to comply with the Affordable Care Act (ACA). These notices appeared to be the start of the IRS ACA audit process.

Just a few weeks ago, Speaker Paul Ryan stated the ACA will be the law of the land for the “foreseeable future.” Companies are still liable for penalties incurred for ACA non-compliance as long as current regulations are in effect. Failure to successfully defend the IRS audit could mean significant ACA-related penalties.

These regulations are still in full effect:

  • Companies with 50 or more full-time employees, including equivalents, must offer health insurance of a certain quality to their full-time employees and their dependents – or face a penalty.
  • The threshold for classifying an employee as full-time, and thereby eligible for an offer of coverage, is an average of 30 service hours a week.
  • Employers large enough to comply with the ACA still won’t be fully ACA-compliant no matter how generous their offers of coverage are unless they also meet annual reporting requirements.
  • Employers must produce health-benefits forms (1095-Cs) for their full-time employees and copy the IRS on what’s documented on those forms.

Complying with the provisions of the ACA will be required until legislation has passed both houses of Congress and has been signed into law. But don’t worry, it’s not too late, give FreedomCare a call and we can get you or your clients compliant today.

6 overlooked requirements of ACA reporting

6-overlooked-requirements-of-aca-reportingWith 2017 right around the corner, it’s almost time for employers to submit their paperwork for their 2016 plans. Unfortunately, the leniency that was given last year is no longer available. In order to seek a waiver of penalties for the 2016 filings an employer will need to meet a standard of reasonable cause and that they acted “responsibly”.

Unfortunately, “responsibly” can be very subjective so employers need to be prepared to demonstrate the same level of quality assurance and audit rigor that is applied to other governmental reporting. To help your clients accomplish this, here are some very important details of ACA reporting:

  1. File on time – Failing to file the required forms to the IRS and provide them to employees can lead to significant penalties. These penalties are NOT tax deductible.
  2. Don’t underestimate the IRS digital data environment – The IRS is increasingly working in conjunction with other Federal agencies, so they have the ability to identify contradictory data submitted on both individual employee forms and across multiple employees, this can lead to audits. The government is projecting employer mandate penalties of $228 billion. There is clear anticipation that revenue will be generated and violations will be ascertained through information reporting filings.
  3. Communication with employees is critical – Employers need to ensure accurate names, social security numbers, dependents, waiver information, eligibility determinations and offers of coverage are documented and up to date. Employers need to remind their employees to report any name changes due to life events such as marriage or divorce to both the Social Security Administration and their human resources department.
  4. Use proper worker classifications – A key requirement under the ACA is properly identifying full time employees and equivalents to determine if an employer is an applicable large employer under the employer mandate. Applicable large employers must cover the requisite 95% of all full time employees or they are risking exposure to penalties. It was only 70% last year which meant employers had a lot more leeway they won’t have this year.
  5. Correct errors – Errors could be identified by an IRS error message, internal audit or by an employee. A corrected return corrects an inaccurate return, if a transmission or submission was REJECTED by the IRS then that rejection requires a replacement.
  6. Keep accurate records – It is important to document and retain proof to substantiate responses on ACA information reporting forms. Among the records employers should retain are:
    1. Records of employees who are provided with an offer of coverage and corresponding dates
    2. Eligibility methodology and determinations
    3. Signed waivers or opt out forms
    4. SSN solicitation records
    5. Controlled group determinations
    6. Participant communications
    7. Affordability calculations

This can get overwhelming very fast but I have some good news, FreedomCare is here to help. Give us a call, we can answer any questions and walk you through the steps you need to take.

How to prepare for earlier reporting in 2017

How to prepare for earlier reporting deadlinesLast December, most employers were relieved when the IRS provided extensions of employee notifications and filing deadlines for Affordable Care Act (ACA) reporting. Unfortunately, this may have set up those same employers for failure as it will seem like these deadlines are coming 2 months earlier in 2017. To prevent this from happening, here are 4 ways to prepare for earlier reporting in 2017.

1. Give yourself plenty of cushion to submit required filings on time.

This year employers must provide 1095-Cs to employees by the end of January, indicating month-by-month coverage provided through the end of the previous December.

ACA Reporting Deadlines_with citationThese forms are required of most employers;

  • Employers of any size that sponsored a self-insured health plan providing minimum essential coverage must distribute to enrolled employees and file with the IRS Form 1095-B, showing a health plan enrollment.
  • Applicable large employers with 50 or more full-time employees or equivalents must distribute to enrolled employees and file with the IRS Form 1095-C, showing compliance with employer shared responsibility/minimum essential coverage requirements.

2. It’s now 95%, not 70%.

Unfortunately, last years extended reporting deadlines may not be the only things that trips up employers this year. Starting in 2016, all organizations with 50 or more full-time employees or equivalents must insure 95 percent of their full-time employees to avoid liability under the ACA’s shared responsibility provisions, and the resulting penalties.

The thing is, some employers may not understand that it’s not a 95% average for the year, it’s 95% for each month. If an employer had a month where they fell below 95%, then the employer is exposed. The employer could be facing penalties for the months when they were below the threshold.

The IRS will ask for payroll and benefits data, this will help them determine whether the indicator codes used on Form 1095-C are accurate. With last year’s 70% threshold, employers had a lot more leeway.

3. Exchange notices have been arriving.

Employers also need to be on the lookout for exchange subsidy notices. Notices pertaining to 2015 coverage, are now being sent from the ACA’s Health Insurance Marketplace. These notices allege that a full-time employee received subsidized coverage on an exchange because the employer failed to provide qualifying coverage.

4. Determining eligibility is an on-going effort.

The coverage provided to each full-time employee needs to be tracked and recorded every month. This needs to be an ongoing process for employers to get ready for the next year’s annual reporting. Employers can find relief by working with companies who offer tracking services that work in conjunction with payroll companies as part of their coverage. FreedomCare is one of the only options that provides this integration.

Employers that were close to the 50 or more full-time employee threshold last year need to make sure they stay on top of their eligibility. They need to run the numbers each month to make sure they aren’t on the hook. It would be terrible to find out too late and be liable for penalties for the whole year.

Reach out to FreedomCare, we can help you calculate and determine whether or not an employer needs to offer coverage. Trust us, it’s much less expensive than paying the penalties.

You can’t take the summer off from the ACA

4 reasons you cant take the summer offIt’s July and we are halfway through the summer; I know a lot of my clients and brokers are taking their yearly family vacations.

While you should enjoy time with your family, the end of the year will be here before you realize and unfortunately we can’t afford to take the summer off from the Affordable Care Act (ACA).

Here are 4 reasons why.

1.  IRS penalties are accruing monthly.

We commonly refer to the IRS penalty amounts as an annual amount but the penalties are actually calculated on a monthly basis. Acting sooner rather than later and getting a compliant plan in place can save employers valuable dollars on penalties that won’t have the opportunity to accrue.

2.  Exchange notices are arriving.

For every employee that logs onto the Insurance Exchange and receives a health care subsidy, a complex trail of communication and paperwork begins that requires employers to prove the status of their health care offering. If an employer has chosen to offer coverage that isn’t compliant or no coverage at all, they will have no choice but to pay the penalties.

3.  Employee eligibility is constantly changing.

Employee status can change on a daily basis, so employers can’t afford to take a break from data collection and management. Employers have to be ready for whatever comes their way – even an IRS audit. ACA requirements have become tougher in 2016, employers must now offer affordable coverage to at least 95% of their full-time employees – up from 70% in 2015. As these and other changes take place, employers have to continue to calculate benefits eligibility and affordability for required employees.

4.  Annual reporting is just around the corner.

Reporting is an annual event. But employers can’t take a break for the rest of the year, the ACA record keeping they do all year is essential for the next reporting season. This includes the information employers must provide to the IRS and their employees that demonstrates the health care coverage offered to employees meets minimum essential and affordability requirements of the ACA.

Bottom line? The ACA is complex and this year the rules are firmer than ever. Most organizations don’t have the expertise and processes to stay on top of these changes and take accurate action.

The good news is, we can help with all of these issues and more. But employers need to take the first step and not delay. Choose to benefit from our comprehensive expertise so you can look forward to smooth ACA compliance and a great rest of the year.

IRS releases updates to form 720 (PCORI)

IRS releases updates to form 720 (PCORI)The ACA includes a number of fees that employers are required to pay in order to help support various aspects of healthcare reform. One of those fees, PCORI was just updated by the IRS for 2016. The deadline for these fees to be paid is July 31st, 2016.

What is PCORI and why does it matter to employers?

According to their website, “The Patient-Centered Outcomes Research Institute (PCORI) helps people make informed healthcare decisions, and improves healthcare delivery and outcomes, by producing and promoting high-integrity, evidence-based information that comes from research guided by patients, caregivers, and the broader healthcare community.” Under the ACA, all employer sponsored health plans are subject to PCORI fees.

Why was the PCORI fee created?

The PCORI fees were established under the Affordable Care Act (ACA) to advance comparative clinical effectiveness research. PCORI fees are assessed on issuers of health insurance policies and sponsors of self-insured health plans. The fees are calculated using the average number of lives covered under the policy or plan, and the applicable dollar amount for that policy or plan year.

How much is the 2016 PCORI fee?

$2.17 per life

When are the 2016 PCORI fees due and how do you pay?

For policy and plan years ending on or after October 1, 2015, and before October 1, 2016
Employers and insurers will need to file Internal Revenue Service (IRS) Form 720 and pay the updated PCORI fee by July 31, 2016.

Employers have one month to calculate and send payment to the IRS. This form is relatively simple, but is structured in a way as to cause some confusion about who it applies to.

Give FreedomCare a call to discuss how to calculate and what to do if your clients aren’t compliant.

Forgotten details of ACA Compliance

Forgotten details of the ACAAs healthcare reform presents more pressing dilemmas for business owners, employers are looking towards insurance brokers to be their expert consultants. Brokers and agents who can devise a complete coverage package for their clients stands the best chance of keeping the decision-makers trust and the company’s business. Unfortunately, some brokers are forgetting about the little details of the ACA that can cost the most money. As a broker, it’s your responsibility to keep your clients informed.

Here are 7 details you or your clients may have missed.

  1. Update employee handbooks

If an employee handbook doesn’t reflect a company’s current benefits offering or is not properly updated, efforts may be in vein. Especially once an audit rolls around, as both the IRS and the Department of Labor may request copies for examination.

  1. Be explicit with the health care coverage offered to employee.

The ACA makes it mandatory for all large employers (those with 50 or more full-time employees/equivalents) to offer health care coverage to their 30+ hours a week employees. Failure to communicate with employees raises the risk of employees applying for subsidies on the exchange resulting in per-employee penalties that will add up quickly. Within the handbook, employers need to make sure the criteria for eligibility for health care coverage complies with the ACA.

  1. Document employees who WAIVE coverage

Should employees waive their coverage, employer’s need to protect themselves with documentation. Healthcare.gov supplied the employer appeal request form earlier this year, which requires employers to provide a reason an employee wasn’t eligible for a subsidy and requests documents to support their case.

  1. Don’t discount your full-time equivalent employees

Under the ACA, anyone employed by your company for 30 or more hours per week is eligible for an offer of health care coverage. That may include, “interns,” “temps,” and “part-timers.” The ACA defines who is eligible based on the hours of service and not the titles the company gives such workers. These workers may be eligible for health care and the employer will want to ensure that they are offered coverage if they fall within the eligibility definition.

  1. Include legal waiting period for health care in employee handbook

90 days is the maximum acceptable waiting period for health care under the ACA. Not three months (as some months have 31 days), and not the day after the 90th day (as that exceeds 90 days). The language used must be firm, 90 means 90, an overage of days will come back to haunt employers.

  1. Provide Summary of Benefits Coverage (SBC)

Just as important as offering coverage is educating your employees on what their coverage includes. An SBC breaks down the coverage for employees in an easy to understand format and must be provided beginning on the first day of the first open enrollment period under the ACA.

  1. Calculate eligible employees correctly (or hire someone that can)

Calculating full-time employees is a no brainer for most employers but calculating seasonal or full-time equivalent employees is an area with huge error for most. It’s important to stay educated with the current changes to the law or contract a company to handle it, like FreedomCare.

Share this valuable information with your clients. With renewals coming up for next year, make their compliance a top priority and call FreedomCare. Quotes are generated in less than 2 business days.

3 reasons to self-fund health benefits under the ACA

3 reasons to self fund acaSelf-funding controls costs.

Under the ACA, fully insured carriers are facing higher exposure to claims without the ability to include rate adjustment factors for health conditions and demographics. New rules limit the insurance carriers’ ability to charge higher premiums for older, riskier individuals now that certain risk reduction strategies are not allowed. These costs will most likely be passed on to employers and individuals.

Self-funding keeps the employers best interest as the priority.

There are some fixed costs of administering a self-funded healthcare plan, such as claims processing, stop loss premiums and administrative fees. Self-funded employers only pay the direct costs of administering employee claims. If the employee base is relatively healthy, having a self-funded plan can be one of the best ways to manage rising costs. When employers choose to self-fund their health plan, they have access to all claims submitted, including Minimum Essential Coverage (MEC) plans. The claims administrator should be able to provide reports of what claims were paid and when they were paid.

Self-funding is customizable.

The costs of fully insured plans are unpredictable for employers since carriers have control over monitoring employee health and underwriting for risk. With fully insured plans, employers don’t have access to employee health claims which is a significant advantage of self-funded plans.

In conclusion, the ACA has changed the healthcare landscape. But your self-funded client will be better positioned to save on healthcare costs while providing a quality health benefit plan that meets or even exceeds the requirements of the ACA. Take advantage of our experience and quality products, give FreedomCare a call today.

4 tips when determining how many full-time employee’s under the ACA

  1. First add up the low-hanging fruit.4 Tips FT employees

If an employee is expected to work 30 or more hours per week, he/she is classified as a full-time employee. You can immediately put all of these people in one category.

  1. Decide how you’ll track hours for variable-hour or seasonal employees

An employee is a variable-hour employee if his/her weekly schedule fluctuates above and below 30 hours.

The IRS has proposed a safe harbor method for employers to determine each employee’s full-time status by counting employee hours using a look-back/stability period. There are two types of measurement periods:

  • The initial measurement period for new employees and;
  • The standard measurement period for ongoing employees. The measurement must be between 3 and 12 consecutive calendar months.

If the variable-hour employee averages at least 30 hours per week during the measurement period, then the employee will be considered full-time during the following stability period (which needs to stay consistent with the measurement period). The employee’s status is “locked in,” regardless of the average hours worked during the stability period.

The stability period always begins immediately after the end of the measurement period and must be at least six consecutive months or the duration of the measurement period, whichever is greater. For example, if the employer used a 12-month look-back period, the duration of the subsequent stability period must be 12 months.

  1. Review your company’s eligibility definition 

The ACA full-time employee definition differs from the 40-hour per week full-time eligibility requirement that many companies currently use. Adjust accordingly to make things less confusing for you.

  1. Don’t forget about ERISA while trying to become ACA compliant.

In a class action suit filed by Dave & Buster’s employee, Maria De Lourdes Parra Marin, claims her employer announced that compliance with the ACA would require a cut in hours to reduce the number of full-time employees from 100 to 40 for the purpose of avoiding $2 million in additional health insurance costs. After the employer mandate took effect, she alleges her hours were in fact cut, she lost full-time status, and her insurance was cancelled.

While an employer who reduces employee hours would not violate any specific provision of the ACA, Dave & Buster’s employees are pursuing their claim under ERISA.

“Under Section 510 of ERISA, an employer cannot intentionally interfere with an employee’s right to benefits,” says Lorie Maring an attorney with the Atlanta office of Fisher & Phillips LLP. “What plantiffs are claiming is that by reducing their hours, the company was intentionally interfering with their right to receive health insurance.

How can your clients stay out of trouble and protect themselves? Self-funding health care benefits with FreedomCare can give them peace of mind and control over their health benefits. We have guaranteed ACA compliant solutions available at different rates to meet the needs of most employers. Reach out today.

Disclaimer:

This article is not to be offered as legal or tax advice. Neither Freedomcare nor the publisher are engaged in legal or tax advisory services. For advice on specific tax or legal questions, contact an attorney, CPA or other professional advisor. IRS CIRCULAR 230 DISCLOSURE: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.

Self-Funded Benefit Plans are on the rise.

Rise of Self funded benefitsWith the advent of the Affordable Care Act and skyrocketing healthcare costs, the concept of Self-Insurance is on the rise. It has been commonplace with large companies for some time but rare among small and midsized employers. So how does self-insurance work?

Self-funded health care has been described as an arrangement whereby an employer provides health or disability benefits to employees with its own funds.

Well, with health insurance costing close to $6,800 per employee per year, self-insuring your benefits can save you 12% or more. So if you have 100 employees, your insurance alone can cost $680,000 annually. A 12% savings would be $81,600. It seems like a no brainer at that point. What would your clients do with an extra $81,600 a year?

Because self-insurance allows an employer to break down virtually every component of their health care claims and administrative expenses, it allows for transparency to see the hard numbers and where all of those hard earned dollars are actually being used. This helps employers to plan better and allocate funds for certain contingencies.

Ask yourself 3 things if you want to self-insure your benefits plan:

  1. Do you want to save money?

  • According to ADP, the average monthly health plan premium rose 13.9% between 2010 and 2013, making a 12% savings hard to pass up.
  1. Are you compliant?

  • Employers still have to comply with the Employer Mandate portion of the ACA, not all companies offer compliant plans. FreedomCare offers the only 100% ACA compliance guarantee.
  1. Can you do this alone?

  • FreedomCare handles all of the details including administration, COBRA, paying claims, enrollment, etc.

According to the U.S. Department of Health and Human services, only about 26 percent of employers between 100 and 499 employees self-insure compared with more than 82 percent of employers with 500 or more employees. With no minimum participation, FreedomCare has made self-insuring possible for employers of all sizes, not just the large ones.