IRS: ACA Employer Mandate Still in Effect

Posted on November 22, 2017

ACA Employer MandateComprehensive healthcare reform legislation was signed into law by President Barack Obama on March 23, 2010. Known as the Patient Protection and Affordable Care Act, it was nicknamed the ACA or Obamacare. The ACA stipulates “employer shared responsibility rules” which require applicable large employers (ALEs) to offer affordable, minimum value health insurance coverage to their full-time employees or pay a penalty. These rules apply to employers with at least 50 full-time employees during the preceding calendar year. The employer shared responsibility rules are also known as the “employer mandate” or the “pay or play” rules. An “ALE” may be penalized if one or more full-time employees obtain a subsidy through the healthcare exchange because the employer did not offer health coverage, or the coverage offered is not affordable or does not provide minimum value.

The ACA Is Questioned

Upon his inauguration as President on January 20, 2017, Donald Trump signed an executive order to minimize the economic burden of the ACA until the law can be repealed and replaced. The order did not provide specific guidance related to any particular provision or requirement of the ACA, and appeared to be more of a mission statement for the President’s administration going forward. Further, only Congress is authorized to make changes to the ACA, i.e. through the legislative process. The President is not empowered to alter legislation. Nevertheless, business owners took notice of this executive order and began to wonder if the employer mandate would go away, along with any associated penalties.

The IRS Responds

The President’s executive order created confusion when it directed the Department of Health and Human Services and other federal agencies to “waive, delay, or grant exemptions from ACA requirements that may impose a financial burden”. In response, the Office of Chief Counsel within the IRS issued Letter numbers 2017-0010 and 2017-0013 on April 14, 2017, to clarify the impact (or lack of impact) of the executive order on the employer mandate rule. These letters confirmed that the pay or play rules continue to apply. Taxpayers must still adhere to the ACA requirements, including paying any penalties they may owe.

Where Do We Stand?

For the time being, it’s business as usual. Although both houses of Congress challenged the ACA between May and September 2017, all efforts failed to repeal and replace the law. The result is that the ACA is still in effect until the Senate and/or House, both Republican-led, can craft a viable alternative that will garner sufficient votes to proceed to the President’s desk for signature. In the meantime, ALEs must continue to comply with the employer shared responsibility rule as well as any other reporting requirements.

In fact, The ACA Times has reported that “all signs point to the IRS being prepared to enforce the employer shared responsibility mandate of the ACA”. The website suggests that by December 2017, “the IRS could be sending enforcement notices to inform businesses with 50 or more employees what they owe for failing to comply with the employer shared responsibility mandate”. These notices will serve to enforce the ACA compliance mandate starting with the 2015 tax year. The IRS website does not contradict this opinion and provides a lengthy Q&A dedicated to the employer shared responsibility provisions under the ACA, including information on how employers will be notified of any penalties assessed and how payments will be collected. Now that the myth of the employer mandate waiver has been dispelled, employers would be wise to ensure they have filed all necessary documentation with the IRS to minimize any potential penalties, and then revisit the status of their health insurance offerings and prepare to be ACA compliant, to avoid possible penalties in future tax years.

Where Can Employers Find Help?

Despite a series of attempts to repeal the Affordable Care Act, the law is still intact. As your benefits compliance experts, MidAmerica will continue to monitor the status of any potential healthcare reform and ensure you are aware of any effects new legislation could have on your clients’ retirement and healthcare benefit plans. We are committed to providing quality benefits solutions to public sector employers while meeting their budget objectives. This commitment drives us to meet changes in the benefits environment with products that will ensure employers are compliant while receiving the best value for their money.

Three Forms Filing Service Options

The 1094/1095 forms filing deadlines for the § 6055 and § 6056 reporting requirements are quickly approaching. MidAmerica can help, no matter what your forms filing needs may be. We offer three ways to file your IRS required forms.

If you would like to learn more about our forms filing packages, please email AccountManagement@myMidAmerica.com.

If you sponsor a 403(b) plan for your employees, you must satisfy the “universal availability” requirement as established by the IRS. According to IRS.gov, all employees of the employer must be eligible to make elective deferrals if any employee has the right to do so, with certain limited exceptions. Certain part-time employees may be excluded from eligibility to make elective deferrals.

The IRS also requires that any employer sponsoring a 403(b) plan must notify all eligible employees of this benefit at least once annually. In doing so, you are providing an “effective opportunity” for eligible employees to participate in the plan.

Top Three Ways to Notify Your Employees

Your plan administrator may provide communication templates you can personalize and distribute to your employees to make the notification process simpler. There are 3 methods by which you can distribute the notices:

  1. Mail. If choosing this method, be sure to retain the list of addresses used and the postage receipt.
  2. Hand Delivery. Prepare a list of employee names and have each employee sign their name to acknowledge receipt.
  3. Email. Strict guidelines must be followed for electronic delivery, but email is permitted.

If you choose to email the Universal Availability notices, this method is recommended in addition to mailing or hand delivery, not instead of. It should not be assumed that all recipients have access to a computer.

IRS Distribution Guidelines

The IRS has indicated they are auditing an increasing number of 403(b) plans, particularly in regards to Universal Availability compliance. An employer found to be non-compliant may have to make contributions to the plan on behalf of any eligible employees who did not receive proper notice. According to the IRS, compliance must be shown on a “facts and circumstances” basis. Treas. Reg. Section 1.403(b)-5(b)(2) stipulates that:

“…An employee is not treated as being permitted to have section 403(b) elective deferrals contributed on the employee’s behalf unless the employee is provided an effective opportunity….Whether an employee has an effective opportunity is determined based on all the relevant facts and circumstances, including notice of the availability of the election, the period of time during which an election may be made, and any other conditions on elections. A section 403(b) plan satisfies the effective opportunity requirement only if, at least once during each plan year, the plan provides an employee with an effective opportunity to make (or change) a cash or deferred election between cash or a contribution to the plan….”

Although the IRS has not provided distribution guidelines specific to 403(b) plans, the “best practice” is to follow the clearer IRS and DOL rules that have been developed for other types of retirement programs. Failure to comply with Universal Availability could disqualify the entire plan, so it’s better to be safe than sorry.

Are you a current MidAmerica client?  You can download Word templates of our Universal Availability notice by clicking on the links below.

Limited Eligibility

For plans which exclude certain employees from participation.

No Exclusions

For plans which allow all employees to contribute.

The Internal Revenue Service recently released the 2018 annual contribution limits for Health Flexible Spending Accounts as well as IRC types 403(b) and 457(b).

Health Flexible Spending Accounts

The annual limit on voluntary employee salary reductions for contributions to a health flexible spending account will be $2,650 in 2018, which is an increase from the prior limit of $2,600. The limit increase will apply when the employer’s FSA plan year begins. For example, if the plan year begins on June 1, the limit increase will kick in on June 1, 2018 during the open enrollment period.

Health Flexible Spending Accounts Contribution Limits
Tax Year Annual Limit
2018 $2,650
2017 $2,600

For more information on the increased Health FSA limits, review Revenue Procedure 2017-58.

403(b) Retirement Plans, Elective Contributions (TSA)

The annual elective deferral limit will be $18,500 in 2018, which is an increase from the prior limit of $18,000.

The following limits will remain unchanged in 2018:

  • If you qualify for the full amount of the lifetime catch-up, the catch-up contribution limit remains unchanged at $3,000. This brings the annual total limit for employees who qualify for the lifetime catch-up to $21,500.
  • The catch-up contribution limit for employees who are age 50 or over remains unchanged at $6,000. This brings the annual total limit for employees who qualify for the age 50+ catch-up to $24,500.
403(b) Plan Contribution Limits
Tax Year Basic Deferral Limit for All Employees Annual Limit if you Qualify for the Full Amount of the Lifetime Catch-Up (15 Years of Service). Total Lifetime Catch-Up Max of $15,000 Annual Limit if You Qualify for the Age 50+ Catch-Up Maximum Annual Contribution if You Qualify for Both the Age 50+ and Lifetime Catch-Ups
2018 $18,500 $21,500 $24,500 $27,500
2017 $18,000 $21,000 $24,000 $27,000

For more information on the increased 403(b) limits, review the IRS article, IRS Announces 2018 Pension Plan Limitations.

 457(b) Retirement Plans, Elective Contributions (TSA)

The annual elective deferral limit will be $18,500 in 2018, which is an increase from the prior limit of $18,000.

The following limits will remain unchanged in 2018:

  • The catch-up contribution limit for employees who are age 50 or over remains unchanged at $6,000. This brings the annual total limit for employees who qualify for the age 50+ catch-up to $24,500.
457(b) Plan Contribution Limits
Tax Year Basic Deferral Limit for All Employees Annual Limit if You Qualify for the Age 50+ Catch-Up
2018 $18,500 $24,500
2017 $18,000 $24,000

For more information on the increased 457(b) limits, review the IRS article, IRS Announces 2018 Pension Plan Limitations.

 403(b) and 401(a) Retirement Plans, Employer-Sponsored
(aka, MidAmerica’s Special Pay Plan)

The annual Section 415(c) contribution limits for 403(b) and 401(a) have increased from $54,000 in 2017 to $55,000 in 2018.

To stay up to date on legislative changes and trends, subscribe to our newsletter.

 

* indicates required




It’s a never-ending battle.  Healthcare costs continue to rise.  As an employer, how do you cope?  If healthcare costs are rising, that means employee health benefit costs are rising.  You want to provide a valuable benefit for your employees, to retain and attract good talent.  For job seekers, the strength of an employer’s benefits package can be as valuable as the salary, even more so if they have dependents.  Employers have to become creative in their financial strategies to limit benefit costs.

How are employers dealing today?  Here are 4 strategies that some have adopted:

  1. Introduce higher premiums or employee cost-sharing.  This is a short-term tactic which shifts more of the financial burden to the employee.  Although it’s counter-productive for drawing talent, it is still a frequent tactic.  Employee cost-sharing offers several options, including higher deductibles and out-of-pocket maximums, moving from a fixed-dollar co-pay to a percentage-based co-insurance model, increasing employee cost for using non-network providers, and increasing employee cost for using brand name prescription drugs over generics.
  2.  Level-funding company healthcare costs.  You’re probably familiar with the traditional fully insured plan and the traditional self-funded plan.  Level-funding is a hybrid of the two, whereby the plan is filed as a self-funded plan, and the employer pays a fixed and unchanging premium per employee each month.  However, after one or two years, the plan is evaluated to see if the employer qualifies for a refund of premium if claims were lower than expected.  Likewise, the premium may increase at renewal if claims were higher than expected.  With a bit of ingenuity and planning, the employer could simultaneously implement other methods to encourage behavioral changes that lead to healthier lifestyles among employees, allowing the employer to realize premium refunds rather than increases.  Which leads to….
  3. Health and wellness initiatives.  This method of cost containment is becoming increasingly more common.  Employers have realized that improving employee health and wellness is an effective way to lower healthcare costs and improve productivity.  The key to the success of these programs is the use of incentives, such as rewarding employees for participating in a program or attaining certain health-related goals, such as smoking cessation.  Wellness programs should be tailored to the individuals, meeting them where they are in order to realistically assist them in reaching healthy goals.  Another important condition is the need to measure employee engagement.  If you know who is and who isn’t participating in the program, you will have a better understanding of how to implement incentive-based initiatives for the future.
  4. Consumer-driven health plans.  Typically, we are talking about Health Reimbursement Arrangements (HRA), Health Savings Accounts (HSA), and even Flexible Spending Accounts (FSA).  These plans allow employees to access funds to cover higher cost-sharing provisions in exchange for lower monthly premiums.  With employees being more engaged in the cost of healthcare services, they become better consumers.  They may be more inclined to consider the necessity of higher-cost healthcare in certain situations, e.g. going to an urgent care facility vs. the hospital emergency room. Further, this greater insight into how healthcare dollars are spent may also persuade them to make positive behavior changes in their lifestyles, leading to significant reductions in health plan spending year over year.  This is a win/win for both employer and employee.  Below is a breakdown of the differences between the 3 types of consumer-driven plans.

 

Health Care FSA HRA HSA
What is it? It’s an account to help employees pay for eligible medical expenses. It’s an account to help employees pay for eligible medical expenses. It’s a personal bank account to help employees save and pay for qualified medical expenses.
How do you get it? Enrollment is through the employer if they offer an FSA.  There is no need to enroll in a health plan. It’s usually connected to a health plan.  If the employer offers an HRA, enrollment is automatic when signing up for the health plan. Requires enrollment in a high-deductible health plan that meets a deductible amount set by the IRS.  Other IRS guidelines must be met in order to be eligible.
Who contributes to it? The employee.  The employer can also contribute if they choose to. The employer.  Employee contributions are not permitted. The employee, their family, the employer, and anyone else that chooses to.
How is the money put into it? The employer will deduct money from the employee’s paycheck, before taxes, and put it into the account. The employer may contribute on a monthly basis, or may fund the entire contribution amount at the beginning of the plan year. The employee can make deposits just like a personal bank account.  Family & the employer can also contribute.  Employee may be allowed to deposit pre-tax money from paycheck.
What happens if I don’t spend all the money in one plan year? The employer may choose to allow a carryover up to the IRS limit of $500. The employer may allow a certain amount to be carried over into the new plan year. Since the employees owns the account, the money will remain until they choose to spend it.
Can I keep the money if I leave my job? No.  The employer keeps the money. No.  The employer keeps the money. Yes.  The employee owns the account.
When can I start using the funds? The employee can start spending down the FSA on the first day of the plan year. Different types of HRAs each have their own rules as to when funds can be accessed.  The employer will set the rules. The employee can start spending down the HSA once enrolled in a high-deductible health plan and has opened the account.
Do I have to pay taxes on the money? No No No
What can I pay for with it? Medical expenses that are determined by the IRS & the employer.  This includes dental, vision, and many other health care services and supplies as listed under Section 213(d) of the Internal Revenue Code. Medical expenses that are determined by the IRS & the employer.  The employer may only allow the HRA to pay for services covered by your health plan.  Some HRAs can be used to pay for dental, vision, & other services/supplies listed under Section 213(d) of the Internal Revenue Code. Qualified medical expenses, including services covered by a health plan as well as expenses listed under Section 213(d) of the Internal Revenue Code.
Can I have other accounts with it? Yes.  The employee can have an HRA or a dependent care FSA. Yes.  The employee can have a healthcare FSA and/or dependent care FSA. Yes.  The employee can have a limited-purpose FSA or limited-purpose HRA, which can only be used for eligible dental and vision services.

While health insurance premiums will continue to rise, employers have options to potentially reduce escalating costs while still providing a valuable benefit to their employees and encouraging employees to become more invested in their own healthcare.  If you’d like to learn how FSAs and HRAs can help you achieve your financial goals, contact us today at accountmanagement@midamerica.biz.

 

MidAmerica Administrative & Retirement Solutions has been providing retirement solutions since 1995, and health and welfare programs since 2002.  Our goal is to maximize benefit dollars for both the employer and the employees.  Our staff of highly experienced subject matter experts, ease of technology, and streamlined administration enable us to reach this goal.  Please contact us if you’d like assistance in reaching your goals.

 

The average American spends 20 years in retirement¹

That’s a long time! Make sure you’re ready by saving now for the retirement you’re envisioning.

Waiting to contribute could cost you

What difference could 10 years make? Over $250,000. If at age 25, you started with a $1,000 investment earning 10% annually and contributed $100 a month, you will have earned a total of $415,466 by age 60. If you waited ten years to start saving at age 35, you would only earn $145,846 by your 60th birthday.

Baby Boomers and Millennials contribute the most

According to the 16th Annual Transamerica Retirement Survey conducted by the Transamerica Center for Retirement Studies, Baby Boomers (those born between 1945 and 1964) and Millennials (those born between 1980 and 2000) contribute 8 percent of their annual pay, while Generation X (those born between 1965 and 1980) only contributes 7 percent.²

Prepare to hit the open highway

TransAmerica Center for Retirement Studies and the Global Coalition on Aging found that, despite travel ranking as one of the top dreams for life after retirement, only two in every ten Americans have actually factored this dream into their retirement savings strategy.³ Want to take that trip to Europe? You can! Don’t just dream about it. Make it a part of your retirement goal and be sure your luggage is packed for those golden years.

ACA Employer MandateComprehensive healthcare reform legislation was signed into law by President Barack Obama on March 23, 2010. Known as the Patient Protection and Affordable Care Act, it was nicknamed the ACA or Obamacare. The ACA stipulates “employer shared responsibility rules” which require applicable large employers (ALEs) to offer affordable, minimum value health insurance coverage to their full-time employees or pay a penalty. These rules apply to employers with at least 50 full-time employees during the preceding calendar year. The employer shared responsibility rules are also known as the “employer mandate” or the “pay or play” rules. An “ALE” may be penalized if one or more full-time employees obtain a subsidy through the healthcare exchange because the employer did not offer health coverage, or the coverage offered is not affordable or does not provide minimum value.

The ACA Is Questioned

Upon his inauguration as President on January 20, 2017, Donald Trump signed an executive order to minimize the economic burden of the ACA until the law can be repealed and replaced. The order did not provide specific guidance related to any particular provision or requirement of the ACA, and appeared to be more of a mission statement for the President’s administration going forward. Further, only Congress is authorized to make changes to the ACA, i.e. through the legislative process. The President is not empowered to alter legislation. Nevertheless, business owners took notice of this executive order and began to wonder if the employer mandate would go away, along with any associated penalties.

The IRS Responds

The President’s executive order created confusion when it directed the Department of Health and Human Services and other federal agencies to “waive, delay, or grant exemptions from ACA requirements that may impose a financial burden”. In response, the Office of Chief Counsel within the IRS issued Letter numbers 2017-0010 and 2017-0013 on April 14, 2017, to clarify the impact (or lack of impact) of the executive order on the employer mandate rule. These letters confirmed that the pay or play rules continue to apply. Taxpayers must still adhere to the ACA requirements, including paying any penalties they may owe.

Where Do We Stand?

For the time being, it’s business as usual. Although both houses of Congress challenged the ACA between May and September 2017, all efforts failed to repeal and replace the law. The result is that the ACA is still in effect until the Senate and/or House, both Republican-led, can craft a viable alternative that will garner sufficient votes to proceed to the President’s desk for signature. In the meantime, ALEs must continue to comply with the employer shared responsibility rule as well as any other reporting requirements.

In fact, The ACA Times has reported that “all signs point to the IRS being prepared to enforce the employer shared responsibility mandate of the ACA”. The website suggests that by December 2017, “the IRS could be sending enforcement notices to inform businesses with 50 or more employees what they owe for failing to comply with the employer shared responsibility mandate”. These notices will serve to enforce the ACA compliance mandate starting with the 2015 tax year. The IRS website does not contradict this opinion and provides a lengthy Q&A dedicated to the employer shared responsibility provisions under the ACA, including information on how employers will be notified of any penalties assessed and how payments will be collected. Now that the myth of the employer mandate waiver has been dispelled, employers would be wise to ensure they have filed all necessary documentation with the IRS to minimize any potential penalties, and then revisit the status of their health insurance offerings and prepare to be ACA compliant, to avoid possible penalties in future tax years.

Where Can Employers Find Help?

MidAmerica’s TotalCare product, offered in conjunction with MyBenefitsChannel, is not just ACA compliance software, but a total ACA consulting service. It enables schools, government, and mid to large employers to reduce potential liability and internal ACA compliance workload, while keeping clients audit-ready. For a low Per Employee Per Month (PEPM) fee, the employer will receive a “Do It For You” (DIFY) solution that:

  • Ensures 95% certainty of compliance
  • Automatically rolls data into IRS reporting
  • Auto generates required notices
  • Tracks for audit preparation
  • Provides optional audit management
  • Is accessible via a mobile application

Despite a series of attempts to repeal the Affordable Care Act, the law is still intact. As your benefits compliance experts, MidAmerica will continue to monitor the status of any potential healthcare reform and ensure you are aware of any effects new legislation could have on your clients’ retirement and healthcare benefit plans. We are committed to providing quality benefits solutions to public sector employers while meeting their budget objectives. This commitment drives us to meet changes in the benefits environment with products that will ensure employers are compliant while receiving the best value for their money.

If you would like to learn more about the TotalCare product, please visit http://www.mymidamerica.com/acatotalcare/.

While tradeshows can be a great way to source valuable new ideas, learn about new products, and form valuable partnerships, we all know even the most disciplined attendee can be distracted from their objective. Each year, we attend or exhibit at dozens of conferences across the country, so we understand the desire to socialize with friends we haven’t seen in a while, or the allure of exploring foreign cities. However, we all want to leave the conferences with valuable contacts, information, or tools that make us more successful in our personal and professional lives. There’s no denying that the giveaways, luncheons, after-parties, and games are all great ways to network, learn, and have some fun, but it’s important to have an exhibit strategy.

Here are some tips for getting the most out of your conference experience:

  1. Have a plan of action

    Before you leave for the tradeshow, consider the challenges your organization is currently facing.- Are there looming budget cuts?

    -Are you unhappy with your current vendor?
    -Do you need to find a more efficient way to perform a cumbersome task?
    -Is there possibly new technology you could implement to increase efficiency?
    -Are your facilities in need of updates?

    Understanding your current challenges will help you formulate a game plan for exploring the exhibit aisles, making sure you make the most of the typically limited time you have to speak to vendors.

  2. Visit companies you know

    This is a great opportunity to connect, or in some cases reconnect, with the companies that already have your business. Speaking with a representative face-to-face about your experiences with the company can not only open up dialogue about how the company can better service you, but also improves your overall relationship with them.

  3. Visit companies you don’t know, but might want to

    Our advice is to research the exhibitors beforehand and make notes on the possible vendors or providers you’d like to visit. The exhibit hall can sometimes be overwhelming, so having a loose itinerary of the companies you definitely want to learn more about will make your exhibit day experience more manageable.

  4. Grab plenty of literature

    Take advantage of the literature the exhibitors provide. A lot of the information is not only intended to sell the company’s specific product, but to inform you on trends in your industry or solutions similar organizations have found beneficial. Takeaways are also great reminders of the companies you visited during your whirlwind of a day, and can facilitate discussions once you’re back in the office.

  5. Attend breakout sessions

    Breakout sessions are often times the greatest value add for attendees of a tradeshow. Take advantage of the fact that there are so many subject matter experts in one place for you to learn from. As with exhibitor lists, tradeshows will typically share the breakout session schedule ahead of time, so be sure to factor that into your plan of action.

  6. Ask questions

    Don’t be afraid to ask the booth representatives questions. That’s why they’re there, after all. Any representative worth speaking with will be more than happy to take time to speak with you about your unique issue and how their company can help. Many will even offer to host post-exhibit discussions to facilitate a more in-depth conversation. If it’s a product that could really help your organization save time or money, take them up on the offer! The worst that could happen is you decide you’re not interested in what they can provide.

  7. Make connections / network

    Sometimes networking can be awkward – we get it. Speaking with people you don’t know may not come naturally to you, but tradeshows are the perfect opportunity to exercise your networking skills because everyone there is open to conversation. Plus, you already have something in common with the attendees and exhibitors – your industry. Use that to your advantage. Spark a conversation with someone while standing in line for a drink, pay attention to people’s name badges (which usually have the person’s organization, title, and name listed – a built-in icebreaker), and know that all of the exhibitors want nothing more than to talk to you. The beauty of networking is you never know when a seemingly meaningless conversation can lead to a mutually beneficial relationship.

Tradeshows are intended to bring a large assortment of solutions uniquely designed for your industry together in one place. Spending just a little bit of time game planning beforehand, and executing on a simple strategy can ensure that you not only have fun, but bring back valuable information for the betterment of your organization and your career. Visit every booth, grab literature (and the coveted giveaway!), listen to all of the great speakers, and don’t be afraid to ask questions. Using these tips will help you get the most out of your tradeshow experience, so that you can bring ideas and solutions back to work, along with that tote bag filled with free swag.

The MidAmerica team will be at the upcoming  Association of School Business Officials (ASBO) Annual Meeting & Expo from September 23 – 24 in Denver, Colorado. Make sure to stop by booth 525 and say hello!

1 3

Feedback Survey

Please take a few moments to complete our survey.
Your responses will help us improve our service!

Take Survey