ACA Reporting: 2022 Key Updates and Tips

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MP: Good afternoon, and thank you for joining us for an MP webinar covering ACA reporting 2022 key updates and tips i’m katie kreider marketing specialist here at MP.

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MP: For those of you joining us on a webinar for the first time empathy is a full service human capital management company we offer a complete suite of products and services to support organizations, through the entire employee lifecycle including.

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MP: recruiting hr.

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MP: payroll benefits administration time and attendance and compliance assistance.

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MP: We support our clients with cutting edge technical solutions, as well as proactive reliable service and deep HR and payroll expertise.

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MP: And MP we’re wired for HR and help our clients succeed by aligning their people strategy with their business goals i’m excited to introduce your presenter for today’s program Paul Cornelis.

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MP: Paul has over a decade of experience in HR consulting space.

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MP: Working with businesses of all sizes and industries.

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MP: Paul and his team of certified HR professionals at MP.

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MP: assist clients with training compliance and full circle HR guidance and support, just a few housekeeping issues before we get started here today.

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MP: If you’d like to submit a question during the program please use the q&a feature at the bottom of the screen, we will be sending out the recording of the webinar later today, along with the slides and with that i’m going to hand the MIC off to Paul.

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Paul Carelis: Thank you so much, great to speak with everybody today really looking forward to digging into this topic with with everyone.

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Paul Carelis: In the age of PPP and the rtc and all of that.

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Paul Carelis: we’ve kind of all collectively forgotten about the old HR stalwart acronym of the ACTA but it’s here and it’s coming do so now’s the the best time to.

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Paul Carelis: kind of refresh our memory if if you’re a seasoned business who’s used to having to do these filings every year, or if you’re a new business of a certain size or maybe you grown to.

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Paul Carelis: become an applicable large employer, which will define in a few minutes but either way ACTA is a is an important regulation that we want to be mindful of and make sure we’re compliant with, and it can be very daunting and very complex but we’ll do our best to break that down today.

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Paul Carelis: Just a quick legal disclaimer this presentation is coming from an HR best practices perspective, I am not an attorney nor a tax advisor so please do not construe anything we talked about today as legal advice or or tax advice, but nonetheless hope you get a lot out of today’s session.

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Paul Carelis: So, in terms of what we hope to cover and address.

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Paul Carelis: First we’ll do a.

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Paul Carelis: overview of the ACTA.

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Paul Carelis: we’ll talk about due dates when when stuff has to be filed, as well as discussing you know what potential penalties for noncompliance.

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Paul Carelis: we’ll go over a few of the key changes that are new this year.

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Paul Carelis: will also take a little bit of time to talk about what to do if you do get a penalty letter.

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Paul Carelis: It can be a scary thing a lot of times it’s it all amounts to nothing so just want to talk through that in a in a calm way and and help you understand what those are all about and how to respond.

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Paul Carelis: And then we’ll also take a deeper dive into the into the AC report, so one of the most common questions we get is I need to approve these forums, but they’re not an English they make no sense to me, what does this all mean.

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Paul Carelis: So we’ll do our best to address that today as well.

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Paul Carelis: Okay, so quick overview, especially for those who who are new to ACTA compliance, the law was originally signed into law in March of 2010 it’s been challenged several times over the years.

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Paul Carelis: Creating cases that rose to the level of the Supreme Court.

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Paul Carelis: In three occasions and then all three occasions in 2012 2015 and then 2021 by enlarge the ACTA was upheld by the Supreme Court so unless there’s a new challenge and a new angle that’s more successful the ICA is here to stay.

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Paul Carelis: So they did as they launched the affordable care act they knew what was really going to change the landscape of.

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Paul Carelis: of benefits and especially benefits offered through an employer and a say, not only address that but also addressed some of the rules for what what truly counted as coverage and what.

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Paul Carelis: Essential insurance is really needed to provide and include to be considered.

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Paul Carelis: eligible as a as a plan under the ACTA.

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Paul Carelis: So it was a gradual rollout but some of the and by now, obviously it is kind of fully in place we’ll talk about really the last training will being removed this year in a second but among the things that are included in the affordable care act.

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Paul Carelis: are guaranteed coverage for pre existing conditions coverage for children up to age 26.

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Paul Carelis: One of the things that some people don’t realize is when we’re going through handbooks and we’re helping clients out ACTA also created the lactation break.

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Paul Carelis: regulations for nursing mothers.

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Paul Carelis: They also been lifetime coverage limits.

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Paul Carelis: And also provided at no cost no out of pocket costs to Members free preventative care screening so annual physicals and other services that are counted as preventative care under the definitions of the ACTA.

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Paul Carelis: They also said that when an employer offers insurance that waiting period cannot exceed 90 days.

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Paul Carelis: During the trump administration, they did roll back the individual mandate, so, if you remember, there was the employer mandate and the individual mandate, which meant that.

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Paul Carelis: Subject employers need to offer coverage to eligible employees and then there was also the onus on employees that they needed to have coverage for themselves or face a penalty.

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Paul Carelis: So those penalties have been rolled back to zero, so there at this time is not an individual mandate, so if an individual does not have health insurance for themselves.

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Paul Carelis: They will not be penalized on their federal income taxes that can vary by state some States do have individual mandates, but.

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Paul Carelis: Today we’re speaking in regards to federal regulations and, as such, there is no individual mandate at this time.

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Paul Carelis: That actually was the owners for one of those Supreme Court challenges the the one in 2021 was that the argument was that, without the individual mandate and place anymore.

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Paul Carelis: They use that to kind of creatively say that it should discredit the entire program but again I got shot down by the Supreme Court.

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Paul Carelis: So, in terms of what is new, this year, they have ticked up the penalties both a non non offer penalty, as well as the failure to provide affordable coverage penalty So those are both both increased we’ll go over those updated numbers in a moment.

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Paul Carelis: When I spoke about the last training wheel in terms of what they’ve referred to as transitional relief as employers have gotten comfortable and gotten into compliance with the ACTA.

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Paul Carelis: There was always this term and notion of good faith, especially when it comes to the reports and the reporting of the CIA and the filing so.

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Paul Carelis: The irs had officially adopted this notion that if an employer was acting in good faith, if they were trying their best to have accurate reporting and accurate files that.

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Paul Carelis: That would be taken into consideration and eliminate or greatly reduce any penalties for any errors on the filing so as of this year they’re saying that good faith is officially dead, there is no more good faith, they are requiring 100% accuracy on the ACTA filings going forward.

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Paul Carelis: Also, if you if you’re a long time, ACTA filer.

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Paul Carelis: you’ll you’ll remember that we’ve always kind of steered down January, in the face and been nervous heading into January that ACTA forms need to get done right away, but every year that kind of punted on it, and always push back the due dates into March.

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Paul Carelis: They have not moved it’s technically and proposed date still so they have the incas and dried on it, yet, but they have put forward a formal proposal to permanently move back the due dates.

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Paul Carelis: And even though it’s proposed they did officially say that for this filing year that’s going on right now that employers may use the proposed due date so it’s pretty much a sure thing it just is not official official just yet.

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Paul Carelis: Before I move on, we did get a quick question that I can address i’m not sure I do address later in the presentation.

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Paul Carelis: Is there a threshold for the number of employees needed to be subject to this law.

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Paul Carelis: So, yes.

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Paul Carelis: It all hinges on the number of full time equivalent employees that you have.

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Paul Carelis: So the way that that’s calculated is a full time employee under the AC is defined as someone who works 30 hours per week or 130 hours per month.

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Paul Carelis: Anyone who who meets that threshold counts as one employee they count as a full timer You then have to add up the hours of anyone who is not a full time employee, so what I mean by that is, if you have two employees who work 15 hours per week.

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Paul Carelis: adding up to 30 hours that would count as one that would count as one F T or full time equivalent.

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Paul Carelis: If, in the previous calendar year your F T co or full time equivalent count was 50 or greater you’re subject to the affordable care act.

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Paul Carelis: If, for some reason, your FT count was below 50 in the previous calendar year, you are not subject and do not need to be in compliance with the ACTA for that, following calendar year.

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Paul Carelis: So.

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Paul Carelis: i’ve been using the term applicable large employer, I may start or sprinkle in the term a le that’s means the same thing, basically, when we say in a le were referring to someone who is subject to the employer mandate, meaning they have 50 or more fts.

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Paul Carelis: we’ve addressed F T and that definition the other one here on the screen that it’s good to be familiar with is a variable our employee.

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Paul Carelis: So the expectations of the affordable care act or that when you hire someone in in many cases you’ll know whether they’re going to be treated as full time eligible for benefits.

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Paul Carelis: Or if they’re going to be part time work fewer than 30 hours per week, not be eligible for benefits not not being counted as.

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Paul Carelis: An eligible employee for these ECA benefits and reporting.

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Paul Carelis: But oftentimes, especially in certain vendors industries retail restaurants and others, you may have you may hire someone who.

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Paul Carelis: You honestly can ascertain what their schedule is going to look like whether they’re going to be above or below the 30 hours per week hundred 30 hour per month threshold.

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Paul Carelis: There is a separate category for those folks call the variable hour, if you if you truly have a variable our employee and you really don’t want to abuse it.

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Paul Carelis: If you know someone’s going to be full time you don’t want to label them as variable our because what variable our does when it when you legitimately have someone in that position is that you can hold off on.

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Paul Carelis: offering them benefits really for up to a year here, in most cases, until you’re able to determine whether or not they met the hours threshold, based on their schedule, so it can be very useful, but at the same time just be sure you don’t abuse that.

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Paul Carelis: Some other really important terms, especially when when working within the ICA and your filings.

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Paul Carelis: There are a few three different periods that are taken into account with the affordable care Act, the first of which is the measurement or the look back period.

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Paul Carelis: So the look back with a measurement period is basically the time that you’re, taking into consideration to determine whether or not employees worked the necessary hours to need to be offered benefits.

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Paul Carelis: Many or most employers use a 12 month look back period, you can use look back period, you can you can do the monthly measurement period where you’re looking at each month, or you know other measurements as well, obviously that’s more burdensome administratively.

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Paul Carelis: But that leads us to the Stability period, so the Stability period is the period of time once you’ve looked at your measurement or look back period.

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Paul Carelis: that whoever qualified as full time during the measurement period, then needs to be offered benefits and that period generally needs to be as long as you’re at least as long as your measurement period, and in some cases, a little bit longer if you use a really brief one.

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Paul Carelis: So what I mean by that is if in our example here if you’re using a 12 month look back period.

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Paul Carelis: You would then you can then have what’s called an administrative period so that your open enrollment time the time that you have to.

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Paul Carelis: Take a look at the data take a look at the hours worked and really determine Okay, what do I need to be offering coverage to.

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Paul Carelis: And that’s then followed up by a stability period where if you’re using the 12 months look back, anyone who rose above that 30 hour per week average.

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Paul Carelis: is then offered periods offered insurance for the next 12 months, regardless of how their how they hours Evan flow throughout that following year they remain eligible for that entire time.

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Paul Carelis: The one exception to that would be if someone had a permanent status change so let’s say you had someone who was full time and then all of a sudden, for whatever reason, you know, maybe.

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Paul Carelis: they’re they’re taking an additional job or.

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Paul Carelis: They need to reduce their schedule to care for a loved one or you know or just.

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Paul Carelis: heading towards retirement and moving to a part time schedule if there’s a a permanent change status change to them where they’re going from a full time employee to a part time employee it’s just it’s not just.

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Paul Carelis: A varied schedule, then that could potentially change the rules in terms of being locked in for the stability period where they could lose their eligibility based on that status change, but by and large, if someone qualifies then they’re there in that stability period for the duration.

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Paul Carelis: Okay, one other question before we move on, does the employee holiday pay and vacation time count towards hours worked, yes, so the way that another key term that’s important to know, and I don’t believe it’s on the slides here is.

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Paul Carelis: is how the ACTA counts hours, so they say hours of service, rather than hours worked so when when they say, an average of 30 hours and I apologize if I say our if I said hours worked.

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Paul Carelis: The ICA defines a devout as hours of service so basically any paid time, whether that be actual hours worked paid vacation paid holiday paid sick those all count towards the equation of determining hours for the ACTA so it’s hours of service, rather than hours worked.

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Paul Carelis: A few more key terms, before we move on to the next section.

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Paul Carelis: You may hear people refer to the exchange or the marketplace so depending on where you are that’s either going to be the federal exchange or the federal marketplace@healthcare.gov.

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Paul Carelis: or it could be a State exchange as well, so some States decided to defer to the federal marketplace, rather than building their own other states, you know.

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Paul Carelis: i’m sitting in Massachusetts so here in Massachusetts we have the the mass health connector.

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Paul Carelis: But really if any employee or any individual goes to healthcare.gov based on the information they provide and and where they live, that would either continue will continue them through the federal exchange or kick them over to their respective state exchange if there’s one set up.

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Paul Carelis: The reason why we bring up these exchanges is because these are really where potential penalties for employers come from when it comes to the ACTA so.

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Paul Carelis: Aside from not filing your required forms with the irs which was its own penalties, the the big heavy hitter penalties that we talked about i’ll have to do with whether or not you’re offering coverage and whether or not that coverage is affordable.

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Paul Carelis: That being said, there are no penalties to be had unless you have an employee they go to one of these exchanges and they sign up for insurance and based on their income or not being offered affordable insurance from their employer they receive a subsidy or a discount on that coverage.

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Paul Carelis: So, by going to to the exchange entering in their information and how they respond to that if they then sign up for a plan, either through the federal or state marketplace and qualify for a subsidy that’s what triggers penalties and penalty letters to you as the employer.

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Paul Carelis: and penalties are based on that so that’s important to know if.

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Paul Carelis: So even if your coverage is not affordable, or even if you don’t offer it to everyone that that you should be technically speaking, you wouldn’t necessarily be penalized for that.

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Paul Carelis: Unless you had an employee go to to the exchange get subsidized coverage that’s what would trigger your penalties.

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Paul Carelis: And we’ll talk about those in a second.

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Paul Carelis: So you know, if nothing else, if you want to take away the the very basics of ACTA compliance at the end of the day, if you’re an apple large employer.

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Paul Carelis: You need to offer coverage to at least 95% of eligible employees and their dependence and the the coverage that you offer and not necessarily what they take, but the coverage that’s offered the.

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Paul Carelis: The lowest cost qualifying plan when you’re looking at the employee only level of coverage, the cost of that or the employees share of that must not exceed 9.83% of their household income, so that percentage.

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Paul Carelis: Is re indexed every year it’s up slightly from last year, so they they always play with that number it’s there’s never been a huge swing.

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Paul Carelis: it’s usually decimal points of difference, but for this year, the affordability threshold is considered 9.3% so we’ll talk about that a little bit later as well.

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Paul Carelis: So, as for due dates So these are the due dates for the filing year do this year.

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Paul Carelis: So, in terms of the 1095 forms that you need to give to employees.

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Paul Carelis: As I said, historically that’s been in alignment with the w to but.

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Paul Carelis: i’ve been here in the industry, for every year that the ncaa has and they’ve never held employers to that January 31 deadline so as I mentioned earlier, they are permanently moving that but for this year and going forward that deadline is extended to march 2.

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Paul Carelis: And then, for the filings that are required, with the irs if you’re a paper filer your ACTA forums or do February 28 edition electronic file, or if you’re with us MP you’re considering electronic filer the forms of do march 31.

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Paul Carelis: If, for some reason, you need an extension for any of your ACTA filings with the irs you’ll want to utilize form at 809 that would provide up to a 30 day extension to file, so if, for some reason you’re having trouble gathering your information or.

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Paul Carelis: Heaven forbid, you have to do your ACTA manually or by hand if you’re you know.

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Paul Carelis: doing it out on your own there, you may need an extension, it is a lot of work if you’re if you don’t have a system, helping you so if so look up at eight or nine and that can give you a small extension.

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Paul Carelis: Alright, so let’s talk about the fun stuff let’s talk about penalties.

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Paul Carelis: So the first there, there are two main penalties when it comes to the ACTA, aside from the filing stuff the first is what’s called a non offer penalty, and this is the biggie.

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Paul Carelis: So, as I said before your requirement as an employer, now that.

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Paul Carelis: All of the relief that this was a kind of a sliding scale, for the first few years, but essentially if you fail to offer insurance to at least 95% of your eligible employees.

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Paul Carelis: And at least one of those employees receives a subsidy when they buy getting insurance on the exchange the county over that is not just based on that one employee who gets the subsidy it’s based on your entire workforce your entire FDA account.

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Paul Carelis: So, from a manual perspective, this is the new number, it was 20 $500 and change but they’ve they’ve picked it up to 2700 so basically.

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Paul Carelis: Your bill or your penalty if if this happens to you, you offered to less than 95% of your workforce and one of those employees went to the exchange and got a subsidy.

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Paul Carelis: The penalty would be 20 $700 per F T minus the first 30 fts so in our example here, looking at 100 full time equivalent company if they were found to be a fall of this rule you would shave off the first so you’re left with 70 FT ease and then you would multiply that by.

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Paul Carelis: They didn’t have that 2570s the previous but the math is correct, you take the 70 times 2700 and your penalty would be $189,000 so nothing to sneeze out there, a huge expense.

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Paul Carelis: One thing to note is that the penalties are prorated on a monthly basis so.

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Paul Carelis: When they’re looking at a violation they look at the months that were affected, so if that let’s say that employee only work for you, for six months.

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Paul Carelis: And left or you know only had that subsidized coverage for six months, whatever it may be.

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Paul Carelis: In that case, the penalty would be cut in half, it is based on a monthly basis we’re just using the annualized numbers, assuming that.

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Paul Carelis: The out of compliance status was for all 12 months.

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Paul Carelis: The other penalty to be mindful of is known as the affordability penalty.

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Paul Carelis: So, this one is is lesser and it is also only based on number of employees who received a subsidy, so this would be enacted if you have an employee who’s.

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Paul Carelis: offered coverage was not considered affordable by any of the safe harbors which we’ll discuss in a moment, and then they go again to the exchange and get subsidized coverage.

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Paul Carelis: This number is also picked up a little bit for this filing year it’s up to $4,060 but, again, it would only be counted towards employees receiving a subsidy.

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Paul Carelis: So again, going back to our 100 F T company if they had four full time employees who were not afford offered affordable coverage and those four employees got subsidized coverage to the exchange.

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Paul Carelis: Your penalty would be four times the 4060 or a total permanently of $16,240 so definitely not peanuts, but a lot less than than the six figure penalty that the company was facing for for the non offer of coverage.

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Paul Carelis: Finally, unchanged, are the failure to file penalties with the irs.

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Paul Carelis: So.

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Paul Carelis: If you finally and again we’ll see what happens with the with the elimination of good faith, but.

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Paul Carelis: We like to think that they’ll still honor it to some extent, when people are trying to do the right thing and file, even if it is after the fact, if they realize they were subject and didn’t file, what have you.

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Paul Carelis: The late filing penalties can be up to $280 perform, with a maximum of a penalty of $3 million.

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Paul Carelis: Because the ACTA crosses over a couple of different irs codes, there is the potential that if they wanted to they could double that fine because you’re technically late filing under two separate.

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Paul Carelis: irs code, so it could potentially be $560 perform I haven’t seen that, in practice, but yeah the law allows for it.

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Paul Carelis: If they feel that a company was being malicious you know willfully violating the law and not complying.

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Paul Carelis: And intentional figure to file penalty can be $530 perform and again that can also be doubled and there’s no CAP when they feel it’s been a willful or intentional failure to file.

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Paul Carelis: Okay, so with all that talk about penalties.

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Paul Carelis: Hopefully, I haven’t struck fear in anyone, but if I have.

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Paul Carelis: The natural question is, what do I do if I get a penalty letter and over the years I have seen some of them come in, I will let you know the irs is years behind on these so.

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Paul Carelis: I think it was maybe 2019 that we started seeing penalty letters for.

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Paul Carelis: and followed similar suit so.

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Paul Carelis: If you have an employee who who did receive subsidized coverage.

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Paul Carelis: Through the exchange you could very well get a letter, even if you weren’t fully compliant and did everything you were supposed to do.

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Paul Carelis: So I think my first piece of advice, if you do get a letter and it will be it’ll be titled form or letter 2226 J that’s basically what the form is called that you would receive from the irs in the mail.

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Paul Carelis: first piece of advice don’t panic.

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Paul Carelis: we’ve we’ve seen these come through and, at least in my experience, well well it’s a limited sample size, every time you’ve been successful and in respond to these and having whatever proposed penalty was in there, wiped away.

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Paul Carelis: They the irs doesn’t necessarily have all the data that they need to really formulate accuracy, basically, what they do is they see that subsidy came in.

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Paul Carelis: They took they take a basic look at the makeup of the business and kind of assess an amount.

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Paul Carelis: You know, hopefully this doesn’t happen, too often, but it is structured in a way, where a business might think that that’s the amount due.

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Paul Carelis: So they may just cut a check and send that back the 226 Jay does provide the opportunity to just admit admit wrongdoing and send in the check sending a payment right away, I advised not doing that.

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Paul Carelis: They do, alternatively, give you the opportunity to respond without sending in a payment and, at least in my experience that’s always been the best way to to tackle this.

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Paul Carelis: If you are truly out of compliance they they may come back and say that you do oh oh some money and that’s fine but it’s best to state your case first and allow them to.

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Paul Carelis: To take a look at the facts so again first don’t panic, but at the same time don’t procrastinate we have, at times, seen that the letters, the letters will always have a deadline for a response.

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Paul Carelis: And sometimes that window has been relatively brief, so you don’t want to procrastinate don’t don’t let it sit there until your next meeting with your benefits advisor or your you know your HR team, or whatever it may be so don’t sit on it.

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Paul Carelis: You do want to take a look at it see what it says it’ll it’ll name some specific employees will obviously named the year and question.

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Paul Carelis: it’ll kind of give you a breakdown of of what they’re coming up with their assessment for a penalty, and why.

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Paul Carelis: So, at that point, you want to want to take a look.

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Paul Carelis: You want to take a look at many things, I honestly, the first thing I would do is is run your overall employee information report to see where you even subject for ECA and that year.

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Paul Carelis: Because I remember the first one of these that I ever saw was with someone that was new to us, we hadn’t worked with them before we didn’t have the payroll data in our system but.

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Paul Carelis: We were able to go back to the previous provider pull that payroll information and come to find out.

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Paul Carelis: Based on that year, that they were being penalized for they weren’t an ethical large employer, so they didn’t need to be in compliance so that was an easy one, they they weren’t required to be offering this employee insurance so.

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Paul Carelis: They were in the clear there, but each one has its own set of circumstances so first I would I would run that check make sure you were actually subject to the ACTA for the year in question.

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Paul Carelis: And then you know, take a look at that employee where they considered full time for you during that period.

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Paul Carelis: Where they offered coverage so that’s another one that will come up sometimes someone I talked to the other day.

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Paul Carelis: Had that situation where they received one of these, it was for an employee they offered coverage to that employee weed coverage and when an employee does that assuming that the offer of coverage was affordable to them.

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Paul Carelis: they’re not eligible for a subsidy through the exchange at that point, because they were offered affordable coverage from their employer so.

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Paul Carelis: i’m not sure what will happen if they’ll go off to that employee, but the employer was found to be in the clear because they were able to show that they had a waiver.

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Paul Carelis: signed by the employee that they were offered coverage and were declining it so again, that that will come to help you.

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Paul Carelis: One quick tip if I forget to mention it by the end if you’re not now each open enrollment period for anyone who’s the cleaning coverage do make sure that you’re.

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Paul Carelis: you’re gathering a waiver for them so that, in case down the road, because sometimes it can be several years down the road and it’s employee may be long gone you want to make sure you have that Weaver that will help your case immensely if you have that on file.

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Paul Carelis: So you do want to write a response, prior to the deadline and the letter.

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Paul Carelis: If you’re a client of ours certainly reach out to us, we can we can help out help you gather the facts help you and help you with the response.

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Paul Carelis: You just want to answer the questions that they’re asking.

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Paul Carelis: respond to any claims, especially if you’re in disagreement with those and send that off and then wait for the ruling so as long as you’re responding within the time frame.

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Paul Carelis: You have that period to wait before we have to send in any payment you don’t need to send in payment.

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Paul Carelis: At least in any other letters that i’ve seen as you are kind of await your the response to your response so write your response.

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Paul Carelis: include your evidence and your information in that response send it off and then wait to hear what they say again i’ve personally had a lot of luck with that we’ve we’ve been able to wash away all the penalties that i’ve seen assessed.

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Paul Carelis: But.

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Paul Carelis: that’s just a little bit a new slide we’ve added for this year, because we don’t want anyone to panic and so they don’t want to send anyone to send in penalties or payments for stuff they don’t actually oh.

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Paul Carelis: Alright, so let’s dive into the information reporting requirements.

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Paul Carelis: So.

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Paul Carelis: In terms of legal ease here.

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Paul Carelis: ACTA false falls under irs code 6055 and 6056, so this is kind of why, when you get penalized for non filing why it can potentially be doubled so 6056 requires applicable large employers to provide an annual statement to each full time employee that’s a 1095 and then code 660 55.

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Paul Carelis: requires employers provide minimum essential coverage.

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Paul Carelis: To covered persons so 6055 generally will fall more more on your ensure if you’re a fully fully insured plan that the carrier will send out 1095 bees to your to your employees and then you’re responsible for what’s known as 1095 see.

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Paul Carelis: If you are self insured you’re going to want to talk to whoever you have that self insurance through to see to make sure that all of the all of the necessary UCC filings are being squared away and that you know what you’re responsible for, and you know what they’re responsible for.

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Paul Carelis: So why does the irs make us do these filings more the more frustrating things that we do is.

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Paul Carelis: An employer or client will go through all of their 1095 c’s though get to know all the codes, though, you know, make any edits as as needed and then.

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Paul Carelis: create these forums and distribute it to all the employees, and I say Okay, what do I tell the employee, they need to do with this, and really, the answer is nothing.

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Paul Carelis: At least at this time in the 1095 CS do not play any role in the individual income tax return or into income tax filing they really just want to keep those on file.

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Paul Carelis: For their records, but.

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Paul Carelis: Really, the the forms are to ensure that employer employees that are eligible for subsidies.

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Paul Carelis: know that and can use that information when they go for.

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Paul Carelis: filing for benefits on the exchanges and that to keep track of any apple large employers who may not be offering affordable coverage to employees that they should.

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Paul Carelis: So a few more definitions here before we roll on to the next section.

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Paul Carelis: minimum essential coverage is defined as the type of coverage.

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Paul Carelis: that’s needed to have to meet requirements on the affordable care act so.

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Paul Carelis: If you’re working with a broker or an insurance advisor.

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Paul Carelis: Most most insurances that they’re going to offer you do provide what’s known as minimum essential coverage.

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Paul Carelis: If, for some reason you had some catastrophic plan let’s say there’s a chance that it may not meet minimum essential coverage.

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Paul Carelis: And again, one thing that’s important know and i’ll repeat this often you can have other plans that employees take advantage of as long as you are offering them the opportunity to sign up for something that offers minimum essential coverage, as well as minimum value.

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Paul Carelis: You could, for instance, have a catastrophic plan offered to your employees as long as they’re also offered something that me CCA requirements.

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Paul Carelis: When we talk about affordability in that 9.3% mark.

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Paul Carelis: you’ll notice that it said 9.83% of household income so as an employer you don’t know what.

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Paul Carelis: What that employer employees household income necessarily look like looks like they may have another job they may have a spouse in their household who works or other other household members who.

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Paul Carelis: who have income so it’s impossible, as the employer really know if the coverage is going to be affordable at the end of the day.

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Paul Carelis: Because of that, the affordable care act offers three different safe harbors for determining affordability that can keep you compliant.

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Paul Carelis: The first of which is.

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Paul Carelis: The w two safe harbor so that’s basically looking at box, one of the employees w two.

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Paul Carelis: slightly out of date, but as you’ll see the number ticked up to 9.3% so you compare box, one of the w to.

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Paul Carelis: Against the monthly employee share of the lowest cost employee only coverage that you offer and want to make sure that on a monthly basis when you divide by 12 that it’s not exceeding that 9.3%.

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Paul Carelis: If that test doesn’t pass, you can then look at the rate of pay safe harbor.

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Paul Carelis: So in that instance you look at their hourly rate of pay multiply that by $130 and then whatever that number is you want that number to be within the affordability guidelines again for the monthly cost employee share of the employee only lowest cost option of the plan.

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Paul Carelis: If both of those fail, you could also look at what’s known as the federal poverty level safe harbor.

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Paul Carelis: I will say that this comes up rarely because of the cost of insurance unless it’s being very heavily subsidized by the company.

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Paul Carelis: In most cases it’s hard to meet affordability under the federal federal poverty level safe harbor.

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Paul Carelis: just looking at the questions here if there’s anything I should address before the general Q amp a.

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Paul Carelis: How do you know if an employee got subsidize coverage from the exchange if they waive your coverage, can they still do this.

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Paul Carelis: Great question so you wouldn’t necessarily know if an employee received coverage on the exchange.

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Paul Carelis: It again if they are waving coverage you just want to make sure that you have that in writing, you have a copy of that waiver, because you won’t know.

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Paul Carelis: And you won’t know you know, sometimes an employee might just not like the insurance that you have it might not meet their needs.

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Paul Carelis: that’s fine they’re still welcome to go to the exchange it’s just they have to answer a series of questions.

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Paul Carelis: When they apply for coverage to the exchange just to determine whether or not they’re eligible for any subsidies so.

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Paul Carelis: There is a question about whether or not you are offered affordable coverage from your employer if they say yes that’s fine they can still sign up for plans they just wouldn’t be eligible for the subsidy.

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Paul Carelis: But it is very tempting for them to click know because all of a sudden they’ll see the prices that they have to pay dramatically decreased so.

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Paul Carelis: It happens often that an employee goes to the exchange and they just naturally answer no or they may not really understand the the option or the they may not understand what’s considered affordable.

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Paul Carelis: By legal definition, but if that happens, you could very well get one of those 226 letters we just talked about but by being able to show that you offered coverage and it was waived any penalty assessed to you would also be waived.

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Paul Carelis: Does the waiver of coverage checkbox and I saw comply with the waiver of coverage requirement, yes, it should, so you.

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Paul Carelis: You should have record of that through the open enrollment to show that the employee you’d see the electronic timestamp that when the employee access the open enrollment that they did we have the coverage and that they did electronically sign.

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Paul Carelis: I will say some carrier here’s some insurance carriers have their own waiver form that they want used so if you hear from the carrier, they may want a specific form filled out by the employee.

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Paul Carelis: You can never, never be too cautious with that So yes, the electronic onboarding in our system does does count as a waiver of coverage, but if you want to do something additional then no harm in doing that.

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Paul Carelis: Okay, do you have to declare which safe harbor you are using a great question and that’ll segue into what we’re talking about now so one thing to keep in mind is that you don’t have to use the same affordability safe harbor across the board for all your employees, so if we say.

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Paul Carelis: You know one employee Maria is her offer was considered affordable because of her w two wages, then we can indicate that, on her 1095 see meanwhile if.

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Paul Carelis: Jonathan if he did not meet affordability, based on the w to safe harbor but did meet affordability, based on the rate of pay safe harbor, then we can use w two for Maria we can use rate of pay for Jonathan and that would all be indicated on these 1095 sees that we’re about to talk about.

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Paul Carelis: Alright, so let’s dig in there.

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Paul Carelis: So for 1095 see is used to collect information about apple larger employers and the coverage that they’re offering to employees, so the 1095 see is the is the form that you’re going to issue to your full time employees in March.

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Paul Carelis: So, part one of the see really just contains the employees, information and then the company’s information so their name their address.

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Paul Carelis: their social security number, and then the information about the business, the business name the business address federal employee identification number so on and so forth.

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Paul Carelis: Part two is really the nuts and bolts that discloses whether or not they were offered coverage what the employees share was and then you know either that they were enrolled or if they weren’t an enrolled.

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Paul Carelis: What safe harbor was used to determine eligibility.

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Paul Carelis: Part three is for covered individuals, so this would really only come into play, if you were self insured, so if you’re a self insured plan.

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Paul Carelis: In addition to the employee information you’d also have to have information about the dependence, but if your plans fully insured you just go through a broker and.

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Paul Carelis: have tough Sir blue cross Blue Shield or at night or united or whatever it is, this can be blank so don’t be concerned with this blank provided you’re you’re considered a fully insured.

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Paul Carelis: plan, this would only part three would only come into play if you’re self insured.

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Paul Carelis: Okay, so.

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Paul Carelis: Part two again is the nitty gritty so we’re going to talk about wines 1415 and 16 wine 17 is new.

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Paul Carelis: That can be blank that only comes into play, if you use what’s called an end of end of visual coverage.

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Paul Carelis: hra or health reimbursement account, so there are there is a new program called ice HR or echoes in those setups an employer basically.

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Paul Carelis: provides $1 amount to all eligible employees those employees can then get their own health insurance.

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Paul Carelis: Through the exchange and, and that is considered acceptable in a CA compliant there’s just the the ACR reporting is really funky for it, you have to look at.

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Paul Carelis: The average cost of of certain plans on the exchange to determine affordability and you have to include the zip code, so that you know that, where you’re basing their affordability off of based on their their homes IP so.

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Paul Carelis: more complicated than we want to dive into in a one hour webinar so we’ll skip that piece, but 1415 and 16 I really where you want to be focused.

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Paul Carelis: So line 14 is what’s telling the story of the offer of coverage so that shows you what did you offer did you offer insurance to this employee.

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Paul Carelis: is generally going to have $1 amount that is the cost again not have the plan that they’re necessarily signed up for but that lower that plan and the employee only version of that plan that’s considered to meet minimum minimum coverage and minimum value.

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Paul Carelis: That they did have a chance to sign up for if they wanted to they might have signed up for a better plan than that you don’t have to worry about that, even if it’s not an affordable it’s just that they had the option to sign up for something affordable.

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Paul Carelis: And then wine 16 essentially tells the story of what they did with that offer if they signed up for it you’ll see a to see if not it’ll go into what, if any, affordability safe harbor was utilized.

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Paul Carelis: So line 14 is going to display if they were offered coverage.

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Paul Carelis: If you may see it blank on the month if if there was no change the offer of coverage so let’s say the employee was employed by you and eligible all 12 months, you would just see something entered in in that all 12 months column.

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Paul Carelis: And these are the apple code and we will make sure everyone has a copy of these slides afterwards will send the recording of the webinar as well as a copy of the slides so you can look at this at your leisure.

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Paul Carelis: I know we’re running short on time, so I want to make sure we get through all of this, but.

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Paul Carelis: You will, you will see these codes.

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Paul Carelis: A lot of times you’ll see a one, a meeting a qualified offer was made.

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Paul Carelis: that’s probably the most common that you’ll see for employees that were offered coverage would be a one day.

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Paul Carelis: You will also, especially if you have a have turnover or have you know growth and new employees, you will see one, H in there many times when he means that there wasn’t an offer of coverage that can that isn’t necessarily a bad thing, it can mean that.

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Paul Carelis: They they were they terminated with you so after the termination they weren’t offered coverage, which is completely fine you do not have to factor in Cobra.

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Paul Carelis: So Cobra is not does not count you’re not on the hook for that under this, at least, and it does not need to be reflected in your ECA filings.

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Paul Carelis: It could also be that someone started but let’s say you have a 60 day waiting period so those first two months after they were hired when he would still be correct, they weren’t offered coverage during that that waiting period.

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Paul Carelis: So don’t be necessarily afraid if you see one on your forums, it just means that you they weren’t offered coverage and most likely because they weren’t eligible or an employed by you.

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Paul Carelis: But this whole a whole laundry list of potential one codes for line 14.

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Paul Carelis: The line 15 kind of the the meat of the sandwich and the 14 1516 series is going to show the lowest cost employee only monthly option again it won’t show the full cost of the plan it will show the employee share so what they would have been responsible for.

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Paul Carelis: And the irs uses this to determine eligibility, so this is the number of the US.

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Paul Carelis: Line 16 is going to show whether or not the employee enrolled in coverage through the employer.

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Paul Carelis: And if not, what what the affordability safe harbor used was.

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Paul Carelis: So for employees who are on the plan, who are enrolled in some plan with you as the employer if they were on your group health plan in some capacity.

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Paul Carelis: The most common code, you would see would be to see that would just indicate that they were enrolled at that point they’re not really factoring in affordability for at least for those months the employee is not going to be gone the exchange because they’re insured through you.

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Paul Carelis: So to answer the previous question that came in.

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Paul Carelis: These are generally what you’re going to see as the affordability safe harbors mine 16 of the 1095 see.

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Paul Carelis: For any employees who were not enrolled in the coverage.

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Paul Carelis: So if the w to safe harbor is being used for that employee you’d see code to F.

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Paul Carelis: If you’re if the rate of pay safe harbor is being utilized should see code to h.

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Paul Carelis: Again, to G is less common that’s that’s when the federal poverty level safe harbor is being utilized you’re more often going to see to F into each.

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Paul Carelis: I can speak for the ice off system, so if you are an MP client and with us for a CA filing.

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Paul Carelis: Our system will automatically run all the scenario so you’ll see this automatically populate so they’ll run through the three safe harbors and.

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Paul Carelis: Whichever one is applicable if there was one applicable it’ll automatically get plugged in there.

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Paul Carelis: If you don’t see something online 16 that should give you pause it, it may be, indicating that the coverage was not affordable by any of the safe harbors and might require a little bit more inspection.

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Paul Carelis: form 1094 C is a close relative to form 1095 see so 1094 is do not need to be distributed to the employees there’s just one of these there’s a 1095 see produce for each of your full time employees and again that the information on that will differ from employee to employee.

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Paul Carelis: is really a Roundup, of all the 1095 CDs that are being filed so will include all the information about the business.

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Paul Carelis: It will also indicate whether or not there are other members of a control group so.

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Paul Carelis: If you’re part of a larger organization control the ownership group they’ll usually be one one singular filing for this, but if there are other fei ends being counted or you’re filing other for other entities within your control group.

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Paul Carelis: At that time, you’ll see those listed in here on the 1094.

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Paul Carelis: And then there’s a month by month breakdown for whether or not you offered minimum essential coverage and how many basically how many 1095 CDs are being produced and how many full time employees, you had during those months.

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Paul Carelis: So here, you see online 18 this is going to tell you the total number of 1095 sees that you’re filing for that year you just want to make sure that that matches up so that the number of 1095 sees that you’re reviewing and be distributing to employees matches the number 1094.

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Paul Carelis: So, if nothing else really ACTA success depends and relies upon maintaining accurate employee records, so you just want to make sure that.

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Paul Carelis: For employees who are meeting the threshold for being considered full time they’re being offered coverage you’re tracking whether or not they’re signing up for insurance or waving it.

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Paul Carelis: And then, monitoring the affordability of those plans throughout the year, if you have people who are lower wage, especially.

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Paul Carelis: So, for those of you who are clients of ours, there are a few key reports that that really help you determine all of these things.

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Paul Carelis: i’ll quickly go through these before we open it up to additional questions, the first of which is is the large employer test, and this is really this is going to be step one as a business to determine whether or not you have to.

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Paul Carelis: be worried about any of the stuff we’ve talked about over the last hour, so this is one of my favorite reports I use it for a number of applications but.

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Paul Carelis: Again, you always want to put in the previous calendar year, so if we’re looking at 2022 here and saying really do I need to be in compliance in 2022 Do I need to be offering insurance of my employees and then filing these.

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Paul Carelis: Are you going to want to do is put in put in run this report for 2021 so from one 120 21 to 1231 2021 and see what spits out.

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Paul Carelis: So the first line will say your full time employees, so the number of employees, you indicated were full time, as well as anyone who kind of cross the hours worked for each month it’ll then add up all of the hours of your less than full time employees.

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Paul Carelis: And ultimately come up with an F T count for each month and then average that, over the course of the year and, finally, you want to take a look in this box, and this is your F T count.

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Paul Carelis: of record, so in this example here this employer was considered an apple large employer, because that number was 50 or greater.

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Paul Carelis: Another really handy report.

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Paul Carelis: Is this one here the full time look back report.

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Paul Carelis: This will tell you, based on your measurement period, and you can play around with it and then customize it to your needs, whether or not an employee.

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Paul Carelis: should be offered coverage so you’ll see some people will be listed as variable.

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Paul Carelis: And, based on the results on the payroll data this person, for instance, is considered full time, so they should be offered coverage, you may see people who are full time they worked full time hours no action required.

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Paul Carelis: You may see people who are listed as full time in your system but based on their hours work they didn’t really meet the threshold so come open enrollment time, you may want to check on that and maybe they won’t be eligible for the next go around.

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Paul Carelis: Finally, there’s the affordability report.

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Paul Carelis: So you can run this get will take the benefit data and the plan notice the lowest cost ACTA applicable option in the system against the various safe harbors so w to.

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Paul Carelis: rate of pay all of that will then help flag, anyone who falls below and would not be considered affordable.

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Paul Carelis: And then and what’s really handy is it gives you some options and kind of let you know what what you’re looking at so.

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Paul Carelis: option one is okay what What would you have to pay employees to get in compliance and have everyone be considered affordable based on on their earnings that’s the top number.

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Paul Carelis: Second number is how much, would you need to subsidize employee benefits, so that everyone would be deemed affordable and then last hey if I just let it ride.

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Paul Carelis: And everyone who’s considered not affordable goes on the exchange and and get subsidized coverage.

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Paul Carelis: What would that potential penalty be for me and that’s the third number, so it gives you some options that you weigh in depending on what your comfortability for risk is would lie to make make some decisions there.

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Paul Carelis: And then, finally, we are a little bit past the the deadline for for filing under the ICA, but if you haven’t already you do want to go into a CA forms approval and I sold.

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Paul Carelis: Take a look at those forms hopefully this presentation has helped you understand what you’re looking at and then go ahead and approve those if there is something that needs correction do reach out to us and talk to us about that would be happy to.

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Paul Carelis: Alright, so let’s see if we have any questions that we can answer here, there is a question about Union coverage and eligibility under unions those those honestly can be quite complex that might.

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Paul Carelis: say my first suggestion would just be taught to the the Union.

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Paul Carelis: And how to handle a ACTA compliance with the Union plan, if you if you run into trouble do reach out to us will be happy happy to do a quick console for you.

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Paul Carelis: see what else we have for questions here, I know we’ve just got a minute or two.

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Paul Carelis: What happens if an employee was offered coverage, but they did not respond with enrolling or waving.

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Paul Carelis: If the employer has proof that they were offered coverage does that help.

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Paul Carelis: It does it does help.

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Paul Carelis: it’s important it’s kind of impossible to say you know what the irs would would do if.

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Paul Carelis: If they don’t have proof that that coverage was waived, it is really a best practice that.

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Paul Carelis: you’d be you’d be a little militant during your open enrollment period and demand that if anyone’s not signing up for coverage that that they do weave in that they do.

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Paul Carelis: yeah they do a sort of we we’ve covered that it’s not just.

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Paul Carelis: The kind of leave it standing, so I know a lot of employers will make everybody go through open enrollment open electronic open enrollment if they see that people didn’t access it, they say you even if you’re waving everything you need to login you need to go through and wave because.

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Paul Carelis: It is really important that that you do have that waiver, if possible, again, if he if he can prove the offer he might be okay, but I can’t get guarantee it.

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Paul Carelis: Can you quickly go over how to manually calculate the ftp count, I had to do these by hand sure so again, anyone who who’s considered full time anyone in a month, who had 130 or more hours you just count as one anyone who is under 130 hours.

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Paul Carelis: You add up those hours and divide by 130 that’s the FDA account for that month you add those two numbers together and that’s your ftp account for that month you do that for all 12 months divide added together and divided by 12 and that’s your ftp count for.

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Paul Carelis: For the year.

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Paul Carelis: Then one final question before I kick it back and close up shop here.

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Paul Carelis: With a three months look back period, do we only have to offer coverage for three months great question so that is the one exception to the rule if you’re using a three month look back period.

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Paul Carelis: Disability period has to be at least six months, otherwise for six months, look back you can use this ability period of six months if you’re using nine months, it can be nine and 12 months can be 12 the one rule is if you’re looking using a three month look back period.

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Paul Carelis: Anyone who qualifies in those three months has to be offered coverage for at least six.

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Paul Carelis: So I think we’re at a time, I thank you very much for participation today and kick it back to you.

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MP: Lots of valuable information on a complex topic any questions that were not able to be answered on today’s program will receive a response via email within five to seven business days.

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MP: The NPA HR team is here to help guide your organization on any HR compliance issues.

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MP: If you’d like to learn more about how we can assist your organization, please visit our website to set up a short 15 minute call.

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MP: Be sure to join us next week on the same day and time for our webinar on unpacking the employee retention credit funding for businesses impacted by coven.

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MP: visit our website to register and to see the full calendar of upcoming events and available resources, we will be sending out a recording of today’s webinar with the presentation slides this afternoon, thank you for joining us today and have a terrific day.