In the post-Affordable Care Act (ACA) world, law firms providing benefits to their employees may be relying on incomplete information to make key decisions relating to the ACA and plan sponsorship. Dropping plans, meeting affordability goals or just maintaining the status quo may not be the best strategy. But, without the right information from their benefit advisors, law firms may end up confused or compelled to make poor decisions. Going into 2015, benefit practitioners will find clients asking more detailed questions and will need to dive deeper into how decisions impact employers and employees at the same time.
The impact of the ACA on law firm benefit plans is substantial. A number of ACA regulations have already taken effect, such as additional IRS reporting requirements, summary of benefits coverage, some additional taxes being withheld for Medicare (when in excess of certain amounts), and no cost-sharing for preventative care. Ensuring compliance for what already is in effect is critical. The ultimate goal is to craft a comprehensive, affordable and compliant benefit package. A good way to start is by asking yourself “Am I currently in compliance?” The following is a short recap of some of the most important ways the ACA is changing benefits plans.
PLAN DESIGN CHANGES
Grandfathered Plan Status: A grandfathered plan is one that was in existence when the ACA was enacted on March 23, 2010. If you make certain changes to your plan that go beyond permitted guidelines, your plan is no longer grandfathered. If you have a grandfathered plan, determine whether it will maintain its grandfathered status for the 2015 plan year.
Cost-Sharing Limits: Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered health plans must comply with an overall annual limit (or an out-of-pocket maximum) on cost-sharing for essential health benefits (EHB).
Review your plan’s out-of-pocket maximum to make sure it complies with the ACA’s limits for the 2015 plan year: $6,600 for self-only coverage and $13,200 for family coverage.
If you have a health savings account (HSA)-compatible high-deductible health plan (HDHP), your plan’s out-of-pocket maximum must be lower than the ACA’s limit. For 2015, the out-of-pocket maximum limit for HDHPs is $6,450 for self-only coverage and $12,900 for family coverage.
Health FSA Contributions: The health FSA limit was $2,500 for 2013 and 2014, but it will increase to $2,550 for 2015.
Reinsurance Fees: Health insurance issuers and self-funded group health plans must pay fees to a transitional reinsurance program for the first three years of the exchanges’ operation (2014-2016). The fees will be used to help stabilize premiums for coverage in the individual market
Heath plans must file a statement with the Department of Health and Human Services certifying their compliance with HIPAA’s electronic transaction standards and operating rules. If you have an insured plan, confirm that the issuer will be providing the HIPAA certification on your behalf.
EMPLOYER PENALTY RULES
Under the ACA’s employer penalty rules, applicable large employers (ALEs) that do not offer health coverage to their full-time employees (and dependent children) that is affordable and provides minimum value will be subject to penalties if any full-time employee receives a government subsidy for health coverage through an exchange.
An ALE is only liable for a penalty under the pay-or-play rules if at least one full-time employee receives a subsidy for coverage purchased through an exchange. Employees who are offered health coverage that is affordable and provides minimum value are generally not eligible for these subsidies.
Applicable Large Employer Status: The ACA’s employer penalty rules apply only to ALEs. ALEs are employers with 50 or more full-time employees (including full-time equivalent employees, or FTEs) on business days during the preceding calendar year.
Under a special rule to determine ALE status for 2015, an employer may select a period of at least six consecutive calendar months during the 2014 calendar year (rather than the entire 2014 calendar year) to count its full-time employees (including FTEs).
Determine your ALE status for 2015 by counting your full-time employees (including FTEs) on business days during the entire 2014 calendar year, or use the special transition rule that allows you to use any period of at least six consecutive calendar months during 2014 to count your full-time employees (including FTEs).
One-Year Delay for Medium-sized Employers: Eligible ALEs with fewer than 100 full-time employees (including FTEs) have an additional year, until 2016, to comply with the shared responsibility rules. This delay applies for all calendar months of 2015 plus any calendar months of 2016 that fall within the 2015 plan year.
Transition Relief for Non-calendar Year Plans: IRS transition relief allows eligible sponsors of non-calendar plans to begin complying with the pay-or-play rules at the start of their 2015 plan years, rather than on Jan. 1, 2015. The transition relief applies to employers that maintained non-calendar year plans as of Dec. 27, 2012, if the plan year was not modified after Dec. 27, 2012, to begin at a later date.
Full-Time Employees: A full-time employee is an employee who was employed on average for at least 30 hours per week. The IRS has provided two methods for determining full-time employee status—the monthly measurement method and the look-back measurement method.
Health Plan Affordability: An employer’s health coverage is considered affordable if the employee’s required contribution to the plan does not exceed 9.5 percent of the employee’s household income for the taxable year (adjusted to 9.56 percent for plan years beginning in 2015). Because an employer generally will not know an employee’s household income, the IRS provided three affordability safe harbors that employers may use to determine affordability based on information that is available to them. These safe harbors are: the employee’s W-2 wages; the employee’s rate-of-pay income; or the federal poverty level for a single individual.
REPORTING OF COVERAGE
The ACA requires ALEs to report information to the IRS and to employees regarding the employer-sponsored health coverage. This reporting requirement is found in Code section 6056. All ALEs with full-time employees—even medium-sized ALEs that qualify for the additional one-year delay from the pay-or-play rules—must report under section 6056 for 2015. Determine which reporting requirements apply to you and your health plans, and start analyzing the information you will need for reporting and coordinate internal and external resources to help track the required data.
The ACA will affect employers differently—large law firms will most likely feel the “play-or-pay” approach in a very real way, while some small firms may enjoy some federal tax credits. Regardless, it is important for your firm to get a qualified benefits expert involved. The ACA is a complex piece of legislation and maintaining compliance with its requirements demands your attention.
About the Author
William W. Johnson is the founder and chief executive officer of CIBC of IL, Inc. a consulting firm specializing in group health and employee benefit solutions. He can be reached at firstname.lastname@example.org or on Twitter @BILLJCIBC.
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