Click to read Ceridian's article on ACA compliance priorities for 2016.While Affordable Care Act (ACA) compliance has been on employers’ minds for more than five years, phased implementation and extensions of controversial provisions have kept HR professionals on their toes. Ceridian’s Washington insider provides insight on how to prepare for this year’s ACA priorities.   

ACA Snapshot: 3 Focus Areas for 2016

While Affordable Care Act (ACA) compliance has been on employers’ minds for more than five years, phased implementation and extensions of controversial provisions have kept HR professionals on their toes. Despite the rocky road behind us, important regulatory and legislative issues are ahead, namely a tightened focus on:

  1. Employer shared responsibility
  2. Health coverage reporting requirements
  3. Uncertainty surrounding the “Cadillac” tax

“A fair amount of uncertainty still exists regarding the logistics of complying with the ACA. HR professionals need to proactively prepare for ACA requirements by ensuring they have the technology and processes in place to meet the compliance demands,” said Jim O’Connell, Ceridian executive consultant and Washington insider.

ACA Compliance Image

Focus 1: Employer Shared Responsibility (aka “Play or Pay”)

"Play or Pay" Close-Up

The Employer Shared Responsibility Provision of the ACA raises a number of questions:

  • Can employers accurately identify full-time employees using look back measurement periods?
  • Can employers determine the appropriate safe harbor for the affordability calculation?
  • Does the employer “play or pay” mandate encourage employers to drop health coverage entirely and refer employees to federal or state insurance exchanges?
  • Is the IRS able to enforce whether employers offer affordable and minimum value coverage to full-time employees?
  • Are private health insurance exchanges viable alternatives for some full-time employees?

   

 

 

 

 

 

 

 

 

 

 

 

The employer shared responsibility provision (Sec 4980H) requires most organizations to offer cost effective health care coverage to their employees. Under the requirement, employers must offer minimum essential coverage that is affordable and provides minimum value to full-time employees who work an average of at least 30 hours per week.

Under the ACA, employer-sponsored health coverage that is affordable and provides minimum value meets the following requirements:

  • The employee’s share of the premiums for self-only coverage does not exceed 9.56 percent of wages, and
  • The plan covers at least 60 percent of the total allowed cost of benefits.

If employers fail to meet this requirement, and their full-time employees qualify for a government Premium Tax Credit subsidy, they potentially face liability for an IRS penalty. This provision went into effect for employers with 100 or more full-time equivalent employees in 2015 and takes effect for the first time for employers with between 50 and 99 full-time equivalent employees in 2016.[1]

Focus 2: Employer Health Coverage Reporting Requirements

Under the ACA, employers must annually report employer-sponsored health coverage information to employees, in addition to filing the information with the IRS. On Dec. 28, 2015, the IRS gave organizations a reprieve from its complex reporting requirements when it issued Notice 2016-4, which extended the due dates for Code section 6055 and Code section 6056 employer health coverage information reporting.

  • The due date to furnish individuals the 2015 Form 1095-B and the 2015 Form 1095-C was extended from Feb. 1, 2016 to March 31, 2016.
  • The due date to file Forms 1095-C (Employer-provided Health Insurance Offer and Coverage) was extended from Feb. 29, 2016 to June 30, 2016 for electronic filers.


As one of the most challenging components of the ACA, employers essentially have been given a grace period to gather, analyze and report the required health coverage information. This reporting requirement applies to all employers with 50 or more full-time equivalent employees for calendar year 2015.

To comply with the provision, employers must furnish employees with IRS Forms 1095-B and 1095-C and file Forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS.

Sharing his perspective on the IRS extension, O’Connell says, “IRS action to extend the due dates suggests that the original reporting requirements may be too complex for too many employers. The big question now is what will happen next.”

It’s not clear at this point what the IRS will do about the ACA employer reporting requirement as the new due dates approach. Employer health coverage information reporting is the IRS’s main enforcement mechanism for employer compliance with the Employer Shared Responsibility mandate, as well as the individual mandate to purchase health coverage. Without timely employer reporting, enforcement of these fundamental ACA requirements will be incredibly difficult.

Focus 3: The “Cadillac Tax”

To slow the growth of health care spending and help rein in soaring health costs, the Affordable Care Act included a special new excise tax on high-value health plans. The so-called “Cadillac Tax” would impose a 40 percent excise tax on health plans whose value is more than $10,200 for individual coverage and $27,500 for family coverage. Originally scheduled to take effect January 2018, Congress passed, and President Obama recently signed, a two-year delay postponing the effective date until January 2020.

What effect does the delay have on employers? According to O’Connell, “Bipartisan action by Congress to delay the ACA Cadillac tax represents the first major legislative change in the Affordable Care Act and suggests that both Republicans and Democrats are open to changing some of the pillars of the 2009 health reform law.”

The Cadillac tax is an area employers will want to continue watching, especially as a new administration comes into office in 2017. In any event, employers need to consider possible changes to their health plan designs to avoid a potential tax in years to come, including considering higher-deductible health plans.

Managing compliance with the ACA

Given the complexities of ACA and the potentially stiff penalties for non-compliance, employers are tasked with precise tracking on a number of fronts. Effective HCM technology can assist with compliance. When evaluating options, ensure that the technology:

  • Uses the most appropriate measurement period for the organization’s unique operating environment
  • Seamlessly transitions new hires from the initial measurement period to the measurement period for ongoing employees
  • Has capabilities and data to flexibly and accurately perform average hour calculations

For more information:

  • Follow Jim O’Connell’s HR Legislation Blog
  • Visit the Ceridian Compliance Center
  • Learn more about Dayforce HCM

[1] ACA Reporting Requirements: Tips for What’s Ahead in 2016