Guidance on how certain Affordable Care Act (ACA) provisions apply to employer-provided health coverage was issued by the Internal Revenue Service (IRS).
Key provisions of the notice include:
- Confirmation of adjusted employer shared responsibility penalty amounts.IRS.gov The adjusted amounts are 9.56 percent for 2015 and 9.66 percent for 2016.
- Clarification on how the employee contribution for coverage is calculated.plan will be treated as reducing the employee’s required contributionThe IRS intends to amend the employer shared responsibility regulations to reflect that the applicable percentage in the affordability safe harbors should be adjusted, consistent with other ACA provisions. Employers may rely upon the 9.56 percent for plan years beginning in 2015, and 9.66 percent for plan years beginning in 2016.
Employer Shared Responsibility Rules
Notice 2015-87 also clarifies other aspects of the employer shared responsibility rules and related Section 6056 reporting requirements.
Hours of Service
The notice confirms that an hour of service does not include:
- Any hours after the individual terminates employment with the ALE;
- An hour for which an employee was paid or entitled to payment as a result of worker’s compensation, unemployment or disability insurance laws; and
- An hour of service for a payment that solely reimburses an employee for medical or medically related expenses.
The notice also clarifies that there is no 501-hour limit on the hours of service required to be credited for any single continuous period during which an employee performs no duties, if the hours of service would otherwise qualify as hours of service.
For purposes of determining whether an hour of service must be credited, a payment is deemed to be made by or due from an employer regardless of whether it is made by or due from the employer directly, or indirectly through, among other things, a trust fund or insurer that the employer contributes or pays premiums to (such as short- or long-term disability payments, but not state or local workers’ compensation wage replacement benefits).
The notice also addresses the following items:
- Break-in-service Rules for Educational Organizations—The IRS intends to amend the employer shared responsibility rules to extend the 26-week break-in-service rule (and the related definition of “employment break period”) to also apply to any employee providing services primarily to educational organizations for whom a meaningful opportunity to work the entire year is not made available.
- AmeriCorps Members—An AmeriCorps member providing services to a grantee receiving assistance under the national service laws is not considered an employee (of either AmeriCorps or the grantee) for purposes of these rules.
- Offers of TRICARE Coverage—An offer of coverage under TRICARE for any month, due to employment with an employer that results in eligibility for TRICARE, is treated as an offer of minimum essential coverage by that employer under an eligible employer-sponsored plan for that month.
Notice 15-87 also addresses various other issues related to employer-sponsored health coverage, including:
- When individuals receiving medical benefits from the Department of Veterans’ Affairs can contribute to a health savings account (HSA); and
- How the COBRA continuation coverage rules impact unused carry-over amounts in a health flexible spending arrangement (health FSA).
Please contact Henderson Brothers for more information on these ACA issues.
Please note that the information contained in this document is designed to provide authoritative and accurate information, in regard to the subject matter covered. However, it is not provided as legal or tax advice and no representation is made as to the sufficiency for your specific company’s needs. This document should be reviewed by your legal counsel or tax consultant before use.