Responding to IRS Letter 226J

Starting in November The IRS began sending letter 226J for the collection of potential Employer Shared Responsibility penalties. These penalties are most commonly associated with employees receiving an Exchange subsidy. We anticipate additional rounds of letters to be issued in the weeks ahead. It is entirely possible your client may receive a letter simply based on a mistake or miscalculation on the IRS part. In all cases it is important that you respond within 30 days from the date it was issued or face unnecessary penalties. For this reason, it is recommended checking mail rooms to see if any IRS notices have been received to cut down on any time lag.
 
Responding to Letter 226J
Detailed instructions on how to respond can be found in the letter and on the IRS Website. You Respond in writing by either agreeing or disagreeing with the proposed employer shared responsibility payment. If you disagree with the proposed ESRP liability, you must provide a full explanation of your disagreement and/or indicate changes needed on Form 14765 (PTC Listing). Return all documents as instructed in the letter by the response date.
  
If you agree with the proposed ESRP liability, follow the instructions to sign the response form and return with full payment in the envelope provided.
 
If you disagree with the assessment we recommend you also gather back up documentation supporting your case. While your 1095 forms and filing records from previous years can provide some support, other materials such as enrollment or waiver forms can provide back up of an offer. Income records for the tax year may also be relevant to the repeal.
 
To date we are unaware of any of our clients receiving letter 226J but wanted you to be fully prepared in case it occurs. Feel free to send this letter along to your clients.

In Case You Missed It

Recent news of 600,000 sign ups into the Federal Health Exchange in the first week provides a small glimmer of hope for the ACA. Nothing more motivating then scarcity – think Black Friday for health insurance. However, the effort to maintain or grow enrollment for the 2018 is unlikely especially when the enrollment period has been cut in half, enrollers have been eliminated and HealthCare.gov is down on Sundays. Despite the focus on the post-election state of affairs, the real story regarding the uninsured population is not what has happened over the last year, but what has occurred over the last two enrollment cycles. Since 2015 we have not seen a significant reduction in the number of uninsured individuals across the US and that number has held steady at around 10% of the population.  For tax years 2015 and 2016

The underlying premise is we need an infusion of healthy uninsured individuals to spread the risk and sustain cost. And, the goal of the ACA was to mostly eliminate our uninsured population so this 10% remains a thorn in the side of the legislation.  Why has this elusive group of uninsured not selected a plan on the Federal Exchange and Why do they do this despite being required to pay penalties (2.5% or$695 per individual and up to $2085 for a family)?

If the penalties were significantly less than their overall cost of insurance that would be one story, but as it stands that is not the case. According to a recently published article by Kaiser Family Foundation entitled “How Many of the Uninsured Can Purchase a Marketplace Plan for Less Than Their Shared Responsibility Penalty, most (about 70%) of individuals are getting the short end of the stick when it comes to bowing out of coverage. And 54% of uninsured individuals who are eligible to purchase a marketplace plan with or without a subsidy would better off financially if they purchased a bronze plan rather than remaining uninsured. Meaning the penalty is higher than the cost of coverage – so you are getting the coverage for free.

 

 

 

 

 

 

 

 

 

 

History has shown that tax policy normally shapes behavior. We would be hard-pressed to point to any piece of tax legislation where a clear majority of our population has opted for the penalty if it doesn’t work in their favor. The likely answer ties back to inability to engage this population and their lack of understanding on how the math works in their favor. If ACA remains in place for the next several years, we should make a conscious effort to better communicate the financial benefits of enrolling on an exchange. These efforts will pay off in many ways including stabilizing cost for the individual health market as a whole as well as the small group market.

 

 

Webinar: ACA – Where we stand today and 5 key things you should consider for 2017.

The Affordable Care Act has faced some uncertainty over the last six months with a House and Senate repeal bills. It looks as if plans for an immediate repeal are put on the back burner and a bipartisan solution may be the likely outcome. This 45-minute webcast will attempt to pinpoint where ACA is headed over the next year and the key considerations employers need to consider.

Agenda:
1. Washington DC legislative update
2. Employer requirements to stay compliant in 2017
3. What the future could bring
4. 5 Things Employers should consider for 2017
5. Q & A

Please Join us for this 45 Minute update on Tuesday August 22nd at 1 PM Central. Register Here

ACA Repeal -What do you think will happen? – 4 possible outcomes

As we outlined in a previous post the ACA repeal process is complicated and unpredictable. We see four possible longer term outcomes although recent voting suggests some of these options may be less likely. What do you think will happen? – Let us know and participate in our one question poll:

  1. Stay the same (no changes to the legislation) – If congress determines that any meaningful legislation is too difficult to pass they may decide to punt and move onto other legislation.
  2. Be partially repealed/modified for an improved bill– The current discussions around a “Skinny Bill” place partial repeal as a front runner this week but what about the outcome? Several factions see the elimination of mandates as a destabilizing to the insurance markets.
  3. Be fully repealed for a better bill– The likelihood of this option is lower in the short term based on this week’s vote but could be a possibility down the road.
  4. Be repealed but for a bill that is worse than current – Always the risk of the political process.

Upcoming Webinar: ACA – Where we stand today and 5 key things you should consider for 2017. Tuesday August 22nd 1 PM Central time – Learn More and Register Here

 

 

ACA Repeal Timeline and Process

ACA Repeal

ACA Repeal Timeline

The road to repeal and replacing The ACA is complicated and will take some time to be successful. The AHCA, the House ACA Repeal bill that passed in May has weak support by industry trade groups as well as low public opinion. Much of the concern centers on the elimination of Medicaid and Obamacare subsidies that is projected to increase the number of uninsured by as much as 24 million individuals. This estimated timeline is designed to provide a easy visual of what the next steps might look like. The complicated process combined with the gravity of its impact suggest the ultimate result may require a bi-partisan solution. Below are the steps for ACA repeal which are subject to change:

  1. May 4th House bill passes – After cancelling the vote in March the House went through an extensive negotiation process to come up with a bill that could satisfy the conservative faction of the house. When it was discovered they still needed a handful of key moderates to participate, additional adjustments to the bill were made. In the end, the bill passes the House narrowly 217 to 213. It’s important to note this bill passed on a weak foundation that will likely be disrupted as the bill travels to the Senate. The Senate is considered to be more moderate than the House and many have predicted significant re-writes.
  2. Senate rules – The Senate Democrats are expected to raise points of order that do not meet the Byrd strict 6-rule test concerning the budgetary impact of the bill. The CBO report due out on May 22 will also factor into this assessment. If portions of the House bill do not satisfy the Byrd rule, major revisions to the bill will result.
  3. Senate writes bill and votes – Based on the feedback during the Senate Rules process as well as a smaller committee, the Senate will craft a bill to be voted on. Meanwhile there are several discussions occurring within the Senate as well as alternate proposed bills being considered. It is doubtful that the committee can craft a bill that will stand a chance of passing. A broad negotiation possibly including Senate Democrats may be necessary in order to pass the bill.
  4. Conference Process – The “conference” process goal is to reach common ground between the House and the Senate on future legislation. During this process, the two chambers resolve different versions of bills and look to get a common bill approved by both bodies. Assuming they can come together on a common piece of legislation, a compromised bill will be written to be voted on.
  5. Vote in House and Senate – After the completion of the Conference process the revised bill goes back to both chambers for a vote. Under reconciliation rules (as before) a simple majority is required to pass. This revised bill must pass both chambers before the President can sign it into law.

EmployeeTech Announces Two Upcoming Events

We are pleased to announce two upcoming events at EmployeeTech:

ACA – What to Consider for 2016 and Beyond– Wednesday March 1 at 1 PM Central (Chicago)

 Presenter – Ben Conley, Partner Seyfarth Shaw, Chicago IL

The Trump administration made this point loud and clear: Priority #1 is to repeal and replace the Affordable Care Act (ACA). This creates many legislative hurdles and lots of uncertainty for everyone involved. That is why organizations need a flexible plan with the right processes and systems in place for whatever may happen down the line. This 30-minute session will provide you with the latest information on the fate of ACA and highlight what employers must bear in mind for this recent filling and the upcoming tax year (2017).

Register here

EmployeeTech is Conducting a Study on HR Technology (For HR Representatives)

New trends are reshaping the HR Technology landscape. Employers are keen on embracing cloud-based technology across all markets and self-service is growing in popularity. However, the deployment of HR solutions has not been particularly smooth –usually lacking the proper mechanisms and required integration. This study will provide insights to employers of all sizes about which systems and strategies are being adopted and the gaps that need to be filled. Client participation would be highly appreciated and should only take less than 5 minutes of your time – click here to access the online questionnaire. Advisors can pass the link on to their clients to complete. All respondents will receive a copy of the study free of charge. The results will help you benchmark your company against your peers and provide actionable insights for your HR technology strategy.

No Extended Deadlines This Year

untitledLast year on December 28, we were alerted a month from the approaching deadline that the forms and filing requirements had moved two and three months out to address challenges. This was a fairly drastic move within a month of a significant compliance deadline. I bring this up almost a year later because the uncertainty and general confusion is expected to subside a little but, will likely continue into the 2016/17 filing season.

As a leading provider of ACA solutions to hundreds of employers, we are finding this concern about uncertainty spills into the 2016 tax season. To provide some useful guidance, I thought it would be helpful to share with you a roll-up of common questions and key issues we are receiving from our clients over the past several months:

  1. Will the ACA be delayed again in 2016? We do not see the filing requirements delayed again in 2016. The delay for 2015 was a one-time delay, and the IRS has signaled this to be the case on their conference calls.
  2. What changes do we need to be concerned with in the 1094 and 1095 C forms? Overall, the changes to these forms are minor in 2016. The 2015 Qualifying Offer, a form of transition relief, was eliminated from the 1094 form. The biggest changes are with two contingent offer of coverage codes 1J and 1K. The idea behind these new offer codes is that employer coverage is contingent upon not having coverage available elsewhere. If this better describes how you offer coverage, you may want to consider selecting these codes over the traditional 1A or 1E.
  3. Will it be easier to work with Name/TIN Mismatches flagged through the corrections process? In the first year it was difficult to work with IRS requested corrections because you often could not identify which covered individual generated the error (we didn’t know if it was the employee, a dependent, or both).  Several IRS conference calls have signaled they will be providing more detail on the corrections this year. If your ACA solution communicates with the IRS Affordable Care Act Information Returns (AIR) system, you will likely be able to display the detail of this error message and act on it. A side-note: remaining corrections from 2015 do not have a specific due date, but should be addressed as soon as possible.
  4. Why do we still have transition relief in 2016? The expectations for many is that transition relief was simply a 2015 phenomenon. While non-calendar year and 2015 Qualifying Offer Transition Relief have been eliminated, 4980H Transition Relief has remained into 2016 for “non-calendar” plans that meet certain criteria. What this means is that employers who might be facing shared responsibility penalties in 2016 can still take advantage of one of the two types of relief 1) if you average 50 to 99 FTEs you are shielded for the 2015 non-calendar year plan for the months that spill into 2016 (e.g., a July 1 plan will be shielded for the first six months of 2016). 2) The same applies for 100+ clients in terms of being able to leverage the 70% offer requirement.
  5. Will it be easier this year? This is a general question that depends on the solution you use. Overall, we believe the answer is a resounding “YES!” With our solution, a large number of clients are able to take advantage of an automated renewal process that transitions setup from 2015 and trends existing employees from December 31, 2015, into 2016. Vendors have learned how to make this process easier for their customers after all the pain they experienced in 2015. Everything from data collection, filing and corrections process should be more automated this year.

ACA Legislative Webinar- Plus final 2016 ACA forms

Register for the Webinar below by Clicking Here

New ACA Forms and Instructions:1094-C1095-C & Final Instructions

Please join us on Wednesday October 19 at 1 PM Central (Chicago Time) for a one-hour legislative update on ACA for 2016. With a year of filing under our belt and new details from Washington, employers will be looking for guidance going into this year. EmployeeTech has partnered with Seyfarth Shaw’s Health Care Report Team to provide important insight into the law. Presenting along with EmployeeTech will be Ben Conley, Partner and a member of the firm’s Health Care Reform Team.untitled

 This one-hour webinar we will cover the following topics:
> Looking back on 2015, and lessons learned
> Key changes for 2016 impacting employers
> How to protect your organization from penalties- plus notices
> Safeguards and enhancements within HCM File to support compliance
> Q & A

About Ben Conley
Ben started closely following health care reform well before it was passed into law. He regularly consults with governmental agencies on health care reform developments and has submitted comments on health care reform interim regulations on behalf of clients. Mr. Conley has presented extensively on health care reform and what it means for businesses, including leading the Healthcare Reform Certification Program offered by the Employer Healthcare Congress.

Legislative Update- What Employers Need to Know

Register for ACA 2016, Legislative Update- What Employers Need to Know on Aug 31, 2016 1:00 PM CDT at: https://attendee.gotowebinar.com/register/207502410046102275

Please join us on Wednesday August 31st at 1 PM Central for a legislative update on ACA for 2016. With a year of filing under our belt and new details from Washington, employers will be looking for guidance going into this year. EmployeeTech has partnered with Seyfarth Shaw’s Health Care Report Team to provide important insight into the law. Presenting along with EmployeeTech will be Ben Conley, Partner and a member of the firm’s Health Care Reform Team.

For this one-hour webinar we will cover the following topics:
> Looking back on 2015, and lessons learned
> Key changes for 2016 impacting employers
> How to protect your organization from penalties
> Safeguards and enhancements within HCM File to support compliance
> Q & A

About Ben Conley
Ben started closely following health care reform well before it was passed into law. He regularly consults with governmental agencies on health care reform developments and has submitted comments on health care reform interim regulations on behalf of clients. Mr. Conley has presented extensively on health care reform and what it means for businesses, including leading the Healthcare Reform Certification Program offered by the Employer Healthcare Congress.

About HCM
HCM is a comprehensive, stand-alone solution for 1094/95 reporting that it easy to use. Come hear how HCM can improve your ACA filing experience for 2016. Last year nearly 1900 clients chose HCM for their clients’ 1094 and 1095 forms and filing, many completely filed by late March.

After registering, you will receive a confirmation email containing information about joining the webinar.

 

New Draft 1095-C form for 2016

Here’s a link to the draft 2016 1095-C form for 2016. The form is unchanged from 2015. One update worth noting is the plan start month will remain an optional field for 2016. HCM file will be populating this field in 2016.
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