IRS Releases Notice 2015-87
info from Cornerstone News
The IRS notice addresses various issues that have arisen under the Affordable Care Act (ACA) with respect to employer-sponsored coverage, focusing particularly on account-based employee benefits such as section 125 cafeteria plans and health reimbursement arrangements, reporting and defining hours of service. In addition, the IRS provided guidance regarding COBRA coverage and Health FSA carryovers.
Health Reimbursement Arrangements (HRA)
HRAs available to cover medical expenses of an employee’s spouse or children may not be integrated with employee-only coverage but must be integrated with coverage in which the dependents are enrolled to comply with ACA requirements. Recognizing that many employer plans do not conform to the requirement, the IRS is allowing plans a grace period until the end of the plan year beginning before January 1, 2017 to come into compliance with this requirement.
Treatment of Opt-Out Payments
If an employer offers an employee cash payments if he or she waives health insurance coverage (an opt-out payment), the IRS will consider the opt-out payment as an additional charge for coverage for determining its affordability for application of the employer mandate penalty. The employee has the option of receiving additional salary for foregoing coverage, and thus is being “charged” the amount of the additional salary if he or she accepts coverage.
Affordability Under The Employer Mandate
For purposes of the employer mandate affordability requirement and related regulatory requirements, including affordability safe harbors, affordability of coverage is defined as costing no more than 9.5 percent of household income (or for safe harbors, 9.5 percent of W-2 or hourly wages or the poverty level). The 9.5 percent standard is adjusted annually and is set at 9.56 for 2015 and 9.66 percent for 2016. The notice makes clear that this adjustment applies to all provisions that use the 9.5 percent standard.
Adjusted Penalty Amounts Under The Employer Mandate
Inflation updates for the statutory penalties under the employer mandate are also provided. The $2,000 per full-time employee penalty that applies when an employer fails to offer minimum essential coverage and an employee receives premium tax credit will increase to $2,080 for 2015 and $2,160 for 2016; while the $3,000 penalty that applies on a per-employee basis for employees who receive premium tax credits when coverage does not meet affordability or minimum value standards will increase to $3,120 for 2015 and $3,240 for 2016.