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Unraveling upcoming IRS rules on Obamacare

Next year promises to be a busy year for healthcare reform compliance — so the IRS has already begun issuing sample documents and rule changes for employers. Here’s what HR pros need to know.  

First, the IRS issued draft forms for employers — with insured and self-insured plans that are subject to the Affordable Care Act’s employer mandate — which must be used to verify their compliance.

The filing for these forms is made on the basis of the calendar year — regardless of the type of year on which a firm administers its plan. The first due date for this form is early 2016 and that data will be based on the 2015 calendar year.

Non-calendar year deferral

If your plan operates on a non-calendar year basis, the feds will allow you to defer compliance with the employer mandate reporting until the first day of the plan’s 2015-2016 plan year. If your plan defers, however, you must still file a report with the IRS for the entire 2015 calendar year.

The reporting forms are available for download on the IRS website, but the drafts don’t currently contain any filing instructions. However, employers can expect IRS guidance on these forms in September.

Changes in ‘Affordability’

On top of the draft forms on the ACA’s employer (and individual) mandate, the IRS also released Revenue Procedure 2014-37 on the ACA’s affordability percentages for 2015.

This release reminds firms that the definition of “affordable” under the healthcare reform law can — and will — change moving forward. In this document, the IRS announced that it will increase the affordability percentages for 2015 under the Shared-Responsibility mandate.

Specifically, for plan years beginning in 2015, a large employer’s coverage will be considered affordable as long as employees’ required contribution to the plan doesn’t exceed 9.56% of their household income. That’s an increase from the 9.5% threshold that is currently in place.

3 safe harbors

In many cases, employers don’t know their workers’ household income. Because of this, the IRS has set up three affordability safe harbors that firms can use to determine affordability based on the info that is available to them.

For plan years beginning in 2015, the safe harbors — with the adjusted affordability percentage — are:

1. An employee’s premium co-sharing for the lowest-cost, self-only coverage that provide minimum value must not exceed 9.56% of an employee’s W-2 taxable (Box 1) income. (Note: The cost of dependent coverage isn’t calculated when determining affordable coverage.)
2. An employee’s required premium co-sharing for the lowest-cost, self-only coverage that provides minimum value and isn’t greater than 9.56% of the rate of pay as of the first day of the coverage period (usually the first day of the plan year), and
3. An employee’s required premium co-sharing for the lowest-cost, self-only coverage that provides minimum value isn’t greater than 9.56% of the federal poverty level for a single individual.

Employers must remember to use the adjusted affordability percentages beginning in 2015 when it comes to using the IRS’ safe harbors.