2024 ACA Pay or Play Increasing Penalties

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On March 9, 2023, the IRS revised the penalty amounts for the employer shared responsibility (pay or play) rules under the Affordable Care Act (ACA) for 2024. For the calendar year 2024, the adjusted $2,000 penalty amount is $2,970, and the revised $3,000 penalty amount is $4,460.

 

Pay Or Play Penalty

An applicable large employer (ALE) that complies with the pay or play regulations is only subject to penalties if at least one full-time employee receives a subsidy for Exchange coverage. Employees provided affordable minimum value (MV) coverage must be qualified for these Exchange subsidies. Based on the circumstances, the pay-or-play rules allow for applying either the 4980H(a) penalty or the 4980H(b) penalty.

 

  • Under Section 4980H(a): If an ALE does not provide coverage to typically at least 95% of its full-time workers (and dependents), and any full-time worker obtains a subsidy toward their Exchange plan, the ALE will be subject to a penalty. For any applicable month, the monthly fine imposed on ALEs that do not provide coverage to almost all full-time employees and their families equals the number of full-time employees at the ALE (minus 30), multiplied by 1/12 of $2,000 (as adjusted).

 

  • Under Section 4980H(b): If at least one full-time employee receives a subsidy through an Exchange due to the ALE not providing coverage to all full-time employees, the ALE’s coverage being prohibitively expensive, or the ALE’s coverage not providing MV, the ALE may still be subject to a penalty even if it offers coverage to nearly all full-time employees (and dependents). For each full-time employee who receives a subsidy, an ALE is subject to a monthly fine equal to 1/12 of $3,000 (as adjusted) for any applicable month. Nevertheless, the 4980H(a) penalty amount is the maximum punishment for an ALE.

 

Important Dates Description
August 16, 2022 For 2023, the IRS published revised pay-or-play penalty amounts.
March 9, 2023 For 2024, the IRS published revised pay-or-play penalty amounts.
2024 Calendar year 2024 penalty amounts are based on a failure to provide affordable minimum value coverage during the 2024 calendar year

 

IRS Pay Resources

The following IRS websites are available to employers for more information and updates regarding. pay or play provisions:

 

 

This ACA Pay Penalty Outline is provided for informational purposes only and should not be construed as legal or a recommendation of any kind. While we have attempted to provide current, accurate, and clearly expressed information, this information is provided “as is,” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy and completeness.

 

*sourcehttps://content.zywave.com/file/b1f47fcf-ae5c-4d8a-a1b2-1d74f01159e9/ACA%20Pay%20or%20Play%20Penalties%20Will%20Increase%20for%202024.pdf *

2023 ACA Pay or Play Increasing Penalties

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On August 16, 2022, the IRS revised the penalty amounts for the employer shared responsibility (pay or play) rules under the Affordable Care Act (ACA) for 2023. For the calendar year 2023, the adjusted $2,000 penalty amount is $2,880, and the revised $3,000 penalty amount is $4,320.

 

Pay Or Play Penalty

An applicable large employer (ALE) that complies with the pay or play regulations is only subject to penalties if at least one full-time employee receives a subsidy for Exchange coverage. In general, employees provided affordable minimum value (MV) coverage are not qualified for these Exchange subsidies. Based on the circumstances, the pay-or-play rules allow for applying either the 4980H(a) penalty or the 4980H(b) penalty.

 

  • Under Section 4980H(a): If an ALE does not provide coverage to around 95% of its full-time workers (and dependents), and any full-time worker obtains a subsidy toward their Exchange plan, the ALE will be subject to a penalty. For any applicable month, the monthly fine imposed on ALEs that do not provide coverage to almost all full-time employees and their families equals the number of full-time employees at the ALE (minus 30), multiplied by 1/12 of $2,000 (as adjusted).

 

  • Under Section 4980H(b): If at least one full-time employee receives a subsidy through an Exchange due to the ALE not providing coverage to all full-time employees, the ALE’s coverage being prohibitively expensive, or the ALE’s coverage not providing MV, the ALE may still be subject to a penalty even if it offers coverage to nearly all full-time employees (and dependents). For each full-time employee who receives a subsidy, an ALE is subject to a monthly fine equal to 1/12 of $3,000 (as adjusted) for any applicable month. Nevertheless, the 4980H(a) penalty amount is the maximum punishment for an ALE.

 

 

Important Dates Description
August 16, 2022 For 2023, the IRS published revised pay-or-play penalty amounts.
March 1, 2022 Prior to this, the IRS updated the 2023 affordability percentage to 9.12%
2024 Calendar year Updates are based on coverage offered during the 2023 calendar year

 

This ACA Pay Penalty Outline is provided for informational purposes only and should not be construed as legal or a recommendation of any kind. While we have attempted to provide current, accurate, and clearly expressed information, this information is provided “as is,” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy and completeness.

 

*source:https://content.zywave.com/file/b1f47fcf-ae5c-4d8a-a1b2-1d74f01159e9/ACA%20Pay%20or%20Play%20Penalties%20Will%20Increase%20for%202024.pdf *

 

2021 ACA Pay or Play Penalties Increase

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On August 19, 2020, the IRS updated its Pay or Play Frequently Asked Questions to include the annual adjusted penalty amounts for the 2021 calendar year.

When the Affordable Care Act was first implemented, there were two penalties for the Pay or Play, 4980H(a) penalty and the 4980H(b) penalty for Applicable Large Employers, also referred to as an “ALE.”

  • The Section 4980H(a) penalty can apply when an ALE, does not offer group health insurance to “substantially all” full-time employees (and dependents). The penalty is calculated as ALE number of full-time employees (minus 30) x $2,000 (as adjusted).

 

  • The Section 4980H(b) penalty can apply when an ALE does not offer coverage to all full-time employees or the ALE’s coverage is unaffordable or does not provide minimum value, and the employee receives an Exchange subsidy. The penalty is calculated as $3,000 (as adjusted) x the number of ALE’s full-time employees who receive an Exchange subsidy.

 

  • For 2021, the adjusted 4980H(a) $2,000 penalty amount is $2,700.
  • For 2021, the adjusted 4980H(b) $3,000 penalty amount is $4,060.

 

Employers with 50 or more full time equivalent employees, also known as Applicable Large Employers (“ALE”), should keep these penalty amounts in mind when reviewing benefit eligibility and employer contributions for 2021 calendar year to avoid penalties.

 

For more information, contact MNJ Insurance Solutions at (714) 716-4303.

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.

California Individual Mandate Returns in 2020

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Beginning in 2020, California imposes a state individual mandate that requires individuals in California to maintain health coverage or pay a penalty. The California law largely mirrors the federal individual mandate requirement under the Affordable Care Act (ACA) that was effectively eliminated, beginning in 2019.  California’s individual mandate requires most individuals in the state (and their family members) to be covered under minimum essential coverage for each month of the year, beginning in 2020.

Similar to what we saw in the past with the ACA individual mandate, California’s individual mandate penalty is calculated in the same manner. The penalty is the greater of two amounts, the flat dollar amount ($695) or the percentage of income amount (2.5% of income).

For a limited time, you can still sign up through April 30, 2020 but you’ll have to enroll quickly to avoid paying the penalty.

You have until April 30, 2020 to apply if you just learned about the new financial help available to almost 1 million Californians or the new state penalty for not having insurance. You can still apply even if you already have coverage through a company like Kaiser Permanente, Blue Shield, Health Net or any other plan outside of Covered California. After you enroll, your coverage will start the first day of the next month, but April 30th is a firm deadline, unless you have a qualified event/special enrollment period.

Let us know if you have any questions or need help applying for Health Insurance coverage.

President Trump’s Executive Order: The Impact to Employers and Employees

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As stated in the prior blog posting, the Executive Order serves as a policy statement and the applicable agencies are not likely to take immediate action on this directive. However, once the Department heads for Health and Human Services, the Treasury, and Labor are confirmed and in place, we may see guidance as to how they intend to enforce (or not enforce) certain provisions of the Affordable Care Act (ACA).

So, What Should Employers Do?

For now, employers should continue to follow the requirements of the ACA until (and unless) further guidance from the applicable administrative agency is issued. Listed below are some of the ACA items still required by applicable employers as of January 2017:

  • Employers with 50 or more full-time equivalent: Continue to prepare and provide 2016 Forms 1094-C and 1095-C. For 2016, the Form 1095-C is due to ACA full-time employees, and for self-insured plans all covered individuals, by March 2, 2017.  form 1094-C and all forms 1095-C are due to the IRS by March 31, 2017 (unless filing paper, then the forms are due to the IRS by February 28, 2017).
  • Employers with 50 or more full-time equivalent: Prepare for the enforcement of the employer mandate penalties, if applicable.
  • Employers with 250 or more W-2 in the prior year, are required to report the value of health insurance coverage on the Form W-2 (box 12, code DD).
  • Continue to comply with the following mandates as to group health plans:
    • No lifetime or annual dollar limits on Essential Health Benefits
    • Cover children to age 26
    • No retroactive cancellation of health plan coverage, except due to fraud or intentional misrepresentation of material fact
    • No pre-existing condition exclusion clauses
    • No waiting periods in excess of 90 days
  • If applicable, comply with additional mandates for non-grandfathered plans.
  • Employers must continue to provide ACA-related notices, including but not limited to Summary of Benefits and Coverage (SBC), Notice of Coverage Options, etc.
  • For those employers who offer a health flexible spending account (FSA), the maximum employee contributions for 2017 cannot exceed $2,600.  In addition, over-the-counter drugs are excluded, unless prescribed by a physician.

What is the Impact to Employees?

Individuals should still continue to act as though the individual mandate will be enforced (have minimum essential coverage, qualify or an exemption, or pay a penalty). For the immediate future, it appears subsidies remain available to assist certain low and middle income individuals to purchase coverage in the Marketplace, if coverage is not available elsewhere (e.g., employer-sponsored, Medicare, or Medicaid).

There is a significant question as to whether the Trump administration will continue to enforce the individual mandate. It is a crucial component of the ACA in that it operates to keep the risk pool large enough to reduce adverse selection. However, by not enforcing the coverage requirement, it could lead to an exodus of healthy individuals from Covered California and creating an unstable risk pool.

There is also question around the continued availability of subsidies during this transition period. As of right now, they remain available. However, this will be an area to be closely monitored as the leadership at HHS takes shape.

We will continue to monitor and report developments. If you have any questions, please contact MNJ Insurance Solutions at (714) 716-4303.

This content is provided for informational purposes only. While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy and completeness. The information provided should not be construed as legal or tax advice or as a recommendation of any kind. External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.

President Trump Signed Executive Order Addressing the ACA

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Many of our clients and prospects have been asking the same question…”Now that President Trump is in office, what is going to happen with the ACA? When do you foresee changes?  What is going to happen to Covered California?”  These are all valid questions and concerns.  We are going to stay informed of any changes…

Read more

Understanding the Small Business Health Care Tax Credit for 2016

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We receive many calls from clients and prospects regarding the Small Business Health Care Tax Credit, so we thought we would provide a brief summary for 2016.  The Small Business Health Care Tax Credit is designed to encourage small businesses and small tax-exempt employers to offer health insurance coverage to their employees.

 

In general, an employer may be eligible for the credit for tax year 2016 if the employer:

• Had fewer than 25 full-time equivalent employees;
• Paid an average wage of less than $52,000 a year;
• Paid at least half of employee health insurance premiums; and
• Paid premiums on behalf of employees enrolled in a qualified health plan offered through the Small Business Health Options Plan (SHOP).

 

Employers seeking to claim the credit should know the following key facts:

• The maximum credit is 50% of premiums paid for small business employers, and 35% of premiums paid for small tax-exempt employers.  Eligible credit is on a sliding scale, depending on number of employees and average salaries.
• Small employers may claim the credit for no more than two consecutive taxable years, beginning in tax year 2014 and beyond.
• Small employers must be enrolled with SHOP/Covered California for the tax credit. If the employer is offering medical through other carriers, they may be eligible for business expense write off, and not the tax credit.
• Eligible small employers (other than those that are tax-exempt) may claim the credit on their annual income tax returns, with an attached Form 8941Credit for Small Employer Health Insurance Premiums, showing the calculation of the credit.

 

If you would like to further discuss the Small Business Health Care Tax Credit and how it may affect your company, please contact MNJ Insurance Solutions at (714) 716-4303.

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.

2017 Key Dates for Open Enrollment: Individual/Family Medical Plans

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2017 IFP open enrollment

 

Did you know that in 2017 the Open Enrollment period is November 1, 2016 through January 31, 2017?  Did you know that if you do not have qualified medical coverage, meeting the minimum essential benefits, that you may face a penalty for not having health insurance coverage, according to the ACA?  (Note: there are a few exemptions for this rule.)

It is important to understand the key dates for Open Enrollment for Individual and Family coverage, both on and off the exchange.

If you are enrolling for individual/family medical coverage between November 1, 2016 and through December 15, 2016, coverage will begin as of January 1, 2017.  If you are enrolling for individual/family medical coverage on December 15, 2016 through January 15, 2017, coverage will begin as of February 1, 2017.  Finally, if you are enrolling for health coverage on January 16, 2017 through January 31, 2017, coverage will begin as of March 1, 2017.

Outside of Open Enrollment, individuals can enroll in the individual/family health coverage only if you qualify for a Special Enrollment Period (SEP).  Some examples may include, but are not limited to the following:  loss of group coverage, divorce and therefore, losing medical coverage through spouse’s employer plan, or employer terminates their group plan and therefore, no longer offers coverage.  It is also important to enroll within a certain period of time of the qualifying event.

If you have any questions, or would like to explore Individual/Family Health Insurance plans, please do not hesitate to contact Julie Mangrello-Jennings at (714) 716-4303.

IRS Issued Notice 2016-4: Extending the Due Dates for Forms 1094-C and 1095-C for 2015

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1094-c and 1095-c

Great news for Applicable Large Employers (ALE) and self-insuring employers, who are required to report under Section 6055 and 6056 of the Internal Revenue Code.  Per the IRS Notice 2016-4, they extended the deadlines for the 2015 Affordable Care Act (ACA) information requirements to complete the 2015 Forms 1094-C and 1095-C.  Coverage providers also have additional time to file and distribute the B series forms for 2015 Calendar Year only.

Under the ACA, Applicable Large Employers must file the 2015 Forms 1094-C and 1095-C with the IRS, and furnish copies of the 1095-Cs to full-time employees (and to covered part-time employees, if the employer’s plan is self-funded).  There are no exceptions to the filing requirement.  Many ALEs have found compliance with this mandate challenging, therefore, we welcome the extension from the IRS to allow employers a couple more months to prepare.

Extensions:

  • Form Distribution to Individuals (Forms 1095-B and 1095-C):
    • Extended from February 1, 2016 to March 31, 0216.
  • IRS Form Filing (1094-B, 1095-B, 1094-C, and 1095-C):
    • Extended from February 29, 2015 to May 31, 0216 (paper filing)
    • Extended from March 31, 2016 to June 30, 2016 (electronic filing)

IMPORTANT NOTE: The extensions for the ACA information reporting requirements apply for calendar year 2015 only and have no effect of the requirements for other years or on the effective dates or application of the ACA “Pay or Play” provisions.  Applicable Large Employers or other coverage providers that do not comply with these extended due dates will be subject to penalties.

 

2015 Required Forms:

Form 1094-B

Form 1095-B

Form 1094-C

Form 1095-C

2015 Form Instructions:

1094-B Instructions

1095-B Instructions

1094-C Instructions

1095-C Instructions

General Penalty:

HR 1295

Questions?

6055 IRS Q&A

6056 IRS Q&A

1094-C & 1095-C FAQs

 

If you would like to further discuss the ACA Employer Reporting Requirements, penalties, and how it affects your company, please contact MNJ Insurance Solutions at (714) 716-4303.

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.

Pay or Play? Reasons Why “Pay” is NOT the Easy Answer

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pay or play pic2

 

“Pay or Play” Employer Mandate and Penalties (brief summary)

Under the “Shared Responsibility of the Affordable Care Act (“ACA”), beginning January 1, 2015 employers with 100 or more full-time equivalent (“FTE”) working 30 hours or more per week (including the hours of the part-time workers added together to equal full-time equivalent workers) will be required to offer “affordable” health insurance coverage and must meet the minimum value, or they will face a penalty. Beginning January 1, 2016, employers with 50 or more FTE will be required to offer “affordable” health insurance coverage meeting the minimum value to their eligible employees, or they will be required to pay the penalty.

Large employers who do not offer coverage to their FTEs face a penalty of $2,000 time the total number of full-time employees, less the applicable exempt employees specified by law.

In addition, large employers who offer coverage to their full-time employees, but do not make the lowest cost plan “affordable” for the employee only premium or does not provide minimum value will face a penalty of $3,000 times the number of full-time employees receiving tax credits for exchange coverage (not to exceed $2,000 times the total number of full-time employees).  This is merely a brief summary of some of the employer’s penalties under the Shared Responsibility provision of the Affordable Care Act, and does not include all penalties and provisions.

 

Some Considerations for Employers

Some employers, who currently offer benefits, have considered eliminating the health care coverage altogether and instead paying the penalty on their full-time employees.  However, there are many reasons an employer should carefully consider all of their options before eliminating their group health care coverage.

Listed below are a few highlights for employers to consider in their final decision-making process.  If an employer should eliminate health care, the following would apply:

  1. Lost tax advantages for the Employer and Employee, as employee’s portion of the premiums will no longer be deducted through payroll with pre-taxed dollars with a Section 125 Premium Only Plan.
  2. Employer will pay the penalty for not offering coverage and the penalty is non-deductible, whereas employer-paid premiums are tax deductible as a business expense.
  3. Penalties will increase in subsequent years.
  4. Employer will still have the annual reporting requirements under Section 6056, regardless if they offer coverage or not.  There are additional penalties for non-compliance with the reporting requirements.
  5. Employer may face recruitment and retention challenges if they opt not to offer coverage.
  6. Other financial implications for Employers (i.e. how it may affect their Workers’ Compensation, payroll taxes, corporate bottom line, etc.).
  7. Individuals will have to purchase insurance on their own with AFTER tax dollars, or face an individual tax penalty.
  8. In most cases, employer group plans have a different and more comprehensive list of participating providers, than that of Individual plans.
  9. In most cases, employer group health plans provide a more comprehensive list of covered prescriptions.

 

As you can see, there are many things an employer needs to consider while evaluating the “Pay or Play” Employer Mandate.  The above-list are some considerations and not limited to such.

If you would like to further discuss the “Pay or Play” employer mandate, penalties, and how it affects your company, please contact MNJ Insurance Solutions at (714) 716-4303.

 

This content is provided for informational purposes only.  While we have attempted to provide current, accurate and clearly expressed information, this information is provided “as is” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy  and completeness.  The information provided should not be construed as legal or tax advice or as a recommendation of any kind.  External users should seek professional advice form their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.