BOK Financial needed to get in front of sky-rocketing costs, industry changes, and government regulations with Tango, an innovative health care solution. They took a calculated risk partnering with Tango, an innovative healthcare solution that enables employees to make smart benefits choices by greatly simplifying the arduous open enrollment process.
On February 10th, 2014, the Internal Revenue Service (IRS) released significant guidance for the Patient Protection and Affordable Care Act, or Obamacare, that ends months of speculation, review of feedback from the industry, and addresses the need for transition relief.
A majority of the media’s headlines such as, “Employer Mandate Delayed” or “Obamacare Delayed to 2016,” misrepresent the majority of the content of this latest release. After a review of the 200+ pages of guidance, it’s clear the administration is not flinching about moving forward with the large employer mandate. However, in order to ease the transition, they’re temporarily relaxing requirements for smaller employers and finally clarifying their position on more complex and complicated portions of the act.
Heads up to employers with more than 100 Full Time Equivalents (FTEs): final regulations have been issued and go into full effect on January 1, 2015
Only organizations with 100 or more Full Time Equivalents (FTEs) will be required to comply and offer affordable benefits to eligible employees starting on January 1, 2015. Organizations with less than 100 but more than 50 have another year before things take effect. This “transition relief” gives smaller employers more time to implement important changes to how they track time and attendance in order to fairly classify employees for the purposes of meeting benefits provision requirements of Obamacare.
For Employers with >49 but less than 100 FTEs, transition relief if…
For these employers, there is no penalty for failure to offer affordable minimum value coverage for the 2015 calendar year (and any months following in 2016 if the plan year is not on a calendar year) provided that these employers:
The guidance contains more details around these requirements, but this summary shows that it is not automatic.
Rules for Large Employer calculation for new employers
Employers not in existence in a preceding calendar year will base their “large employer” status based upon the average number of employees the employer will reasonably expect to employ during business days for the current calendar year.
So you are a >100 Large Employer. Transition relief for the 2015 plan year….
Rather than having to offer minimum essential coverage to 95% of your full-time employees in 2015, you only have to offer it to 70%. You will still be penalized $2,000 per employee per year for substantially all of your employees if you fall below the 70% threshold. By phasing in this rule the IRS has given large employers transitional breathing room so that a casual book keeping error can’t trigger the massive “Pay or Play” penalty. You still face per-employee penalties for: full-time employees not offered coverage within 90 days of their start date, variable-hour employees who have met the 30-hour rule and have not been offered coverage, full-time employees who are not offered an affordable qualifying coverage. In summary, your obligation to appropriately track full-time status and offer affordable coverage to all of your full-time employees (as defined by final regulations) is unchanged, only the trigger for the “Pay or Play” penalty is affected.
Penalty calculations for 100 or more…
For the 2015 plan year, if you have more than 100 FTEs, your penalty calculation for not offering coverage is the number of FTEs minus 80 FTEs multiplied by 1/12 of $2,000 for each calendar month.
Transition guidance for multiemployer arrangements such as collective bargaining agreements…
For any large employer member of a multi-employer arrangement, coverage will be considered affordable if the employee contribution is no more than 9.5% of actual wages or the wage rate under the collective bargaining agreement. Any penalties for failure to offer minimum value affordable coverage would be borne by the employer member, not the multi-employer plan, and the employer member has to identify its FTEs in the plan.
More to come, stay tuned…
Obviously there are lots of definitions and details that we couldn’t include here, but this gives you a good idea of the complexity of making sure that you are complying with these rules. In our next post, we’ll cover more detailed changes with regard to how to measure certain classes of employees, such as teachers and seasonal workers.
The classification of a worker as either an “employee” versus an “independent contractor” is an important factor crucial in determining an employer’s compliance with the “shared responsibility” provision of the Affordable Care Act (ACA), as penalties are assessed based on the number of full-time-equivalent employees (FTEs). The employer must understand which of its workers qualify as “employees” in order to accurately calculate the number of FTEs. The number of FTEs on a monthly basis over the calendar year determines Large Employer status (specifically Large Employer status is determined by the number of “employee” hours each month). Large Employer must ensure they are offering ACA compliant coverage and calculate any potential penalties (based on actual full-time “employees”, not FTEs).
Currently, the ACA refers to the ERISA definition of an “employee” as “any individual employed by an employer.” However, this doesn’t clearly define the term “employee” for employer compliance purposes, so proposed regulations refer to the common law “employee” definition of “right to control” that applies for income tax wage withholding purposes. The common law “employee” definition determines worker classification as “employee” or “independent contractor” based on whether or not the business has the “right to control and direct the worker in the way of when, where, how and what work is performed.” (29 U. S. C. § 1002(6))
In order to determine “right to control” status for ACA compliance purposes, employers should generally use the following guidelines to evaluate whether or not the individual in question is an “employee.” If the answer is generally “yes,” then this indicates the individual is an employee; however, if the answer is generally “no,” then this indicates the individual is a contractor.
If an overall analysis of “right to control” factors determines that those factors do not apply to a particular worker, then the worker is not considered an “employee” and will not count in determining the business’ “Large Employer” status or in calculating applicable penalties.
However, in the event of employee misclassification, existing IRS misclassification relief (Section 530 Safe Harbor and other federal classification relief programs) may not be extended to cover ACA compliance issues with respect to how the misclassification affects the “shared responsibility” provision. The good news is that businesses can use the implementation of the ACA and its focus on “employee” status as an opportunity to re-evaluate their workforce classification in order to reduce the risk of classification disputes. In their re-evaluation, they should consider the factors under the “right to control” test, as well as implement the following steps to help reduce the risk of classification problems:
While new laws and regulations can mean additional compliance burdens, in this case, a business’ efforts to comply with the ACA also assists in compliance with already existing wage and hour requirements.
If I am a divorced/separated from my child’s other parent, can I still use my HSA funds to pay for my child’s expenses? Even if the other parent claims our child’s tax exemption?
Yes! HSAs are an exception for which your child can be considered your dependent, even if you are a non-custodial parent and/or your child’s tax exemption is claimed by your former spouse.
The IRS specifically states in Publication 969 http://www.irs.gov/pub/irs-pdf/p969.pdf, “For this purpose, a child of parents that are divorced, separated, or living apart for the last 6 months of the calendar year is treated as the dependent of both parents whether or not the custodial parent releases the claim to the child’s exemption.”
“This purpose” refers to determining whose expenses are qualified for HSA funds. The excerpt defines that the parents must be legally divorced or separated at the end of the year or have lived apart during the last six months of the year in order for the rule to apply.
|Age 54 and under||Age 55 and above|
The IRS allows for an extra $1,000 catch-up contribution during the year you turn 55. So, if your 55th birthday is in the 2014 calendar year, you are eligible for the extra contribution.
For those using Tango to manage their HSA, your 2014 annual contribution limit will be updated based on your insurance coverage, as reported by your employer, and age. Also, if you or your spouse contribute to another HSA this year, you should enter those contributions n Tango’s limit calculator to avoid exceeding your IRS maximum. Learn more about how spouses should handle HSAs here.
|Minimum Deductible||Maximum Out-of-Pocket|
Below are the IRS guidelines of FSA contribution limits, but your employer may restrict these based on their plan design.
|FSA (including limited)||$25||$2,500|
Your employer may also decide to utilize the new Carryover period in lieu of a Grace Period this year. This option allows you to carry up to $500 of your remaining 2013 balance into 2014. This only affects your Health FSA and does not apply to Limited or Dependent Care FSAs.