Potential ACA Relief for Employers Facing COVID-19 Hardship
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As the COVID-19 global health pandemic continues to affect businesses large and small, employers must still comply with the requirements of the ACA’s Employer Mandate.
As a reminder to employers in conjunction with the Employer Shared Responsibility Payment (ESRP), the ACA’s Employer Mandate, Applicable Large Employers (ALEs), organizations with 50 or more full-time employees and full-time equivalent employees, are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is Affordable for the employee or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
With many organizations experiencing financial hardship, there may be relief coming in the form of flexibility as to how an Employer can meet the ACA’s Employer Mandate, as per proposed IRS regulations regarding Health Reimbursement Arrangements (HRAs).
The proposed IRS regulations state that the offering of an individual coverage HRA can satisfy the ACA requirement that employers offer MEC that meets MV as required by the ACA’s Employer Mandate. An individual coverage HRA is in compliance with general ACA requirements as long as it provides preferred funds to pay for the cost of health insurance coverage purchased through the individual health insurance marketplace.
This provides employers with an opportunity to offer individual coverage HRAs to employees instead of offers of health coverage.
In late 2019, the U.S. Department of Health and Human Services (HHS), U.S. Department of Labor (DOL) and the U.S. Department of Treasury issued a final rule expanding the use of HRAs to allow employers to use individual coverage HRAs to provide their workers with tax-preferred funds to pay for the cost of health insurance coverage that they purchase in the individual health insurance marketplace. The HRA expansion went into effect in January of this year.
While the decision regarding whether or not an HRA will substantiate an offer of ACA mandated coverage probably does not come in time for employers feeling the burn now, it is something to consider with your brokers and ACA compliance team as they continue to navigate these challenging times.
While the expansion of HRAs may create simpler financial decisions for employers, it could also create challenges in annual IRS reporting, specifically with Form 1095-C. And with the IRS issuing ACA non-compliance penalties for the 2017 tax year in Letter 226J, employers need to be sure they’re getting it right.
Employers in need of assistance in navigating their ACA responsibilities should contact us to learn about ACA Complete.
To learn more about ACA compliance in 2020, click here.
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