Play or Pay

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October 12th, 2015
Categories: CEO's Blog

International residents and expats have often been wrongfully advised by their insurance carrier not to pay any importance to the penalties of Affordable Care Act (ACA), under the assumption that the individual tax assessment penalty may be the only item to be concerned about and may result in a small tax obligation. However, in 2015 a new series of tax laws specified within ACA have gone into effect, which penalize the employers or groups that do not meet the employer mandate under the Obamacare.

These tax laws, commonly referred to as the “Play or Pay” in our industry, does exactly that. If the employer does not meet all the requirements of Obamacare in the group insurance plans provided to all employees (this includes foreign nationals and expats) the employer is subject to tax penalties under multiple criteria. The following is a list a Q &A’s WellAway Limited has gathered in an effort to clarify the many questions we are receiving from international employer groups.

What is “Play or Pay” all about?

As of 2015, Applicable Large Employers (ALEs) must comply with the requirements under the Employer Shared Responsibility Mandate (Play or Pay Provisions). In order to avoid penalties, ALEs must offer affordable and minimum value health coverage to full-time employees and their dependents. The determination and reporting requirements can be difficult for any employer to navigate, all within an annual deadline.

 

Who must comply?

  • Generally, all Applicable Large Employers (ALEs) with on average at least 50 or more FTEs “full-time employees” (including full-time equivalent employees, variable hour, part-time and seasonal) on business days during the preceding calendar year.
  • ALEs with 50-99 FTEs received transition relief (from any penalties) until 2016 provided they did not reduce their workforce or eliminate or reduce health coverage between February 9 and December 31, 2014. (Required to certify they meet the transition relief.)
  • Summary Plan Description (SPD) including any changes in Plan benefits and entitlement to benefits. Please indicate the date of the SPD and the most recent date and method of distribution. These rules apply to all employees; expats and international.
  • These rules apply to all employees; expats and international.

 

What is considered a full-time employee?

  • A “full-time” employee is any employee who averages at least thirty (30) hours of service per week or 130 hours per calendar month.
  • Applicable employers must monitor hours of service to determine which employees meet the definition of full-time employee and thus must be afforded health coverage.
  • If these employees meet the definition of full-time employees then an offer of health coverage must be made to them (and their dependents) in order to avoid potential penalties.
  • An employee is a “variable-hour employee” if, based on the facts and circumstances as of the employee’s start date, it cannot be determined whether the employee is reasonably expected to work on average at least 30 hours per week during the initial measurement period because the employee’s hours are variable or uncertain.
  • These rules apply to all employees; expats and international.
  • These rules apply to all employees; expats and international.

 

What are the rules of “Play or Pay” (Employer Shared Responsibility)?

  • Starting in 2015, to avoid potential penalties under the Play or Pay rules, certain ALEs (employers to which “transition” relief does not apply) must offer their full-time employees (and dependents) health coverage;
  • That is both “affordable” and “of minimum value.”
  • An ALE may be liable for penalties under the Play or Pay rules;
    • If at least one of its full-time employees receives a government subsidy for coverage purchased under a government Exchange.
    • Primary penalty: failure to provide any coverage results in a $2,000 penalty multiplied by all full-time employees (excluding the first 30 employees) if one employee receives a subsidy;
    • Secondary penalty: failure to provide “affordable” coverage (exceeds 9.5% of household income based upon W-2) to 95% (70% relief for 2015) of full-time employees (and dependents) or “minimum value” coverage results in $3,000 multiplied by each employee receiving a subsidy.
  • These rules apply to all employees; expats and international.

 

Tracking Periods

  • All employers must use a tracking method approved by Obamacare and the IRS. There are 2 ways of tracking the time employees worked in a company.
  • The Monthly Method
  • The Look-back Measurement Method

In summary, for 2015 two reporting requirements or mandates are effect.  They each assess a tax or a penalty to the individual and the employer.

The two reporting requirements (Mandates):

Individual Mandate: IRS Section 6055: regardless of size, requires all health plans, (individual coverage or fully and self-insured group coverage) to annually report to IRS and individuals (enrolled employees) if coverage constitutes “minimum essential coverage.” (All employers with group health plans and individuals with individual policies.)

  • Fully-Insured Plans

o 109 4-B – Transmittal form (summary page) provided to IRS by the insurance carrier; summarizes coverage and # of 1095-Bs.

o 1095-B – Individual employee/group insured forms provided to IRS by carrier along with 1094-B; 1095-B also provided to employees to be filed with individual tax return.

  • Self-Insured plans non-ALE (less than 50 Employees)

o 1094-B – Transmittal form (summary page) provided to IRS by Plan Sponsor; summarizes coverage and # of 1095-Bs.

o 1095-B – Individual employee/insured forms provided to IRS by Plan Sponsor along with 1094-B; 1095-B also provided to employees to be filed with individual tax return.

  • Self-Insured plans ALE (50+ employees)

o 1094-C – Transmittal form (summary page) provided to IRS by Plan Sponsor; summarizes coverage and # of 1095-Cs.

o 1095-C – Individual employee/insured forms provided to IRS by Plan Sponsor along with 1094-C; 1095-C also provided to employees to be filed with individual tax return.

 

Play or Pay Mandate: IRS Section 6056: requires only ALEs (employers with 50 or more full-time and full-time equivalent employees) to report to the IRS and to full-time employees.

  • Employer Reporting Requirement
  • 1094-C – Transmittal form
    • 1095-C – Provided by ALE to the IRS and also provided to the employee.
    • Clarification: For self-insured ALEs the same forms (1094-C and 1095-C) are required for both the Individual Mandate and “Play or Pay “Mandate; however, the ALE is required to produce/ file only one set of these forms to meet both filing requirements [ Individual Mandate (6055) & Play or Pay Mandate (6056)].
    • Deadlines for reporting:

o All employers:

• January 31: 1095-B/C statements to employees.

-Employers with 250+

- March 31: W2s (must be filed electronically); 1094-B/C, 1095-B/C.

-Employers with fewer than 250 employees: 1094-B/C,1095-B/C –

-February 28: if filing via paper;

-March 31 if filing electronically.

 

WellAway Limited provides employers and individuals with Obamacare compliant solutions that meet all regulatory aspects and avoid the double taxation of companies and individuals. For more information as to how we can assist you, with your compliance process for 2015 and the future, please contact us at +1 (441) 296 0651 or via email at info@wellaway.com.


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