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IRS Won’t Accept 2017 Individual Tax Returns without ACA Information

October 25 - Posted at 8:26 AM Tagged: , , , , , , , , , , , , , , , , ,

In a recent statement released by the IRS it advised that it would not accept individual 2017 tax returns that did not indicate whether the individual had health coverage, had an exemption from the individual mandate, or will make a shared responsibility payment under the individual mandate. Therefore, for the first time, an individual must complete line 61 (as shown in previous iterations) of the Form 1040 when filing his/her tax return. This article explains what the new IRS position means for the future of ACA compliance from an employer’s perspective.

First, it will be critical (more so this year than in year’s past) that an employer furnish its requisite employees the Form 1095-C by the January 31, 2018 deadline. In previous years, this deadline was extended (to March 2, 2017 last year). However, with the IRS now requiring the ACA information to be furnished by individual tax day, April 17, 2018, employers will almost certainly have to furnish the Form 1095-C to employees by the January 31, 2018 deadline. This is a tight deadline and will require employers to be on top of their data as the 2017 calendar year comes to a close.

An employee who is enrolled in a self-insured plan will need the information furnished in part III of the Form 1095-C to complete line 61 on his/her tax return. It is reasonable to assume that an employee is more likely to inquire as to the whereabouts of the Affordable Care Act information necessary to complete his/her 2017 tax return. Therefore, the possibility of word getting back to the IRS that an employer is not furnishing the Form 1095-C statements to employees is also likely greater in 2017 compared to past years. Remember, an employer can be penalized $260 if it fails to furnish a Form 1095-C that is accurate by January 31, 2018 to the requisite employees. This penalty is capped at $3,218,500. The $260 per Form penalty and the cap amount can be increased if there is intentional disregard for the filing requirements. 

The IRS statement continues the IRS’ trend of being more strenuous with ACA requirements. Many employers have received correspondence from the IRS about missing Forms 1094-C and 1095-C for certain EINs. Frequently, this has been caused by the employer incorrectly filing one Form 1094-C for the aggregated ALE group as opposed to a Form 1094-C for each Applicable Large Employer member (ALE member). While the IRS’ latest statement does not ensure that enforcement of the employer mandate (the section 4980H penalties) is coming soon, one could infer that the IRS will soon be sending out penalty notices with respect to the employer mandate.

With the actions taken by the IRS in 2017, all employers need to be taking the reporting of the Forms 1094-C and 1095-C seriously. As of the date of this publication, the Form 1095-C must be furnished to an employer’s requisite employees by January 31, 2018.

With the Republicans’ failure to pass a bill to repeal and replace the Affordable Care Act (ACA), employers should plan to remain compliant with all ACA employee health coverage and annual notification and information reporting obligations.

Even so, advocates for easing the ACA’s financial and administrative burdens on employers are hopeful that at least a few of the reforms they’ve been seeking will resurface in the future, either in narrowly tailored stand-alone legislation or added to a bipartisan measure to stabilize the ACA’s public exchanges. Relief from regulatory agencies could also make life under the ACA less burdensome for employers.

“Looking ahead, lawmakers will likely pursue targeted modifications to the ACA, including some employer provisions,” said Chatrane Birbal, senior advisor for government relations at the Society for Human Resource Management (SHRM). “Stand-alone legislative proposals have been introduced in previous Congresses, and sponsors of those proposals are gearing up to reintroduce bills in the coming weeks.”

These legislative measures, Birbal explained, are most likely to address the areas noted below.
(more…)

Many employers offer affordable health coverage that meets or exceeds the minimum value requirements of the Affordable Care Act (ACA). However, if one or more of their full-time employees claims the coverage offered was not affordable, minimum value health coverage, the employee could (erroneously) get subsidized coverage on the public health exchange. This would cause problems for applicable large employers (ALEs), who potentially face employer shared responsibility penalties, and for employees, which may have to repay erroneous subsidies.


If an employee does receive subsidized coverage on the public exchange, most employers would want to know about it as soon as possible and appeal the subsidy decision if they believed they were offering affordable, minimum value coverage. There are two ways employers might be notified: (1) by the federally facilitated or state-based exchange or (2) by the Internal Revenue Service (IRS).

Employer notices from exchanges

The notices from the exchanges are intended to be an early-warning system to employers. Ideally, the exchange would notify employers when an employee receives an advance premium tax credit (APTC) subsidizing coverage. The notice would occur shortly after the employee started receiving subsidized coverage, and employers would have a chance to rectify the situation before the tax year ends.


In a set of Frequently Asked Questions issued September 18, 2015, the Center for Consumer Information and Insurance Oversight (CCIIO) stated the federal exchanges will not notify employers about 2015 APTCs and will instead begin notifying some employers in 2016 about employees’ 2016 APTCs. The federal exchange employer notification program will not be fully implemented until sometime after 2016.


In 2016, the federal exchanges will only send APTC notices to some employers and will use the employer address given to the exchange by the employee at the time of application for insurance on the exchange. CCIIO realizes some employer notices will probably not reach their intended recipients. Going forward, the public exchanges will consider alternative ways of contacting employers.


Employers that do receive the notice have 90 days after receipt to send an appeal to the health insurance exchange.


Employers that do not receive early notice from the exchanges will not be able to address potential errors until after the tax year is over, when the IRS gets involved.


Employer notices from IRS

The IRS, which is responsible for assessing and collecting shared responsibility payments from employers, will start notifying employers in 2016 if they are potentially subject to shared responsibility penalties for 2015. Likewise, the IRS will notify employers in 2017 of potential penalties for 2016, after their employees’ individual tax returns have been processed. Employers will have an opportunity to respond to the IRS before the IRS actually assesses any ACA shared responsibility penalties.


Regarding assessment and collection of the employer shared responsibility payment, the IRS states on its website:


An employer will not be contacted by the IRS regarding an employer shared responsibility payment until after their employees’ individual income tax returns are due for that year—which would show any claims for the premium tax credit.

If, after the employer has had an opportunity to respond to the initial IRS contact, the IRS determines that an employer is liable for a payment, the IRS will send a notice and demand for payment to the employer. That notice will instruct the employer how to make the payment.


Bottom line

For 2015, and quite possibly for 2016 and future years, the soonest an employer will hear it has an employee who received a subsidy on the federal exchange will be when the IRS notifies the employer that the employer is potentially liable for a shared responsibility payment for the prior year. The employer will have an opportunity to respond to the IRS before any assessment or notice and demand for payment is made. The “early-warning system” of public exchanges notifying employers of employees’ APTCs in the year in which they receive them is not yet fully operational.

The IRS and the Treasury Department issued a notice on the so-called “Cadillac Tax”—a 40 percent excise tax to be imposed on high-cost employer-sponsored health plans beginning in 2018 under the Affordable Care Act (ACA).


Notice 2015-16, released on Feb. 23, 2015, discusses a number of issues concerning the tax and requests comments on the possible approaches that ultimately could be incorporated in proposed regulations. Specifically, the guidance states that the agencies anticipate that pretax salary reduction contributions made by employees to health savings accounts (HSAs) will be subject to the Cadillac tax.


Background

In 2018, the ACA provides that a nondeductible 40 percent excise tax be imposed on “applicable employer-sponsored coverage” in excess of statutory thresholds (in 2018, $10,200 for self-only, $27,500 for family). As 2018 approaches, the benefit community has long awaited guidance on this tax. While many employers have actively managed their plan offerings and costs in anticipation of the impact of the tax, those efforts have been hampered by the lack of guidance. Among other things, employers are uncertain what health coverage is subject to the tax and how the tax is calculated.

Particularly, Notice 2015-16 addresses:

  • Definition of applicable coverage
  • Determination of cost of coverage
  • Application of dollar limits


The agencies are requesting comments on issues discussed in this notice by May 15, 2015. They intend to issue another notice that will address other areas of the excise tax and anticipates issuing proposed regulations after considering public comments on both notices.


Applicable Coverage

Of most immediate interest to plan sponsors is the specific type of coverage (i.e., “applicable coverage”) that will be subject to the excise tax, particularly where the statute is unclear.


Employee Pretax HSA Contributions
The ACA statute provides that employer contributions to an HSA are subject to the excise tax, but did not specifically address the treatment of employee pretax HSA contributions. The notice says that the agencies “anticipate that future proposed regulations will provide that (1) employer contributions to HSAs, including salary reduction contributions to HSAs, are included in applicable coverage, and (2) employee after-tax contributions to HSAs are excluded from applicable coverage.”


Note: This anticipated treatment of employee pretax contributions to HSAs will have a significant impact on HSA programs. If implemented as the agencies anticipate, it could mean many employer plans that provide for HSA contributions will be subject to the excise tax as early as 2018, unless the employer limits the amount an employee can contribute on a pretax basis.


Self-Insured Dental and Vision Plans
The ACA statutory language specifically excludes fully insured dental and vision plans from the excise tax. The treatment of self-insured dental and vision plans was not clear. The notice states that the agencies will consider exercising their “regulatory authority” to exclude self-insured plans that qualify as excepted benefits from the excise tax.


Employee Assistance Programs
The agencies are also considering whether to exclude excepted-benefit employee assistance programs (EAPs) from the excise tax.


Onsite Medical Clinics
The notice discusses the exclusion of certain onsite medical clinics that offer only de minimis care to employees, citing a provision in the COBRA regulations, and anticipates excluding such clinics from applicable coverage. Under the COBRA regulations an onsite clinic is not considered a group health plan if:


  • The health care consists primarily of first aid provided during the employer’s work hours for treatment of a health condition, illness or injury that occurs during work hours.
  • Health care is only available to current employees.
  • Employees are not charged for use of the facility.


The agencies are also asking for comment on the treatment of clinics that provide certain services in addition to first aid:


  • Immunizations.
  • Allergy injections.
  • Provision of nonprescription pain relievers, such as aspirin.
  • Treatment of injuries caused by accidents at work, beyond first aid.


In Closing

With the release of this initial guidance, plan sponsors can gain some insight into the direction the government is likely to take in proposed regulations and can better address potential plan design strategie

IRS Releases “Final” Versions and Instructions for Forms 1094 and 1095: Start Collecting Data

February 18 - Posted at 3:00 PM Tagged: , , , , , , , , , , ,

Last week, the IRS issued its “final” versions of the forms 1094-B,1094-C1095-B and 1095-C along with instructions for the “B” forms and instructions for the “C” forms. The good news is that the forms are pretty much the same from the drafts released in mid 2014.  What has changed is that the revised instructions have filled in some gaps about reporting, some of which are highlighted below:


1.      Employers with 50-99 FTEs who were exempt from compliance in 2015 must still file these forms for the 2015 tax year.


2.      For employers that cover non-employees (COBRA beneficiaries or retirees being most common), they can use forms 1094-B and 1095-B instead of filing out 1095-C Part III to report for those individuals.

3.      With respect to reporting for employees who work for more than one employer member of a controlled group aggregated “ALE”, the employee may receive a report from each separate employer.   However, the employer for whom he or she works the most hours in a given month should report for that month.


4.      Under the final instructions, a full-time employee of a self-insured employer that accepts a qualifying offer and enrolls in coverage, the employer must provide that employee a 1095-C. The previous draft indicated that it would be enough to simply provide an employee a statement about the offer rather than an actual form


5.      For plans that exclude spouses covered or offered health coverage through their own employers, the definition of “offer of health coverage” now provides that an offer to a spouse subject to a reasonable, objective condition is treated as an offer of coverage for reporting purposes.


6.      There are some changes with respect to what days can be used to measure the “count” for reporting purposes.  Employers are allowed to use the first day of the first payroll period of each month or the last day of the first payroll period of each month, as long as the last day is in the same month as when the payroll period starts.  Also, an employer can report offering coverage for a month only if the employer offers coverage for every day of that month.  Mid-month eligibilities would presumably be counted as being covered on the first day of the next month.  However, in the case of terminations of employment mid-month, the coverage can be treated as offered for the entire month if, but for the termination, the coverage would have continued for the full month.


Now as a refresher about what needs to be filed:


  • Each ALE member may satisfy the requirement by filing a Form 1094-C (transmittal) and, for each full-time employee, a Form 1095-C (employee statement).


  • Non-ALE members (meaning employers not subject to the employer shared responsibility provisions) that sponsor self-insured plans will file Forms 1094-B and 1095-B to satisfy the reporting requirements.


  • An employer must furnish a Form 1095-C to each of its full-time employees by January 31 of the year following the year to which the Form 1095-C relates. Filers of Form 1095-B must furnish a copy to the person identified as the responsible individual named on the form.

 


Bear in mind that there is a considerable amount of time between now and the final filing obligation so there may be additional revisions to these instructions, or at least some further clarification. But in the meantime, read the instructions and familiarize yourself with the reporting obligations as well as beginning the steps to collecting the necessary data to make completing the forms next year easier.

Model Exchange Notice for Employers Released By DOL

May 15 - Posted at 2:01 PM Tagged: , , , , , , , , , , , ,

A provision of Health Care Reform requires employers to provide a notice to all employees regarding the availability of health coverage options through the state-based exchanges. The Department of Labor delayed the original requirement that the notice be distributed by March 1, 2013, as it was determined that there was not enough information regarding exchange availability.

 

 

The DOL recently issued temporary guidance along with a model notice. The DOL has issued the model notice early so employers can begin informing their employees now about the upcoming coverage options through the marketplace.

 

 

Two model notices were released by the DOL. One is for employers who currently offer medical coverage and the other is for those who do not offer medical coverage.

  

 

Employers are required to issue the exchange coverage notice no later than October 1, 2013. This will coincide with the beginning of the open enrollment period for the marketplace.

 

The notice must be provided to all employees, regardless of their enrollment on the group health plan. It must be provided to both full time and part time employees as well. Employers are not required to provide a separate notice to dependents. Employers will need to provide the notice to each new employee (regardless of their status) who are hired on or after October 1, 2013 within 14 days of their hire.

 

 

An exchange coverage notice must include –

 

  • information about the existence of the exchange, including a description of the services provided by the exchange and how to contact the exchange;

 

  • a statement that the employee may be eligible for subsidized exchange coverage (i.e., premium tax credit under Internal Revenue Code § 36B), if the employee obtains coverage through the exchange and the employer’s plan fails to meet a 60% minimum value; and

 

  • a statement that the employee may lose the employer contribution (if any) toward the cost of employer coverage (all or a portion of which may be excludable from income for Federal income tax purposes) if the employee obtains coverage through the exchange.

 

The DOL also modified its model COBRA election notice to include information about the availability of exchange coverage options and eliminate certain obsolete language in the earlier model.

 

 

Please contact our office for a copy of the model notice(s).

If you currently have an individual health insurance plan, you will be in for a big change when you sign up for your coverage in 2014.

 

Approximately 50% of the individual health plans that are currently being sold in the marketplace do not meet the standards of Obamacare to be sold in 2014. The reason for this is because the Affordable Care Act (ACA) sets new minimums for the basic coverage every individual health care plan must provide effective on renewals on or after January 1, 2014.

 

About 15 million Americans (or about 6% of non-elderly adults) currently have coverage in the individual health market. Beginning in the fall of 2013, they will be able to shop for and enroll in health insurance through state-based exchanges (aka SHOP or The Exchange) with coverage taking effect in January. By 2016, it is projected that around 24 million people will get their insurance through the exchanges, while another 12 million will continue to obtain individual coverage outside of the exchange.

 

Beginning in 2014, nearly all plans, both group and individual, will be required to cover an array of “essential” services regardless of if they are purchased within the exchange or not. These “essential” services will include medication, maternity, and mental health care. Many individual plans do not currently offer these benefits.

 

What will happen to the plans that do not meet the new minimum standards? They will more than likely disappear and you will not be allowed to renew your existing coverage on the plan you currently have. A handful of existing plans will be grandfathered in, but the qualifying criteria for a grandfathered plan is hard to meet. In order for your existing individual plan to be considered “grandfathered”, (1) you have to have been enrolled on this plan before the ACA was passed in 2010 and (2) the plan has to have maintained fairly steady co-pay, deductible and coverage rates until now.

 

Many insurers in the individual marketplace have already acknowledged that the majority of their existing individual plans do not meet Obamacare standards for 2014 and they are currently working to ready new product lineups for 2014.

 

In the future, consumers buying individual plans will be able to choose between four levels of coverage: platinum, gold, silver, and bronze.

 

Platinum plans will carry the highest premiums but will offer the lowest out of pocket expenses, with enrollees paying no more than 10%, on average. At the other end of the spectrum are the bronze plans, which will have the lowest monthly premiums but will have higher deductibles and copayments totaling up to 40% of the out of pocket costs on average.

 

Starting also in 2014, all Americans will be required to carry health care coverage or face fines. Those penalties will start at $95 per adult or 1% of the adjusted family income, whichever is greater, and will escalate in later years.

 

Individuals will annual incomes of up to 400% of the poverty line (or roughly $45,000 for an individual and about $92,000 for a family of four) will get federal subsidies to help defray the premium costs.

 

Most individual plans sold next year, even the lowest level bronze plans, are likely to charge higher premiums than today’s most “bare-bones” individual insurance plans. Many consumers feel the costs will be offset by having lower out of pocket costs and more comprehensive coverage than their current “bare-bones” plan offers.

 

In today’s marketplace, with deductibles of $10,000, an individual can buy a policy and then when they get sick, they may go broke because the policy leaves them with such a high level of out of pocket expenses to pay.  Many insurance industry experts feel, however, that consumers may now wind up with more coverage–and higher monthly costs– than they want. As a result, some individuals may just choose to simply pay the fine instead of obtaining health insurance coverage they will not use or can not afford.

 

The Patient Protection and Affordable Care Act (the “ACA”) adds a new Section 4980H to the Internal Revenue Code of 1986 which requires employers to offer health coverage to their employees (aka the “Employer Mandate”). The following Q&As are designed to deal with commonly asked questions.  These Q&As are based on proposed regulations and final regulations, when issued, may change the requirements.

Question 2: Who Is Eligible for a Premium Tax Credit or Cost-Sharing Subsidy?

As noted in Part 1, failing to offer full-time employees minimum essential coverage, or coverage that meets the affordability or minimum value requirements, is not enough to trigger liability under the Employer Mandate. Two additional things must occur before any penalty will be assessed:

 

  1. one of the full-time employees must enroll in health coverage offered through an Exchange.

     

  2. one of the full-time employees must also receive an Exchange subsidy (a premium tax credit or cost-sharing subsidy).

 

 

Thus, an employer should consider which employees are potentially eligible for an Exchange subsidy when deciding how to comply with the Employer Mandate. It is important to note that the employee must qualify for the Exchange subsidy. An employee’s dependent receiving an Exchange subsidy (i.e. an adult child who is not a tax dependent of the employee) will not cause an Employer Mandate penalty.

Coverage Through an Exchange

In order to be eligible to receive an Exchange subsidy, an individual must enroll in health coverage offered through the Exchange. Under the ACA, an Exchange will be established in each state, either by the state or by the federal government (or a combination of the two). An Exchange is a governmental entity or nonprofit organization that serves as a marketplace for health insurance for individuals and small employers. Health insurance offered through the Exchanges must cover a minimum set of specified benefits and must be issued by an insurer that has complied with certain licensing and regulatory requirements.

Eligibility for an Exchange Subsidy

There are two Exchange subsidies available:

 

  • The premium tax credit- This is intended to help individuals purchase health coverage through the Exchange. The credit is available only to legal U.S. residents whose household income is 100% - 400% of the federal poverty line (“FPL”). Legal resident aliens also qualify for the credit if their household income is below 100% of the FPL since they are not eligible for Medicaid. Individuals who are eligible for Medicaid or Medicare, or certain other government-sponsored coverage (like CHIP or VA health care), are not eligible for premium tax credits.

    An employee is not eligible for a premium tax credit if the employee is either (i) enrolled in an employer-sponsored plan or (ii) eligible for an employer-sponsored plan that meets the affordability and minimum value requirements.

 

  • The cost-sharing subsidy- Cost-sharing subsidies, which reduce cost-sharing amounts such as co-pays and deductibles, are available to individuals who have a household income no greater than 250% of the FPL and enroll in “silver-level” coverage through the Exchange. An employee whose household income is 200% of the FPL may as a result be eligible for a premium tax credit to help defray the cost of monthly insurance premiums, and a cost-sharing subsidy to help reduce the amount of out-of-pocket cost (like co-pays and deductibles) to which the Exchange-enrolled employee otherwise would be subject to.



“Certification” of Eligibility for an Exchange Subsidy to Employer

The Employer Mandate penalty applies only when the employer has first received “certification” that one or more employees have received an Exchange subsidy. The IRS will provide this certification as part of its process for determining whether an employer is liable for the penalty. This penalty will occur in the calendar year following the year for which the employee received the Exchange subsidy (i.e. the employer would receive the penalty in 2015 for a employee Exchange subsidy beginning in 2014). Under IRS issued procedures, employers that receive notice of certification will be given an opportunity to contest the certification before any penalty is assessed.

In addition, Exchanges are required to notify employers that an employee has been determined eligible to receive an Exchange subsidy. The notification provided will identify the employee, indicate that the employee has been determined eligible to receive an Exchange subsidy, indicate that employer may be liable for an Employer Mandate penalty, and notify the employer of the right to appeal the determination. These notices will be useful in giving employers an opportunity to correct erroneous Exchange information and protect against erroneous penalty notices from the IRS. These notices will also be useful in budgeting for any penalties that may be owed.

Planning Consideration
The Employer Mandate penalty applies only to an employer failing to offer health coverage if one or more of its full-time employees enrolls in insurance coverage through an Exchange, and actually receives either a premium tax credit or a cost-sharing subsidy. Unless a full-time employee enrolls in an Exchange and obtains the tax credit or subsidy, the employer is off the hook. This can lead to some surprising exemptions from the penalty.

The Patient Protection and Affordable Care Act (the “ACA”) adds a new Section 4980H to the Internal Revenue Code of 1986 which requires employers to offer health coverage to their employees (aka the “Employer Mandate”). The following Q&As are designed to deal with commonly asked questions.  These Q&As are based on proposed regulations and final regulations, when issued, may change the requirements.

Question 1: What Is the Employer Mandate?

On January 1, 2014, the Employer Mandate will requiring large employers to offer health coverage to full-time employees and their children up to age 26 or risk paying a penalty. These employers will be forced to make a choice:

 

  • “play” by offering affordable health coverage that is  considered “minimum essential coverage”

 

                             OR

 

  • pay” by potentially owing a penalty to the Internal Revenue Service if they fail to offer such coverage.

 

This “play or pay” system has become known as the Employer Mandate. The January 1, 2014 effective date is deferred for employers with fiscal year plans that meet certain requirements.

 

Only “large employers” are required to comply with this mandate. Generally speaking, “large employers” are those that had an average of 50 or more full-time or full-time equivalent employees on business days during the preceding year. “Full-time employees” include all employees who work at least 30 hours on average each week. The number of “full-time equivalent employees” is determined by combining the hours worked by all non-full-time employees.

To “play” under the Employer Mandate, a large employer must offer health coverage that is:

  1. “minimum essential coverage”
  2. “affordable”, and
  3. satisfies a “minimum value” requirement to its full-time employees and certain of their dependents.

 

This includes coverage under an employer-sponsored group health plan, whether it be fully insured or self-insured, but does not include stand-alone dental or vision coverage, or flexible spending accounts (FSA).

 

Coverage is considered “affordable” if an employee’s required contribution for the lowest-cost self-only coverage option does not exceed 9.5%  of the employee’s household income. Coverage provides “minimum value” if the plan’s share of the actuarially projected cost of covered benefits is at least 60%.

If a large employer does not “play” for some or all of its full-time employees, the employer will have to pay a penalty, as shown in following two scenarios.

Scenario #1- An employer does not offer health coverage to “substantially all” of its full-time employees and any one of its full-time employees both enrolls in health coverage offered through a State Insurance Exchange, which is also being called a Marketplace (aka an “Exchange”), and receives a premium tax credit or a cost-sharing subsidy (aka “Exchange subsidy”).

 

In this scenario, the employer will owe a “no coverage penalty.” The no coverage penalty is $2,000 per year (adjusted for inflation) for each of the employer’s full-time employees (excluding the first 30). This is the penalty that an employer should be prepared to pay if it is contemplating not offering group health coverage to its employees.

Scenario #2- An employer does provide health coverage to its employees, but such coverage is deemed inadequate for Employer Mandate purposes, either because it is not “affordable,” does not provide at least “minimum value,” or the employer offers coverage to substantially all (but not all) of its full-time employees and one or more of its full-time employees both enrolls in Exchange coverage and receives an Exchange subsidy.

 

In this second scenario, the employer will owe an “inadequate coverage penalty.” The inadequate coverage penalty is $3,000 per person and is calculated, based not on the employer’s total number of full-time employees, but only on each full-time employee who receives an Exchange subsidy. The penalty is capped each month by the maximum potential “no coverage penalty” discussed above.


Because Exchange subsidies are available only to individuals with household incomes of at least 100% and up to 400% of the federal poverty line (in 2013, a maximum of $44,680 for an individual and $92,200 for a family of four), employers that pay relatively high wages may not be at risk for the penalty, even if they fail to provide coverage that satisfies the affordability and minimum value requirements.

 

Exchange subsidies are also not available to individuals who are eligible for Medicaid, so some employers may be partially immune to the penalty with respect to their low-wage employees, particularly in states that elect the Medicaid expansion. Medicaid eligibility is based on household income. It may be difficult for an employer to assume its low-paid employees will be eligible for Medicaid and not eligible for Exchange subsidies as an employee’s household may have more income than just the wages they collect from the employer. But for employers with low-wage workforces, examination of the extent to which the workforce is Medicaid eligible may be worth exploring.

Exchange subsidies will also not be available to any employee whose employer offers the employee affordable coverage that provides minimum value. Thus, by “playing” for employees who would otherwise be eligible for an Exchange subsidy, employers can ensure they are not subject to any penalty, even if they don’t “play” for all employees.

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