Commentary: In August, we shared ACA myths: A baker’s dozen. Based upon the popularity of that article and the continuing ACA confusion, I prepared the following sequel. Fear not, we’ll return to my normal laborious challenge/solution/case study essay style, next month!

General myths

1. Minimum essential coverage (MEC) provides health coverage that an employee would consider minimum essential health coverage.

Truth: As far as I can tell, pretty much anything calling itself a health plan qualifies as minimum essential coverage.1 Who came up with this phrase? And, how can coverage that is defined as minimum and essential sometimes not even meet the minimum value standard?

2. Plans meeting the minimum value standard always provide comprehensive health coverage.

Truth: The 60% minimum value standard is a low bar.2 Even catastrophic plans can easily meet it. For example, a plan with a $5,000 individual/$10,000 family deductible with 80% coinsurance on hospitalization can meet this requirement if the plan is properly structured.

3. Before the ACA, fully insured health plans were not subject to nondiscrimination requirements.

Truth: While it’s true that fully insured health plans are not yet subject to the TBD ACA nondiscrimination rules, a Section 125 plan is and has been subject to nondiscrimination rules. If an employer with a fully insured health plan permits their employees to pay for their share of the health premiums pre-tax through a Section 125 plan, the employer is subject to the Section 125 nondiscrimination rules.

ACA reporting myths

4. Part III of Form 1095-C must be completed by all employers that averaged 50 or more full-time employees plus full-time equivalents during calendar year 2014.

Truth: Employers sponsoring fully insured plans generally do not have to complete Part III. In other words, they won’t need to report dependent information on this form.6

5. It’s possible to outsource the preparation of Forms 1095-C and 1094-C without providing payroll information to the TPA.

Admittedly, I was slow to recognize this truth: If the TPA doesn’t have the payroll data or similar files, how can they use application logic to determine the codes in Part II of the Form 1095-C?6

Employer shared responsibility myths

6. The ACA employer shared responsibility penalty will be calculated and reported on the 2015 corporate tax return.

Truth: In the first draft of ACA myths: A baker’s dozen, I almost introduced this myth as fact. Luckily, my colleagues in CBIZ tax and regulatory affairs were quick to point out the truth: Employers will only pay a penalty if the government says they owe one. Now’s the time to consult with your tax adviser on this topic.

7. The ACA definition of full-time employee determines health plan eligibility.

Truth: No, the health plan documents still determine health plan eligibility. Now’s a good time to double-check the eligibility definitions in all documents, SPDs, policies, and handbooks.

8. An ACA seasonal employee is one that is hired for temporary work.

Truth: The working definition of ACA seasonal is as follows: An individual that usually works 6 consecutive months per year or less in a position with clear seasonality, such as a lifeguard in summer or a ski instructor in winter.2 Many employees that are hired for temporary work won’t qualify as ACA seasonal but could, depending on the circumstances, qualify for the variable hour employee safe harbor.

What mythologies did we miss this time? Please let me know via the below comment section or via Twitter @zpace_benefits.

Zack Pace is senior vice president, benefits consulting at CBIZ, Inc.

Further Reading:

  1. Treasury: Questions and Answers on the Individual Shared Responsibility Provision
  2. Treasury: Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act
  3. CBIZ: Exploring the Final Employer Shared Responsibility Regulations
  4. EBN: 10 ACA employer shared-responsibility reporting tips
  5. Treasury: Questions and Answers on Reporting of Offers of Health Insurance Coverage by Employers (Section 6056)
  6. Treasury: Instructions for Forms 1094-C and 1095-C
  7. Treasury: Final Employer Shared Responsibility Regulations

 

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