Soon we will be ushering in the New Year, which marks the first for the roll-out of the Employer Shared Responsibility provisions under the Affordable Care Act (ACA). Though numerous guidelines were put forth to inform employers of how to satisfy the requirements under this employer mandate, 2014 also provided an opportunity to understand ways in which employers will fail (or at the very least, struggle) to meet these same obligations.
Faced with the requirement to provide medical coverage to an expanded population of employees, some employers sought strategies that required the least amount of commitment while still meeting the demands of the law. “Skinny” or “minimum value” plans were just such a strategy, as these plans provided the absolute minimum amount of coverage to employees. The IRS and the Department of Labor (the Agencies), however, swiftly came down on these plans and stated that these plans do not meet the minimum standards contemplated by the ACA and therefore fail to satisfy the employer mandate.
Similarly, employers considered reimbursement arrangements as a way to provide funding for employees’ health expenses while avoiding the obligation to put in place a group plan. On several occasions, however, the Agencies made clear that stand-alone reimbursement arrangements fail to comply with the ACA, regardless of whether done on a pre- or post-tax basis. Simply put, the Agencies made clear in 2014 that cutting corners won’t “make the cut” at all.
Delaying the Inevitable
Despite the overwhelming amount of rules that employers are facing, there are more on the horizon. Enforcement of certain provisions under the ACA has been delayed, and while this allows employers more time to prepare, employers should not postpone the creation of a competent strategy. For example, the ACA extends Nondiscrimination Rules to fully-insured plans. The Agencies stated that these Nondiscrimination Rules will not be enforced until more thorough guidelines are provided, but employers will be wise to keep these rules in mind when designing health plans to avoid the need for a total re-design in the future.
In addition, Section 6055 and 6056 reporting to the IRS is not required until 2016. This requirement is over a year away, but employers need to be diligent in their preparations to efficiently and effectively meet this obligation. Putting in place a reliable HR reporting system now will avoid an unnecessary scramble later.
Denying the Current Reality
The most detrimental strategy for compliance is for employers to deny the need to comply altogether. By now, it is clear that the employer mandate will be in effect in a matter of weeks. Employers should not hold out for significant changes to, or even a complete repeal of, the current law. A now-Republican majority in Congress brings with it much grandstanding and political rhetoric concerning a repeal of the ACA, but such discussion should be taken with a grain of salt. Any overhaul to the existing law won’t be seen for some time – if at all. And though the U.S. Supreme Court will soon be hearing arguments regarding the role of federally-established Marketplace Exchanges, the Court’s decision is not only many months away, but is unlikely to result in the unraveling of the employer mandate.
2015 will be the first year of enforcement of Employer Shared Responsibility, but in many instances, 2014 served as a prime guide for employers by highlighting not only the steps to take, but also the steps to avoid in creating a successful compliance strategy.