Tom Bernard October 2015. This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does not provide tax advice.

Affordable Care Act Executive Update

Tom BernardOctober 2015

This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does not provide tax advice to any taxpayer because it does not take into account any specific taxpayer’s facts and circumstances.

These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.

The views expressed by the presenters are not necessarily those ofErnst & Young LLP.

This presentation is © 2015 Ernst & Young LLP. All Rights Reserved.

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Agenda

ACA overview

Implementation risks

Wrap-up

Today’s agenda

The ACA is not only a benefits issue — it is a business issue

Shareholders, boards and audit committees need to understand the costs and tax liabilities and plan for minimizing their exposure.

The ACA impacts HR, timekeeping/payroll, IT, accounting, tax, legal and internal audit functions.

Company systems and processes must be capable of complying with significant reporting requirements.

The ACA is expected to expand health coverage to an estimated 25 million previously uninsured Americans by 2024. Depending upon your workforce, cost savings opportunities may exist for your business and employees.

The Affordable Care Act (ACA) is a business issue

Penalty for no coverageIRC §4980H(a)

► If a large employer does not offer coverage to all of its full-time employees and their dependents, employers face a tax of:

► $2,000x the total number of full-time employees (FTE) if at least one FTE is receiving a premium assistance tax credit

► Minimum of 95% (70% in 2015) of FTE employees offered coverage constitutes all full-time employees

Penalty for unaffordable coverage IRC §4980H(b)

Employer requirementsRisk in the form of tax penalties

► If a large employer offers coverage to its FTEs and their dependents but the coverage is unaffordable to certain employees or does not provide minimum value, employers face a penalty of:

► The lesser of $3,000x the number of FTEs receiving a premium assistance tax credit or $2,000x the total number of FTEs

Risk areasIndependent contractors, variable hour employees, unions, interns, rehires,

leaves of absence, cross-border employees

Why do the new reporting regulations matter to ACA implementation?

How do you assess your employer’s readiness to meet all implementation requirements of the ACA?

ACA implementation risks

Implementation risks

Have you evaluated your eligibility process and controls around contingent workers, staffing agencies and other employees as it relates to ACA? 

Implementation risks

Are you comfortable with the controls you have in place to properly document the accounting for any potential penalties? 

Implementation risks

Do you have a process in place to handle notices from the Exchanges and appeal any erroneously issued premium tax credits in a timely fashion to avoid penalties and employee misunderstandings? 

Implementation risks

Have you addressed the technology

requirements for IRS and employee reporting? 

An integrated approach is required

Anatomy of IRS information returns

The following information will be captured on a monthly basis: For each full-time employee (and part-time employee that was offered

coverage) ◦ Whether minimum essential coverage providing minimum value was offered:

To the employee only To the employee’s spouse To the employee’s dependents

Employee’s share of lowest-cost monthly premium for self-only coverage providing minimum value

Whether an employee’s effective date of coverage was affected by a waiting period

Which employer met one of the affordability safe harbors

The name, address and tax identification number for the primary insured and each individual enrolled in minimum essential coverage

Months during which the individual is treated as having minimum essential coverage (in place of coverage dates)

What data must be reported monthly?

Affordable Care Act tax compliance

Form 1095C – IRC § 6055 and 6056 reporting

Form 1094C – IRC § 6055 and 6056 reporting

Form 1094C – IRC § 6055 and 6056 reporting

Form 1094C – IRC § 6055 and 6056 reporting

Implementation Life Cycle (12-20 weeks)

Are your systems and processes ready and capable?

Who are your employees?◦ Common law employee standard

Do you have a self-insured or fully-insured plan? Or both? How many EINs are in your control group? How are you defining full-time and are you applying the

ACA definition for purposes of the IRS forms?◦ May be different from benefits eligibility definition

Do you have data for union employees? Do you have data for COBRA enrollees? Do you have retirees enrolled in a self-insured plan? Have there been or will there be any acquisitions during the

calendar year?

Key considerations

Thank you and please remember to complete your evaluation for this session.