ACA Best Practices: Avoiding IRS Penalties – Why Acting Now Can Save You Penalty Dollars LaterRobyn Crosson, Compliance Executive | ADP LLCAlison Duronslet, Agency Relations Analyst | ADP LLC

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Our Speakers

Agency RelationsAnalyst, ADP

Alison Duronslet

Alison is an Agency Relations Analyst for ADP, Inc. During her 16-year tenure with ADP, Alison has held several leadership positions interacting with clients and agencies. For several years, Alison worked with the Unemployment Insurance agencies and held positions on the SIDES Operations Committee and was the Vice President of AUTO (Association of Unemployment Tax Organizations). In her current role, Alison manages the relationships and compliance requirements between ADP and the government agencies involved with the enforcement of the Affordable Care Act.

ACA Center of Excellence & Compliance ExecutiveADP, LLC

Robyn Crosson

Robyn joined ADP TotalSource in August 2011 as Senior Counsel. In August 2015, she accepted a position as ACA Center of Excellence and Compliance Executive in the ADP TotalSource Benefits Division. Prior to joining ADP TotalSource, Robyn served as Chief Deputy Commissioner at the Indiana Department of Insurance. Robyn’s 20+ years in insurance experience is broad and across several types of insurance.

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Marketplace Notices:• What is a Marketplace Notice? • Should you respond – and how?• What is the potential impact to

your employees?• What are some tips for

responding?Penalties• What is the latest IRS information

on penalty relief?• How is 2015 different than 2016?

Today’s Agenda

Copyright © 2016 ADP, LLC. Proprietary and Confidential.

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This presentation is not:• Legal Advice• The Final Word on Health Care Reform• A Political Opinion

Disclaimer

Before taking any actions on the information contained in this presentation, employers should review this material

with internal and/or external counsel.

Marketplace Notices7

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Polling question #1On average, how many marketplace notices have your clients received?

0 1-10 11 or more I know what these are, but am unsure if they received

any I don’t know what a marketplace notice is

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What is a Marketplace Notice?• 45 CFR Section 155.310(h) requires the Marketplace to:

– Notify employers when an employee is eligible for advance payments of the premium tax credit(PTC) or cost sharing reductions(CSR)

– Has enrolled in a qualified health plan through the Marketplace

– Notify employers within a reasonable timeframe

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What is a Marketplace Notice?The marketplace notice must:• Identify the employee

– Name – May include date of birth and/or truncated SSN

• Indicate the employee was deemed eligible for PTC/CSR• Inform that if > 50 employees, may be subject to an employer

shared responsibility assessment• Notify regarding the right to appeal

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What is a Marketplace Notice?• The Marketplace is unable to verify:

– The size or make up of the employer’s workforce– The employee’s status (FT/PT) or hours worked – The preferred contact information for the employer

• The Marketplace is relying upon information provided by the applicant/employee

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Who is sending notices?

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When to Expect Notices for 2016?• Most marketplaces sent a batch of notices

covering 2016 open enrollment • Connecticut, Minnesota and Washington

mailed them as needed as employees enrolled in coverage

Note: A marketplace is only able to send notices when complete and accurate employer contact information is provided

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When to Expect Notices for 2017?• CMS has not released information as to

what the process will be for the Federally Facilitated Marketplace for 2017

• Covered CA plans to mail notices quarterly to employers

• Expect to see the remaining state-based marketplaces implement their processes or continue mailing as they do currently

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Do your clients currently have a plan in place to respond to Marketplace Notices?

Polling Question #2

Yes No Not sure

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Exchanges Must Verify Eligibility

Employers may be called upon to substantiate

The existence of qualified employer-provided coverage

Whether or not an employee is eligiblefor that coverage

Whether or not the employee was offered qualified coverage

In order to support this effort, employers will need to have auditable records

Will have 90 days to respond

Process and documentation will vary by State or Federal Exchange

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Helping the Employer Make a DecisionIf appealing, employer to attest to 1 of 3 possible reasons:

1. The employee listed on the Notice was not for any part of the current calendar year a full-time employee, employed by the listed employer.

2. The employer sponsors and timely offered affordable and Minimum Value health insurance coverage to the employee listed on the Notice received.

3. The employer receiving the Notice sponsors and timely offered affordable and Minimum Value health insurance coverage to the child dependents of the employee listed on the Notice.

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Helping the Employer Make a Decision• Independent Contractors: best interest to vigorously

appeal individual’s status at Marketplace level to resolve prior to IRS review – head-off potential worker classification audits.

• Employee Dependents: only one appeal is required to be submitted for the employee. Dependent appeals not required since they are not an employee and may still be eligible for the subsidy.

• Whistleblower’s Protection Act: employer representative making appeal decisions should not be actively involved in making employment decisions

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Impact to the Employee• Could Lose Advanced Premium Tax Credit

– Bright side – pay less money back to IRS if coverage truly is affordable, minimum value and compliant

• Loss of subsidy could create a qualifying event, justifying special enrollment

• Note: Since eligibility for the advanced premium tax credit is based upon family income (not individual), the employee may still be eligible even if the employer appeals

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Tips• Worthwhile exercise to see if employer is able to gather

the required documentation• Even if you choose not to respond, maintain

documentation! Similar information required to respond to IRS

• This is not the same as the IRS Assessment letter to be received later.

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Marketplace Appeal v. IRS Notice of Assessment Letter

• 2 different agencies (HHS v. IRS)• IRS will not be looking at the response to Marketplace

Appeal (although may require the same data)• Marketplace Appeal could mitigate some penalties for

failure to offer affordable minimum value minimum essential coverage (remember penalties are assessed monthly)

• IRS is not prepared to discuss the penalties at this time

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2015 v. 2016• Only a few states were doing this previously• Reporting differences focused on offer of

coverage to dependents, so may see additional inquiries as to whether coverage offered to children

• More focus on eligibility prior to enrollment, expect many more notices at year end because of 2017 Open Enrollment Period

Penalties2626

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Polling Question #3

Which of the following compliance requirements do you believe your clients are at risk of possibly violating this year?

Offering coverage to at least 95% of eligible employees

Offering minimum value and/or affordable coverage Annual health care reporting on Forms More than one of the above Not sure

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Must offer minimum essential coverage to at least 95% (70% for 2015 plan year) of full-time employees and their dependents • If one full-time employee receives subsidized Marketplace

coverage, then• Penalty = number of full-time employees (minus 30) times

$2,080 annually* (minus 80 for 2015 plan year)

*Assessed on a monthly basis

Employer Shared Responsibility “(a)” Penalty

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• If the coverage offered is not affordable or not does not provide minimum value, then

• Penalty = number of full-time employees that received a subsidy times $3,120 annually*

• Cannot be greater than the “(a)” penaltyExpect IRS Preliminary Notices in 4Q 2016 or later

*Assessed on a monthly basis

Employer Shared Responsibility “(b)” Penalty

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Scenario Penalty Per Return Calendar Year Maximum Annual Maximumfor businesses with gross receipts <$5M

Failure to File Correct Information Returns $260* $3,178,500 $1,059,500

Failure to Furnish Correct Payee Statements $260* $3,178,500 $1,059,500

Failure to Both File Correct Information Returns and Failure to Furnish Correct Payee Statements

$520 $6,357,000 $2,119,000

Corrected on or before 30 days after required filing date $50 $529,500 $185,000

Corrected after 30th day but on or before August 1st (*Nov 1 for 2016) $100 $1,589,000 $529,500

Penalties for Annual Reporting Forms Filed after 12/31/15 (Under IRC Sections 6721 and 6722)

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The IRS will not impose penalties for incorrect or incomplete information filed on Forms 1094-C and 1095-C under sections 6721 and 6722 on ALE members that can show that they have made good faith efforts to comply with the information reporting requirements• No relief is provided for ALEs that cannot show a good

faith effort to comply

Penalty Relief Available for 2015

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• Definition of good faith effort is specific to the filer• Error correction is part of the good faith effort and errors

should be corrected as soon as possible• For TIN/SSN and name errors, filers are responsible for

validating the information with employees or third parties• If correct information cannot be obtained or filer believes the

information was accurate as filed, no further action is needed for 2015 reporting

First Year Good Faith Relief

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• TIN solicitation process– IRS Publication 1586– Proposed 6055 regulations– Eye on Washington: www.adp.com/eyeonwashington

• For employers that do not qualify for good faith relief, reasonable cause waivers may apply– IRS Publication 1586

Items to Consider

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Potential for significant penaltiesACA mandates affecting employers

Plan Design Reforms Continue; Small ER tax credits

2011W-2 reporting;Summary of Benefits and Coverage

2012Notice of Coverage Options; FSA limits; Medicare payroll tax

2013Wellness tax credit for small ERs; various fees; Plan Changes Continue

2014 2015ACA Reporting; More Exchange Notices

2016IRS Sends 4980H Penalty Notices

2017“Cadillac” Excise Tax on High Cost Health Plans 40%, deductible

2020Employer Shared Responsibility; Exchange Notices (3 states)

Pre-2016: Preparing to comply Going forward: Law in effect• Employers preparing to:

• Ensure full-time employees offered affordable coverage that provides minimum value

• Notify employees and file with the IRS• Employers have not yet felt the full impact of the law:

• In 2015, 70% FT employees must be offered coverage• Exchanges not yet reporting utilization by employees• IRS filings (Forms 1094/5) first due June 30, 2016

• Full impact of the ACA• 95% of FT employees must

be offered coverage• Marketplace notices• IRS penalty notices for 2015

likely in early 2017• IRS enforcement

Full Impact of the ACA Begins in 2016

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Thank You

Before taking any actions on the information contained in this presentation, employers and plan sponsors should review this material with internal This material is subject to change and is provided for informational purposes only and nothing contained herein should be taken as legal opinion, legal advice, or a comprehensive compliance review. The ADP Logo and ADP are registered trademarks of ADP, LLC. All other trademarks and service marks are the property of their respective owners. Copyright © 2016 ADP, LLC. ALL RIGHTS RESERVED.

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