Employer Penalty for Sending Employees to Exchange

[AllenChicago]

Nice recap:
Can Employers Dump Workers To Health Exchanges? Yes, For A Price – Capsules - The KHN Blog

Very nice indeed. It summarizes much of this thread's contents. Now I'll need to do some premium/income crunching to determine if it's less expensive for specific employees to purchase an Exchange plan next Open Enrollment, or for the company to purchase a small group policy. Oh, then there's that 50% Government contribution to small employers to help pay the group premium. Have to take that into consideration. Has anyone here written a small group that qualified and received this premium credit?

Micro-employer (4 employees) asked me today when the $100.00 @ day penalty goes into effect. He writes a check (pre-tax $$$) for each employee each month to the health insurer for the 4 individual policies. Told him that the wording and timeframe is still being finalized. Is that correct?
ac

 

[Happy Texan]

IRS guidance states (and I quote) "...these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits..."

Employer payment plan=group health plan=non compliant

Relevant US Code 5000 (b)(1) states "(1) Group health plan
The term "group health plan" means a plan (including a self-insured plan) of, or contributed to by, an employer"

So self insured plan=group health plan=non compliant?

Am I missing something, or are these 105 plans just a different child from the same family of non-compliant "group health plans"?

Edit: 2013-54 contains guidance on HRA's and this rule. If my legalese translation is correct, it's only allowed A) if the HRA is unlimited or B) it's integrated with a true group plan.

This is beyond confusing, good thing I just recommend a nice and simple, completely compliant, group policy. I feel bad for these employers trying to cut a corner who now may be facing 5-6 figure fines.

A self-insured plan can be an employer group plan, but that doesn't mean it is non-compliant with the ACA. It simply means that a self-insured plan which is an employer sponsored plan needs to be ACA compliant period.
Don Levit

 

[Ann H]

Very nice indeed. It summarizes much of this thread's contents. Now I'll need to do some premium/income crunching to determine if it's less expensive for specific employees to purchase an Exchange plan next Open Enrollment, or for the company to purchase a small group policy. Oh, then there's that 50% Government contribution to small employers to help pay the group premium. Have to take that into consideration. Has anyone here written a small group that qualified and received this premium credit?

Micro-employer (4 employees) asked me today when the $100.00 @ day penalty goes into effect. He writes a check (pre-tax $$$) for each employee each month to the health insurer for the 4 individual policies. Told him that the wording and timeframe is still being finalized. Is that correct?
ac

Allen, that "50% government contribution" that you mentioned is a tax credit available only if you buy through the SHOP, only a credit against the business's profit for the year (but you can carry it back or carry it forward 3 years if the business doesn't have a profit that year), only if the employer pays 50% of the employee-only premium, only if the employer employs less than 25 employees with an average wage of less than $50,000 (not including the owner and the owner's family).

That 50% level is the highest credit, and it really only applies to business with less than 10 employees having less than $25,000 average income or less. Between 10 employees and 25 employees, that 50% is reduced 1/15th for the 11th employee and thereafter, up to the 25th employee. If the average income goes up higher than $25,000, the credit decreases 1/25th for every $1,000 (up to the $50,000 cap).

Also, the credit is capped based on the price of plans available to the employer. Employers will base their credit on either the premiums for their plan or the market average for small group plans in their state, whichever is less. This means that employers opting for more expensive plans will base their maximum credit on the premiums for an average plan in their state rather than their own plan's higher costs

And..... it's an audit magnet. The IRS itself announced that they are tagging all of these for audits.

Most of my groups have spent more on an Accountant to fill out the form, than they ever got back in a credit.

http://info.kaiserpermanente.org/html/hcr_ca/sb_tax_credit.html

http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers

 

[1raggedhole]

Allen, that "50% government contribution" that you mentioned is a tax credit available only if you buy through the SHOP, only a credit against the business's profit for the year (but you can carry it back or carry it forward 3 years if the business doesn't have a profit that year), only if the employer pays 50% of the employee-only premium, only if the employer employs less than 25 employees with an average wage of less than $50,000 (not including the owner and the owner's family).

That 50% level is the highest credit, and it really only applies to business with less than 10 employees having less than $25,000 average income or less. Between 10 employees and 25 employees, that 50% is reduced 1/15th for the 11th employee and thereafter, up to the 25th employee. If the average income goes up higher than $25,000, the credit decreases 1/25th for every $1,000 (up to the $50,000 cap).

Also, the credit is capped based on the price of plans available to the employer. Employers will base their credit on either the premiums for their plan or the market average for small group plans in their state, whichever is less. This means that employers opting for more expensive plans will base their maximum credit on the premiums for an average plan in their state rather than their own plan's higher costs

And..... it's an audit magnet. The IRS itself announced that they are tagging all of these for audits.

Most of my groups have spent more on an Accountant to fill out the form, than they ever got back in a credit.

Very true and thanks for the reply. The credit is dollars chasing dimes for most groups. It is just too complex to deal with in the midst of trying to run a business. Accountants don't even want to deal with it. Small group is going the way of the Dodo except for those who can afford it regardless of cost. I have chosen to exit this crazy business and find another industry out of necessity. You can't sell what people can't afford. Time to move on after 20 years.

 

[AllenChicago]

Ann, you're THE BEST! My mistake was reading the IRS/ACA propaganda, which made the SHOP credit seem generous and easy to obtain...like the Exchange subsidies.

Now I'll just quote this 4-person group and not take into account the potential credit. Will leave that to the company accountant, if he wants to pursue it. Thanks to you Ann, I'll have one less migraine during these micro-group decision processes.

In your debt,
Allen

 

[Post Quartermaster]

Allen, that "50% government contribution" that you mentioned is a tax credit available only if you buy through the SHOP, only a credit against the business's profit for the year (but you can carry it back or carry it forward 3 years if the business doesn't have a profit that year), only if the employer pays 50% of the employee-only premium, only if the employer employs less than 25 employees with an average wage of less than $50,000 (not including the owner and the owner's family).

That 50% level is the highest credit, and it really only applies to business with less than 10 employees having less than $25,000 average income or less. Between 10 employees and 25 employees, that 50% is reduced 1/15th for the 11th employee and thereafter, up to the 25th employee. If the average income goes up higher than $25,000, the credit decreases 1/25th for every $1,000 (up to the $50,000 cap).

Also, the credit is capped based on the price of plans available to the employer. Employers will base their credit on either the premiums for their plan or the market average for small group plans in their state, whichever is less. This means that employers opting for more expensive plans will base their maximum credit on the premiums for an average plan in their state rather than their own plan's higher costs

And..... it's an audit magnet. The IRS itself announced that they are tagging all of these for audits.

Most of my groups have spent more on an Accountant to fill out the form, than they ever got back in a credit.

Health care reform - Small business tax credit

Small Business Health Care Tax Credit for Small Employers

Well said.

I will add that I have seen a group of mine that claimed the SBHCTC get an audit as a result. They took the tax credit under the advice of their CPA. The biz owner said the tax savings was pretty much wiped out by hours paid for their CPA to handle the audit - and they came out clean......

 

[Yagents]

IRS: Pre-Tax Payment Plans Won't Satisfy ACA Employer Mandate - Health Insurance Exchange

The FAQ "informs employers they cannot sponsor a reimbursement arrangement that reimburses on a pre-tax basis an employee's purchase of an insurance plan both inside and outside of the exchange," says Christopher Condeluci, a benefits attorney with Venable LLP.

He adds: "It puts employers on notice that if they buy an arrangement like this from a consultant or adviser they will be subject to an excise tax; and it informs benefit advisers, brokers, agents and consultants that it would be in their best interest not to recommend these types of policies."

An employer is permitted to give contributions, however, in the form of taxable wages, to help an employee purchase an individual market plan, Condeluci says.

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The IRS notice doesn't affect private exchanges.

Private exchanges are group plans, just a sexy way to say a multiple plan option platform......with a set tax free stipend.

Looks like private exchanges will be the winner for those who value the tax deduction of the ability for employees to get a tax credit.

 

[Happy Texan]

Doe sit say in the Notice that private exchanges are not affected?
How are the private exchanges group plans, if the purpose of the exchange, is to get the employer out of the insurance business?
Don Levit

 

[ctg]

The private exchanges are hired by companies/employers to to the administrative work on the group plans. Mercer, AON Hewett, Bright Choices come to mind.

 

[Happy Texan]

Isn't the attraction of these plans for employers is that they can provide subsidies for policies and, at the same time, rid them of any fiduciary responsibility to thier employees?
Don Levit