Affordable Care Act Review

Affordable Care Act Review

Draft IRS Publication 5164 (Early Look) for Processing Year 2017

Posted in Affordable Care Act

If your EIN will have 250 or more full-time employees in 2016 (counting each person who was full-time in any month) you’ll need next year to file your 2016 ACA Information Returns – Forms 1094-B and 1095-B or Forms 1094-C and 1095-C – electronically.  But how can you know that the IRS ACA Information Returns (AIR) system will accept what you’re planning to file?  That’s the subject of “Publication 5164 (Early Look), Test Package for Electronic Filers of Affordable Care Act (ACA) Information Returns (AIR) (Processing Year 2017).”

A friend once said of the javelina pigs on his south Texas ranch, “they’re ugly and stupid but, hey, they smell bad.”  Similarly, Pub. 5164 is tedious and technical, but boring. If you can hire someone reliable to understand this, do.   But if this falls to you, it can’t be ignored.  As tough a read as it is, it’s better than last year’s and it’s absolutely essential to getting this right.  Here are some highlights from its 23 pages.

The ACA Assurance Test System (AATS) will open in November 2016.  The desired result of testing is to acquire a Transmitter Control Code (TCC).  If you are seeking a Software Developer TCC, it will be issued in permanent testing “T” status.  Issuers and Transmitters will need a Production “P” TCC. Software Developers must confirm compatibility by testing each year.  As the IRS explains, “Software Developers need a new Software ID for each tax year and each ACA Information Return Type they support. The software information must be updated yearly on the ACA Application for TCC available on e-Services at Annual AATS testing is required for Software Developers.” Issuers and Transmitters also must test this year if you acquired for Processing Year 2016 less than all the TCC you will need for 2017.  How could that happen?  You might have transmitted only Forms 1094-C and 1095-C last year but this year will also need to transmit Forms 1094-B and 1095-B.  If you are an Issuer or Transmitter but not a Software Developer, and if you acquired for last year all the TCCs you will need for next year, you will not need to test again; it’s optional for you.  Here’s the summary table from page 8.

If . . .

And . . .


I have a completed application, but need to add a role? E.g. I am a transmitter, but I plan on developing my own software this year. Add the new role or roles to your existing application.
I have a complete application with software packages for tax year 2014 or 2015. Add the new software packages for the new tax year to obtain your new Software IDs. Also update your application with any changes, e.g. new Contacts or Responsible Officials
I am a commercial Software Developer creating software and selling software packages to employers and insurance issuers/carriers, I will transmit information for employers or insurance issuers/carriers, Select both the Software Developer role and the Transmitter role on your application.
I am an employer or insurance issuer/carrier purchasing a software package, I will transmit my own information returns Select the role of Issuer on your application.
I am an employer or insurance issuer/carrier purchasing a software package, I will transmit my own information returns and transmit for other employers or insurance issuer/carriers, Select the role of Transmitter on your application. Note: The TCC for a Transmitter can be used to transmit your own returns and others. You may not use an Issuer TCC to transmit other’s information returns.
I am an employer or insurance issuer/carrier creating my own software package, or who has contracted with someone to develop a unique package for my sole use, I will perform the software testing with the IRS and transmit my own information returns, Select the role of Software Developer and Issuer on your application.

Not so fast, though.  You must register in order to apply to test.  To register, you must be a Responsible Official or a Contact, which requires you to hold a position listed in this table on page 10.

Business Type


Partnership and Limited Liability Partnership Partner, General Partner, Limited Partner, LLC Member, Manager, Member, Managing Member, President, Owner, Tax Matter Partner (TMP)
Corporations, Personal Service Corporation and Limited Liability Corporations President, Vice President, Corporate Treasurer/Treasurer, Assistant Treasurer, Chief Accounting Officer (CAO), Chief Executive Officer (CEO), Chief Financial Officer (CFO), Tax Officer, Chief Operating Officer, Corporate Secretary/Secretary, Secretary Treasurer, Member
Association, Credit Union, Volunteer Organization, State Government Agency President, Vice President, Treasurer, Assistant Treasurer, Chief Accounting Officer, Tax Officer, Chief Operating Officer, Chief Executive Officer (CEO), Chief Financial Officer (CFO), Executive Director/Director, Chairman, Executive Administrator/Administrator, Receiver, Pastor, Assistant to Religious Leader, Reverend, Priest, Minister, Rabbi, Chairman, Secretary, Director of Taxation, Director of Personnel, Tax Officer
Sole Proprietor Owner, Sole Proprietor, Member, Sole Member

You must complete the e-Services Registration online at  A confirmation code will be mailed to you, good for 28 days.  When you get it, you log on again using that code.  That gets you to the starting line.

If this is all new to you, we’re not talking about an internet site for storing and sharing .pdf images of the Forms you generate and deliver to employees.  The AIR system only accepts XML data.  A .pdf that looks like this –

IRS Pub 5164 PDF

Looks like this in XML format.

IRS Pub 5164 XML

Unless you’re a seasoned IT professional, you’ll need help.  If you are an Applicable Large Employer Member, you should have had that help for the filing season ended June 30, 2016.  If you were satisfied with that service, we still recommend that you check with your vendor about its plans and progress for Processing Year 2017 testing.

2016 Draft Instructions For 1094-B and 1095-B

Posted in Affordable Care Act

Last week, the IRS released draft 2016 instructions for the 1094-B and 1095-B (the “B” Forms).  The release of the draft instructions is just weeks after the IRS released the draft instructions for the 1094-C and 1095-C Forms. (see our blog post)  Notwithstanding a few clarifications and additions, the draft instructions for the B Forms are quite similar to the 2015 instructions.  We have summarized some of the changes below:

  • The draft instructions for the B Forms provide that insurers must report coverage under qualified health plans sold in the individual market through an Exchange on Form 1095-A, but coverage under group policies sold through a Small Business Health Options Program (SHOP) must be reported on Form 1095-B.
  • The draft instructions also encourage insurers to report 2016 coverage under catastrophic health plans on Form 1095-B. Currently under the proposed Code Section 6055 regulations, insurers would be required to report coverage under a catastrophic plan starting with 2017 coverage.
  • The draft instructions emphasize that excepted benefits should not be reported.
  • The draft instructions added an example explaining that providers that were required to file electronically may file corrected forms on paper provided they are correcting fewer than 250 forms.
  • The draft instructions also change the language regarding the “relief from penalties” to state that penalties may be waived “if the failure was due to reasonable cause and not willful neglect.”






2016 Draft Forms 1094-C and 1095-C and Instructions: What’s New, Page-by-Page

Posted in Affordable Care Act, Employee Leasing, Government Employers, Independent Contractors, Insurers and Brokers, Private Employers, Taxes

In the ACA realm, change is the only constant, so don’t take this to the bank.  We’re telling you what we see for the first time, on a first reading of the draft 2016 Forms and Instructions that the IRS has released since July 7.  “Applicable Large Employers,” their contractors and consultants will use these Forms in early 2017 to report to the IRS coverage offers (and self-insured coverage) extended during 2016. We apologize for the unusual length of this article, but reading it all yourself would take far longer.  Believe us.

Form 1094-C

As for 2015 coverage reporting, each ALE Member will file this to summarize data about its accompanying Forms 1095-C. There’s only one substantive difference for 2016 coverage reporting – Line 22, Box “B,” “Qualifying Offer Method Transition Relief,” which was available only for 2015 coverage, is gone, and Box “B” is now “Reserved.”

In part III, “Section 4980H” was inserted before “Full-Time Employee Count for ALE Member.”  We infer that many 2015 filers were unaware of the important differences between the § 4980H term “full-time” and the term as defined in their policies and plans.  See also page 9 of the Instructions.

Form 1095-C

Just beneath the Form’s title, the IRS has added this instruction to the recipient employee: “Do not attach to your tax return. Keep for your records.”  Sounds like the IRS was deluged this filing season.

The Line 15 title, “Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage,” was abbreviated.  It’s now, “Employee Required Contribution (see instructions).” Part III references to “SSN” now say “”SSN or other TIN.”

The Instructions for Recipient note that the 9.5% affordability figure is inflation-adjusted.  See also page 13 – 9.56% for plans beginning in 2015 and 9.66% for plans beginning in 2016.  There are short explanations of three, Form 1095-C, Line 14, Series 1 Code changes.  Code 1I, “Qualifying Offer Transition Relief,” is gone, replaced by “Reserved,” as on Form 1094-C, Line 22.  New Code 1J reports, “Minimum essential coverage providing minimum value offered to you; minimum essential coverage conditionally offered to your spouse; and minimum essential coverage NOT offered to your dependent(s).”  New Code 1K indicates, “Minimum essential coverage providing minimum value offered to you; minimum essential coverage conditionally offered to your spouse; and minimum essential coverage offered to your dependent(s).”

2016 Instructions for Forms 1094-C and 1095-C

Do government forms ever get shorter from year to year?  Seventeen pages of 2015 instructions have expanded to 19, and the font is no bigger.

The revisions recited above appear on page 1, under the heading “What’s New.” Immediately thereafter, the IRS advises close attention to the disappearance in 2016, for calendar year plans, of transitional relief that was offered only for 2015.  And, there’s a link to the IRS page that details technical aspects of filing through the IRS AIR system –

On page 1 and throughout, references to filing by “employers” have been changed to speak of filing by “ALE Members.” The “Who Must File” section expanded to emphasize that each EIN within a controlled group must file if the group as a whole is an Applicable Large Employer, based, most commonly, on the prior year’s employment data.  That’s nothing new, but maybe some missed that point in 2015.

The explanation of self-insurer reporting on page 2 is longer than last year, and perhaps clearer, but not substantively new.

Specific Instructions for Form 1094-C

The first substantial re-write begins on page 2, providing much-needed clarification of when and how an ALE Member may file multiple Forms 1094-C.  Here it is.

A Form 1094-C must be filed when an ALE Member files one or more Forms 1095-C. An ALE Member may choose to file multiple Forms 1094-C, each accompanied by Forms 1095-C for a portion of its employees, provided that a Form 1095-C is filed for each employee for whom the ALE Member is required to file. If an ALE Member files more than one Form 1094-C, one (and only one) Form 1094-C filed by the ALE Member must be identified on line 19, Part I as the Authoritative Transmittal, and, on the Authoritative Transmittal, the ALE Member must report certain aggregate data for all full-time employees and all employees, as applicable, of the ALE Member.

Example 1. Employer A, an ALE Member, files a single Form 1094-C, attaching Forms 1095-C for each of its 100 full-time employees. This Form 1094-C should be identified as the Authoritative Transmittal on line 19, and the remainder of the form completed as indicated in the instructions for line 19, later.

Example 2. Employer B, an ALE Member, files two Forms 1094-C, one for each of its two operating divisions, Division X and Division Y. (Division X and Division Y are units of the same ALE Member, and thus both report under the same EIN; they are not members of an Aggregated ALE Group.) Attached to one Form 1094-C are Forms 1095-C for the 200 full-time employees of Division X, and attached to the other Form 1094-C are Forms 1095-C for the 1,000 full-time employees of Division Y. One of these Forms 1094-C should be identified as the Authoritative Transmittal on line 19, and should include aggregate employer-level data for all 1,200 full-time employees of Employer B as well as the total number of employees of Employer B, as applicable, as required in Parts II, III, and IV of Form 1094-C. The other Form 1094-C should not be identified as the Authoritative Transmittal on line 19, should report on line 18 only the number of Forms 1095-C that are attached to that Form 1094-C, and should leave the remaining sections of the form blank as indicated in the instructions for line 19, later.

Note. Each ALE Member must file its own Forms 1094-C and 1095-C under its own separate EIN, even if the ALE Member is part of an Aggregated ALE Group. No Authoritative Transmittal should be filed for an Aggregated ALE Group.

Example 3. Assume that Employer A from Example 1 is a member of the same Aggregated ALE Group as Employer B from Example 2. Accordingly, Employer A and Employer B are separate ALE Members filing under separate EINs. Forms 1094-C should be filed in the same manner indicated in Examples 1 and 2. Employer A should include only information about employees of Employer A in its Authoritative Transmittal, and Employer B should include only information about employees of Employer B in its Authoritative Transmittal. No Authoritative Transmittal should be filed for the Aggregated ALE Group reporting combined data for employees of both Employer A and Employer B.

Similar rules apply for a Governmental Unit that has delegated its reporting responsibilities for some of its employees to another Governmental Unit—see Designated Governmental Entity (DGE) in the Definitions section of these instructions for more information. In the case of a Governmental Unit that has delegated its reporting responsibilities for some of its employees, the Governmental Unit must ensure that among the multiple Forms 1094-C filed by or on behalf of the Governmental Unit transmitting Forms 1095-C for the Governmental Unit’s employees, one of the filed Forms 1094-C is designated as the Authoritative Transmittal and reports aggregate employer-level data for the Governmental Unit, as required in Parts II, III, and IV of Form 1094-C.

Example. County is an Aggregated ALE Group made up of ALE Members School District, Police District, and County General Office. School District designates the state to report on behalf of the teachers and reports for itself for its remaining full-time employees. In this case, either the School District or the state must file an Authoritative Transmittal reporting aggregate employer-level data for the School District.

Page 3 does the same to explain when one employee may be reportable by multiple ALE Members.

[A] full-time employee who works for more than one ALE Member that is a member of the same Aggregated ALE Group must receive a separate Form 1095-C from each ALE Member. For any calendar month in which a full-time employee works for more than one ALE Member of an Aggregated ALE Group, only one ALE Member is treated as the employer of that employee for reporting purposes (generally, the ALE Member for whom the employee worked the greatest number of hours of service), and only that ALE Member reports for that employee for that calendar month. The other ALE Member is not required to report for that employee for that calendar month, unless the other ALE Member is otherwise required to file Form 1095-C for that employee because the individual was a full-time employee of that ALE Member for a different month of the same calendar year. In that case, the individual may be treated as not employed for that calendar month. If under these rules, an ALE Member is not required to report for an employee for any month in the calendar year, the ALE Member is not required to report for that full-time employee for that calendar year. For a description of the rules related to determining which ALE Member in an Aggregated ALE Group is treated as the employer for a month in this situation, see the definition of Employee.

Example. Employer A and Employer B are separate ALE Members that belong to the same Aggregated ALE Group. Both Employer A and Employer B offer coverage through the AB health plan, which is an insured plan. In January and February, Employee has 130 hours of service for Employer A and no hours of service for Employer B. In March, Employee has 100 hours of service for Employer A and 30 hours of service for Employer B. In April through December, Employee has 130 hours of service for Employer B and no hours of service for Employer A. Employer A is the employer of Employee for filing purposes for January, February, and March. Employer A should file Form 1095-C for Employee reporting offers of coverage using the appropriate code on line 14 for January, February, and March, should complete lines 15 and 16 per the instructions, and should include Employee in the count of total employees and full-time employees reported for those months on Form 1094-C. For the months April through December, on Form 1095-C, Employer A should enter code 1H (no offer of coverage) on line 14, leave line 15 blank, and enter code 2A (not an employee) on line 16 (since Employee is treated as an employee of Employer B and not as an employee of Employer A in those months), and should exclude Employee from the count of total employees and full-time employees reported for those months on Form 1094-C.

It’s hard to read, but we’re glad it’s there.  Also on page 3, the IRS notes that the paper filing date will be February 28, 2017 and the e-filing date will be March 31, 2017.  This year, extensions will be available only by request, and page 3 includes instructions about where to get and how to use Form 8809 for that purpose.

Page 4 discusses e-filing rules at greater length than last year and notes the penalty increase from $250 to $260 per Form.  See also page 6.  But it’s not all gloom and doom.

If you are required to file electronically but fail to do so, and you do not have an approved waiver, you may be subject to a penalty of $260 per return for failure to file electronically unless you establish reasonable cause. However, you can file up to 250 returns on paper; those returns will not be subject to a penalty for failure to file electronically. The penalty applies separately to original returns and corrected returns.

The correction “how to” chart on page 5 adds the requirement to correct a Form 1094-C Authoritative Transmittal if the original filing incorrectly reported the other members of the ALE Group.

Page 6 notes that Forms 1095-C are to be delivered to the employee recipients by January 31, not February 1, as last year.

Page 7 clarifies that Code 1A, “Qualifying Offer Method,” properly entered on Line 14 of Form 1095-C relieves the ALE Member from any obligation to fill the related box on Line 15 or on Line 16.

Page 9 clarifies that employers sponsoring non-calendar year plans may have early 2016 months of 2015-only transition relief, because those months were part of the 2015-2016 plan year.  This includes the 50-99 “smaller large employer” relief and the 70% offer transitional relief that applied only for 2015.  Page 9 also notes that an employee who terminates during a 2016 stability period, having been measured full-time in the associated, prior measurement period, must be reported on Form 1094-C as a full-time employee, regardless of his or her average hours of service during 2016.

Specific Instructions for Form 1095-C

Page 10 notes that the ALE Member contact listed on Line 10 need not be the contact listed on Line 8 of Form 1094-C.  Also, filers are admonished never to leave Line 14 blank, even for months before and after employment.

Page 11 is almost entirely new text, explaining in helpful detail how to code on Line 14 COBRA coverage offers and retiree coverage offers.  Here’s the Example provided:

During the applicable open enrollment period for its health plan, Employer makes an offer of minimum essential coverage providing minimum value to Employee and to Employee’s spouse and dependents. Employee elects to enroll in employee-only coverage starting January 1. On June 1, Employee experiences a reduction in hours that results in loss of eligibility for coverage under the plan. As of June 1, Employer terminates Employee’s existing coverage and makes an offer of COBRA continuation coverage to Employee, but does not make an offer to Employee’s spouse and dependents. Employer should enter code 1E (Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse) on line 14 for months January – May, and should enter code 1B (Minimum essential coverage providing minimum value offered to employee only) on line 14 for months June – December.

Page 12 (see also page 17) reiterates that new Line 14 codes 1J and 1K are conditional offer variants of codes 1D and 1E, respectively, and defers Line 15 employee cost guidance to the “Employee Required Contribution” section of the Definitions on page 15.

On page 13, and in the “Tip” on page 17, the IRS continues its Delphic guidance about how Line 16, Code 2E applies when an employer seeks § 4980H credit for coverage offers made to its common law employees by their Form W-2 employer, e.g., a temp staffing firm.  Suppose that an employer seeking such credit sponsors a self-insured plan.  The 2016 Instructions read, “For this [Part III] purpose, employer-sponsored self-insured coverage does not include coverage under a multi-employer plan.”  Our initial guess is that the IRS means to say so only for purposes of reporting covered individuals in Part III.  We remain concerned about the lack of published IRS guidance regarding whether an employer will be assumed to participate in a MEWA if it enters Code 2E on Line 16 in order to claim credit for coverage offers made by a temp staffing firm.


Page 14 adds a link to the IRS page on § 4980H employer aggregation rules.

Page 15 adds this definition of “Employee Required Contribution” for Form 1095-C, Line 15 affordability determinations.

Employee Required Contribution. The Employee Required Contribution is the employee’s share of the monthly cost for the lowest-cost self-only minimum essential coverage providing minimum value that is offered to the employee by the ALE Member. The employee share is the portion of the monthly cost that would be paid by the employee for self-only coverage, whether paid through salary reduction or otherwise

For purposes of determining the amount of the employee’s share of the monthly cost, an ALE Member may divide the total cost to the employee for the plan year by the number of months in the plan year. This monthly amount of the employee’s share of the cost would then be reported for any months of that plan year that fall within the 2016 calendar year. For example, if the plan year begins January 1, the ALE Member may determine the amount to report for each month by taking the total annual employee cost for all 12 months and dividing by 12. If the plan year begins April 1, the ALE Member may determine the amount to report for January through March, 2016, by taking the total annual employee cost for the plan year ending March 31, 2016, and dividing by 12 (and reporting that amount for January, February, and March 2016). Then the ALE Member may determine the monthly amount for April through December, 2016 by taking the total annual employee cost for the plan year ending March 31, 2017, and dividing by 12 (and reporting that amount for April through December 2016).

The Employee Required Contribution may not be the amount the employee paid for coverage. For additional rules on determining the amount of the Employee Required Contribution, including for cases in which an ALE Member makes available certain HRA contributions, cafeteria plan contributions, wellness program incentives, and opt-out payments, see Regulations sections1.5000A-3(e)(3)(ii) and 1.36B-2(c)(3)(v)(A). Also see Notice 2015-87.

Also on page 15 begins a longer explanation of what “Full-Time Employee” means, apparently to correct common employer filing errors for 2015.  We noted this part especially:

Under the look-back measurement method, an employee is a full-time employee for each month of the stability period selected by the ALE Member if the employee was employed an average of least 30 hours of service per week with the ALE Member during the measurement period preceding that stability period. (The look-back measurement method for identifying full-time employees is available only for purposes of determining and computing liability under section 4980H, and not for purposes of determining if the employer is an Applicable Large Employer.)

Pages 18-19 describe in great detail the trailing effects for 2016 reporting of 2015-only transitional relief by employers with non-calendar year plans.

We close with this good news:  As in 2105, the IRS estimates that you will need just four hours to complete and file your Form 1094-C and just twelve minutes to complete and file each Form 1095-C.  If there’s an appropriate emoji here, suggest it, please.

Stand Alone, Fixed-Indemnity Plans Are Back, Maybe

Posted in Affordable Care Act, Coverage Mandates, Exchanges, Insurers and Brokers, Taxes

In Central United Life Ins. Co. v. Burwell, D.C. Cir. No. 15-5310 (July 1, 2016), a D.C. Circuit panel affirmed, 3-0, a trial court injunction barring enforcement of the 2014 HHS regulation permitting individual fixed-indemnity policies to be sold only as supplements to ACA minimum essential coverage. You’ve heard this theme before. The Public Health Service Act, 42 U.S.C. §§  300-21(c)(2), 300gg-63(b), 300gg-91(c)(3), defines “excepted benefits” as policies offered separately from and not coordinated with health plans. When passing the ACA, Congress adopted and piggy-backed on those PHS Act provisions. Many consumers decided to buy fixed indemnity plans in lieu of ACA Marketplace plans, despite the ACA individual mandate penalties for not buying minimum essential coverage. Displeased, HHS issued a regulation “to amend the criteria for fixed indemnity insurance to be treated as an excepted benefit,” outlawing such plans unless sold as a supplement minimum essential coverage. See 79 Fed. Reg. 30240, 30253 (May 27, 2014). But only Congress may amend a statute, the Court held, and Congress did nothing of the sort in the ACA. Rather, the ACA reaffirmed the existing definition of “excepted benefits” and how that definition applied to individuals’ purchase of fixed indemnity plans.

As of this writing, HHS has not requested rehearing and has not filed an appeal notice. We expect the government to take a mulligan, asking the full D.C. Circuit to over-rule the panel opinion. We think that likely because 4-4 Supreme Court opinions are treated as affirming the decision appealed. While we wait, we’ll be interested to see whether and how quickly insurers resume marketing fixed indemnity plans to individuals as alternatives to ACA minimum essential coverage.


ACA Retaliation: Let Us Tell You A Little Story about A Man Named Jed

Posted in Affordable Care Act, Employee Leasing, Government Employers, Independent Contractors, Private Employers

Jed, employed by Drysdale LLC, a janitorial contractor, recently began working nights at the Commerce Bank, supervised by the Bank’s Chief of Security.  Jed’s family had health insurance until his wife lost her job early this year.  Drysdale didn’t offer insurance, so Jed bought a policy through  With the federal subsidy, his premium is less than $50 monthly.

About six weeks ago, Drysdale got a Marketplace notice of the subsidy granted to Jed.  After consulting its lawyer, Drysdale amended its standard contract to negate any indemnity obligation to customers for ACA taxes and penalties imposed on the customer with respect to Drysdale employees.  The Bank noticed the change and inquired.  Drysdale explained, using Jed’s example, that the Bank could have ACA obligations to Jed independent of Drysdale’s obligations to Jed.

On July 5, the Bank asked for a replacement after Jed was found asleep in a computer closet.  Drysdale removed Jed from the Bank and has not reassigned him.

Today, Drysdale and the Bank received OSHA notices that Jed (represented by a labor union) had charged them with retaliation in violation of FLSA § 218c, which reads, in relevant part:

218c. Protections for employees

(a) Prohibition

No employer shall discharge or in any manner discriminate against any employee with respect to his or her compensation, terms, conditions, or other privileges of employment because the employee (or an individual acting at the request of the employee) has—

(1) received a credit under section 36B of title 26 or a subsidy under section 18071 of title 42;


(b) Complaint procedure

(1) In general

An employee who believes that he or she has been discharged or otherwise discriminated against by any employer in violation of this section may seek relief in accordance with the procedures, notifications, burdens of proof, remedies, and statutes of limitation set forth in section 2087(b) of title 15.

(Emphasis ours.)  When Jed applied for his subsidy, he was given three notices of this retaliation protection.  Much to the employers’ surprise, they have only a few weeks to prove that Jed would have suffered the same fate even if they had been ignorant of his subsidy.  But Jed says that he and the Security Chief had a deal: If Jed finished his work an hour early, he could nap before leaving for his day job.  And OSHA’s rules say that Jed’s proof “burden may be satisfied, for example, if the complaint shows that the adverse action took place shortly after the protected activity, giving rise to the inference that it was a contributing factor in the adverse action.” 29 CFR § 1984(e)(3).  Very probably, OSHA will issue a preliminary order reinstating Jed who, by the way, is now a union organizer.  A damages trial will follow some months later.

Why is this the Bank’s problem?  Because DOL enforces this law, and DOL’s “employee” definition is even broader than the definition used by the IRS.  You may “employ,” for this purpose, a worker whom the IRS would recognize as an independent contractor.  Jed’s supervision by the Bank’s Chief of Security goes a long way toward proving that the Bank was Jed’s joint employer.

Why is this Drysdale’s problem?  Because it opened the Marketplace subsidy notice envelope.  As we explained in several prior articles, there are ways to appeal subsidy errors without acquiring notice of the identities of subsidy recipients who might be among your employees.  If you have not established those procedures yet, now would be a very good time to do so.


DOL Adjusts Civil Monetary Penalties Upward

Posted in Affordable Care Act

On June 30, the Department of Labor (“DOL”) published an interim final rule to adjust the civil monetary penalties on employer-sponsored plans.  The DOL published the interim final rule in accordance with the Federal Civil Monetary Penalties Inflation Adjustment Improvements Act of 2015, which amended the Inflation Adjustment Act.  While the interim final rule adjusts many penalties (see the full list here), we are listing only those that have an affect on health plans.  They are as follows:

ERISA Penalty Statute Description of ERISA Violations Subject to Penalty Current Penalty Amount New Penalty Amount
ERISA § 502(c)(2) – Failure or refusal to file annual report (Form 5500) required by ERISA § 104; and

– Failure of a multiemployer plan to certify endangered or critical status under ERISA § 305(b)(3)(C) treated as failure to file annual reports.

Up to $1,100 per day Up to $2,063 per day
ERISA § 502(c)(5) Failure of a multiple employer welfare arrangement to file report required by regulations issued under ERISA § 101(g). Up to $1,100 per day Up to $1,502 per day
ERISA § 502(c)(9)(A) Failure by an employer to inform employees of CHIP coverage opportunities under ERISA § 701(f)(3)(B)(i)(I) – each employee a separate violation. Up to $100 per day Up to $110 per day
ERISA § 502(c)(9)(B) Failure by a plan administrator to timely provide to any State the information required to be disclosed under ERISA § 701(f)(3)(B)(ii), regarding coverage coordination—each participant/beneficiary a separate violation. Up to $100 per day Up to $110 per day
ERISA § 502(c)(10)(B)(i) Failure by any plan sponsor of a group health plan, or any health insurance issuer offering health insurance coverage in connection with the plan, to meet the requirements of ERISA §§ 702(a)(1)(F), (b)(3), (c) or (d); or § 701; or § 702(b)(1) with respect to genetic information. $100 per day during non-compliance period $110 per day during non-compliance period
ERISA § 502(c)(10)(C)(i) Minimum penalty for de minimis failures to meet genetic information requirements not corrected prior to notice from Secretary of Labor. $2,500 minimum $2,745 minimum
ERISA § 502(c)(10)(C)(ii) Minimum penalty for failures to meet genetic information requirements which are not corrected prior to notice from Secretary of Labor and are not de minimis. $15,000 minimum $16,473 minimum
ERISA § 502(c)(10)(D)(iii)(II) Cap on unintentional failures to meet genetic information requirements. $500,000 maximum $549,095 maximum
ERISA § 715 Failure to provide Summary of Benefits Coverage under Public Health Services Act section 2715(f), as incorporated into ERISA § 715 and 29 CFR 2590.715-2715(e) Up to $1,000 per failure Up to $1,087 per failure

In addition, the DOL issued a fact sheet and an FAQ further explaining the adjustments.  While these changes increase the penalties on a wide variety of violations, it is worth noting that the maximum penalty is not always imposed for a violation.

Beginning in 2017, future adjustments may be made annually and will have to be made by January 15 of such year.

It’s Marketplace Appeal Season!

Posted in Affordable Care Act, Government Employers, Private Employers, Taxes

All of us of a certain age remember the Bugs Bunny cartoon in which Bugs and Daffy confused dimwit Elmer Fudd as to the current hunting season – i.e., wabbit (Bugs) or duck (Daffy) – ending with the proclamation of baseball season. Play ball!  Whatever other season you think it may be now, know this: it’s also Marketplace Appeal Season.

The online employer appeal function of still isn’t operational, so Marketplace subsidy certification notices are being mailed to employers from this address:  Health Insurance Marketplace, Department of Health and Human Services, 465 Industrial Boulevard, London, KY 40750-0001.  We saw our first notice last week; it was dated June 21, 2016.  With identities redacted, here is the text.

Dear Benefits Manager:

The person listed below submitted an application for health coverage through the Health Insurance Marketplace in [redacted] and indicated that he or she is an employee of [redacted] at the address shown above.

This person reported that he or she:

  • didn’t have an offer of health care coverage from [redacted];
  • did have an offer of health care coverage, but it wasn’t affordable or didn’t provide minimum value; or
  • was in a waiting period and unable to enroll in health care coverage.

The employee has been determined eligible for advance payments of the premium tax credit (APTC) or cost-sharing reductions (CSRs) for at least one month during 2016 to help pay for Marketplace coverage and has enrolled in coverage through the Marketplace.

Employee Name


Last 4 digits of Social Security Number (if available)

Marketplace Application ID





Why am I getting this notice?

This notice Informs you that your employee was found eligible for APTC or CSRs and that, if various conditions are met, you may have to pay an employer shared responsibility payment to the Internal Revenue Service (IRS) in the future. It also notifies you of your opportunity to appeal this eligibility determination.

Certain employers (those with at least 50 full-time employees or full-time equivalent employees, called applicable large employers) might have to pay an employer shared responsibility payment for any month that at least one full-time employee enrolled in Marketplace coverage and receives APTC or CSRs.

Important: This is only a notification that [redacted] may have to pay an employer shared responsibility payment. Only the IRS, not the Marketplace, can determine whether this employer will owe an employer shared responsibility payment.

What can I do next?

To learn more, you can visit or contact the IRS at 800-829-4933 Monday- Friday, 7 a.m. – 7 p.m. your local time (Alaska & Hawaii follow Pacific Time).

You may file an appeal to the Marketplace if you believe there’s been a mistake regarding the employee’s eligibility for APTC or CSRs. If you believe your employee was incorrectly determined eligible for APTC or CSRs because you offered the employee affordable, minimum value health coverage, filing an appeal could help reduce the employee’s potential tax liability. Filing an appeal could also eliminate reports from the Marketplace to the IRS that your employee received APTC or CSRs following an appeal decision in your favor. However, filing an appeal won’t necessarily affect whether you have to pay an employer shared responsibility payment to the IRS, because the IRS will determine independently whether you have to pay.

If you appeal, the Marketplace will consider evidence provided by both you and your employee to determine if the employee is eligible for APTC or CSRs.

Remember, it’s a violation of the Fair Labor Standards Act to discriminate against any employee because he or she received APTC or CSRs.

What are my appeal rights?

You have 90 days from the date of this notice to request an appeal from the Marketplace. For more information about the employer appeal process and to download the employer appeal request form, visit and mail the completed form to:

Health Insurance Marketplace

465 Industrial Blvd.

London, KY 40750-0061

You may also fax the form through this secure fax line: 1-877-369-0129.

You must include a copy of this notice with your appeal request.

When you navigate to that URL, you’ll find a four-part Form that looks like this.




It’s worth stressing again: If you open these envelopes and see the employee names, you will expose your organization to claims from those employees that their subsidy certifications motivated your subsequent, adverse employment actions against them.  You’ll bear a heavy, expensive burden to disprove such claims.  Better to outsource your appeals under a written agreement that deprives you of knowledge of the names appearing in such notices.  If you have not done that yet, consider doing it soon, because . . . it’s Marketplace Appeal Season.  Play ball!

EEOC Sample Notice for Employer-Sponsored Wellness Programs

Posted in Affordable Care Act, Government Employers, Private Employers

You know the drill.  A manufacturer advertises a new drug, warning, of course, that some users may suffer serious side effects.  A year or two later, lawyers counter-advertise for new clients with those conditions who took the drug.  There follows, in some cases, a campaign to remove the “bad drug” from the market.  On June 21, 2016, the EEOC published a Sample Notice, to be given by employer-sponsored wellness programs.  Some parts of it remind the reader of a lawyer’s TV ad – “Have you been injured by a bad wellness program?  You may have a right to compensation.”  Here’s the full text.


[Name of wellness program] is a voluntary wellness program available to all employees. The program is administered according to federal rules permitting employer-sponsored wellness programs that seek to improve employee health or prevent disease, including the Americans with Disabilities Act of 1990, the Genetic Information Nondiscrimination Act of 2008, and the Health Insurance Portability and Accountability Act, as applicable, among others. If you choose to participate in the wellness program you will be asked to complete a voluntary health risk assessment or “HRA” that asks a series of questions about your health-related activities and behaviors and whether you have or had certain medical conditions (e.g., cancer, diabetes, or heart disease). You will also be asked to complete a biometric screening, which will include a blood test for [be specific about the conditions for which blood will be tested.] You are not required to complete the HRA or to participate in the blood test or other medical examinations.

However, employees who choose to participate in the wellness program will receive an incentive of [indicate the incentive] for [specify criteria]. Although you are not required to complete the HRA or participate in the biometric screening, only employees who do so will receive [the incentive].

Additional incentives of up to [indicate the additional incentives] may be available for employees who participate in certain health-related activities [specify activities, if any] or achieve certain health outcomes [specify particular health outcomes to be achieved, if any]. If you are unable to participate in any of the health-related activities or achieve any of the health outcomes required to earn an incentive, you may be entitled to a reasonable accommodation or an alternative standard. You may request a reasonable accommodation or an alternative standard by contacting [name] at [contact information].

The information from your HRA and the results from your biometric screening will be used to provide you with information to help you understand your current health and potential risks, and may also be used to offer you services through the wellness program, such as [indicate services that may be offered]. You also are encouraged to share your results or concerns with your own doctor.

Protections from Disclosure of Medical Information

We are required by law to maintain the privacy and security of your personally identifiable health information. Although the wellness program and [name of employer] may use aggregate information it collects to design a program based on identified health risks in the workplace, [name of wellness program] will never disclose any of your personal information either publicly or to the employer, except as necessary to respond to a request from you for a reasonable accommodation needed to participate in the wellness program, or as expressly permitted by law. Medical information that personally identifies you that is provided in connection with the wellness program will not be provided to your supervisors or managers and may never be used to make decisions regarding your employment.

Your health information will not be sold, exchanged, transferred, or otherwise disclosed except to the extent permitted by law to carry out specific activities related to the wellness program, and you will not be asked or required to waive the confidentiality of your health information as a condition of participating in the wellness program or receiving an incentive. Anyone who receives your information for purposes of providing you services as part of the wellness program will abide by the same confidentiality requirements. The only individual(s) who will receive your personally identifiable health information is (are) [indicate who will receive information such as “a registered nurse,” “a doctor,” or “a health coach”] in order to provide you with services under the wellness program.

In addition, all medical information obtained through the wellness program will be maintained separate from your personnel records, information stored electronically will be encrypted, and no information you provide as part of the wellness program will be used in making any employment decision. [Specify any other or additional confidentiality protections if applicable.] Appropriate precautions will be taken to avoid any data breach, and in the event a data breach occurs involving information you provide in connection with the wellness program, we will notify you immediately.

You may not be discriminated against in employment because of the medical information you provide as part of participating in the wellness program, nor may you be subjected to retaliation if you choose not to participate.

If you have questions or concerns regarding this notice, or about protections against discrimination and retaliation, please contact [insert name of appropriate contact] at [contact information].

This or a similar notice is required by ADA and GINA rules that the EEOC published on May 17, 2016.  Along with the Sample Notice, EEOC released this Q&A guidance.

  1. If wellness program participants already get a notice under the Health Insurance Portability and Accountability Act (HIPAA), do they need to get a separate ADA notice?

Employers that already provide a notice that informs employees what information will be collected, who will receive it, how it will be used, and how it will be kept confidential, may not have to provide a separate notice under the ADA. However, if an existing notice does not provide all of this information, or if it is not easily understood by employees, then employers must provide a separate ADA notice that sets forth this information in a manner that is reasonably likely to be understood by employees.

  1. Who must provide the notice?

An employer may have its wellness program provider give the notice, but the employer is still responsible for ensuring that employees receive it.

  1. Does the notice have to include the exact words in the EEOC sample notice?

No. As long as the notice tells employees, in language they can understand, what information will be collected, how it will be used, who will receive it, and how it will be kept confidential, the notice is sufficient. Employers do not have to use the precise wording in the EEOC sample notice. The EEOC notice is written in a way that enables employers to tailor their notices to the specific features of their wellness programs.

  1. When should employees get the notice?

The requirement to provide the notice takes effect as of the first day of the plan year that begins on or after January 1, 2017 for the health plan an employer uses to calculate any incentives it offers as part of the wellness program. For more information about which plan to use in calculating wellness program incentives, refer to EEOC’s questions and answers on the ADA rule and the Genetic Information Nondiscrimination Act (GINA) rule. Once the notice requirement becomes effective, the EEOC’s rule does not require that employees get the notice at a particular time (e.g., within 10 days prior to collecting health information). But they must receive it before providing any health information, and with enough time to decide whether to participate in the program. Waiting until after an employee has completed an HRA or medical examination to provide the notice is illegal.

  1. Is an employee’s signed authorization required?

No. The ADA rule only requires a notice, not signed authorization, though other laws, like HIPAA, may require authorization. Title II of the Genetic Information Nondiscrimination Act (GINA) requires prior, written, knowing, and voluntary authorization when a wellness program collects genetic information, including family medical history. (See Q&A 7 below.)

  1. In what format should the notice be provided?

The notice can be given in any format that will be effective in reaching employees being offered an opportunity to participate in the wellness program. For example, it may be provided in hard copy or as part of an email sent to all employees with a subject line that clearly identifies what information is being communicated (e.g., “Notice Concerning Employee Wellness Program”). Avoid providing the notice along with a lot of information unrelated to the wellness program as this may cause employees to ignore or misunderstand the contents of the notice. If an employee files a charge with EEOC and claims that he or she was unaware of a particular medical examination conducted as part of a wellness program, EEOC will examine the contents of the notice and all of the surrounding circumstances to determine whether the employee understood what information was being collected, how it was being used, who would receive it, and how it would be kept confidential.

Employees with disabilities may need to have the notice made available in an alternative format. For example, if you distribute the notice in hard copy, you may need to provide a large print version to employees with vision impairments, or may have to read the notice to a blind employee or an employee with a learning disability. A deaf employee may want a sign language interpreter to communicate information in the notice, whether the notice is in hard copy or available electronically. Notices distributed electronically should be formatted so that employees who use screen reading programs can read them.

  1. What notice must employers provide for spouses participating in an employer’s wellness program?

As was the case prior to the issuance of the rules in 2016, GINA requires that an employer that offers health or genetic services and requests current or past health status information of an employee’s spouse obtain prior, knowing, written, and voluntary authorization from the spouse before the spouse completes a health risk assessment. Like the ADA notice, the GINA authorization has to be written so that it is reasonably likely to be understood by the person providing the information. It also has to describe the genetic information being obtained, how it will be used, and any restrictions on its disclosure.

While problematic, the Sample Notice and the guidance fairly portray the published rules.  For employers trying hard to do the right thing, the government seems to have no end of right things for you to do.

2015 ACA Information Reporting: Parts Sold Separately, Some Assembly Required

Posted in Affordable Care Act, Government Employers, Private Employers

Ten days before the deadline for electronic filing of 2015 Forms 1094-C and 1095-C, many employers are discovering that they contracted for less than all the needed services. Here’s what we’re seeing all too commonly.

Some vendors offered turnkey packages. They promised, in writing, to host or to manage your data, to use it to generate your Forms, to deliver timely Forms 1095-C to the 2015 employee recipients, and to upload the Forms to the IRS timely. Some even committed to make and upload required corrections. Typically, these vendors sold those comprehensive services as part of a broader deal to administer your payroll and/or your benefit plans. They committed to do lots of expensive development and preparation – e.g., acquiring an AIR system Transmitter Control Code (“TCC’), months in advance of knowing exactly what their associated costs and delivery schedules would be. Their prices typically reflected that risk. Those prices sent many employers in search of less costly options.

That spurred the market for software that enables employers to generate their own XML Forms. Some vendors bundled that software with a commitment to deliver the employer-generated Forms to employees and to upload the Forms to the AIR system.  Some allowed customers to buy only the software license. Some vendors offered only the software license.

As the 2016 delivery and filing deadlines approached, employer options narrowed. Some vendors offering comprehensive services cut off sales months in advance of those deadlines, to assure the delivery of quality services in the first year of operation. In short, the less you bought, the later you could buy it. But too many employers waited too late and could buy only a software license. Those employers were able to generate and deliver 2015 Forms 1095-C to their 2015 full-time employees, avoiding the $250-per-Form fine for that failure, but there’s a separate $250-per-Form fine for failing to file timely with the AIR system. If the ALE Member has 250 or more 2015 Forms 1095-C to file, paper filing is not an option, and electronic filing requires an IRS-issued TCC. Getting the TCC requires application to the IRS and IRS approval based on passing a series of data and system integrity tests. Do you know what a “SOAP Envelope” is? If not, and maybe even if you do, you probably need a Plan B. There is no “EASY” button.

If this is your situation, you need to make a last minute AIR system transmitter deal with a reputable vendor, or you need to budget for the penalties. As noted in a prior article, you can mitigate your penalty exposure by filing correctly, though late. If you don’t file at all, you’ll be exposed to the full penalty of $250 per Form 1095-C.

As of June 20, 2016, there are still a few AIR system Transmitters who will accept a few more 2015 upload-only customers. While you’re at it, ask if they will upload the required corrections for the quoted price. You’re likely to need to make loads of corrections.

House v. Burwell: Insurer Cost-Sharing Subsidies Unauthorized

Posted in Affordable Care Act, Exchanges, Insurers and Brokers

A U.S. District Judge has ruled that HHS unlawfully has spent billions of dollars to reimburse insurers for cost-sharing reductions granted to individuals who bought health insurance through an ACA Exchange such as U.S. House of Representatives v. Burwell, D.D.C. No. 1:14-cv-01967 (May 12, 2016). The Court stayed its ruling pending review by the D.C. Court of Appeals.

As usual, the winning argument was simple – i.e., ACA § 1401 makes a permanent appropriation for premium subsidies but § 1402 cost-sharing subsidies are left to the annual appropriations process, and Congress has appropriated nothing. The government rehashed its King v. Burwell ambiguity arguments, but with far more difficulty. Among other things, the Administration previously had conceded that cost-sharing subsidies depend on annual Congressional appropriations.

If this decision stands, it’s very bad news for insurers participating in the ACA Exchanges, even if, as the Court suggested, they may be able to sue, under the Tucker Act, 28 U.S.C. § 1491(a)(1), to recover the promised payments from the government. The opinion does not address whether the subsidies already paid are subject to HHS claw-back.

But if this decision stands, and if Congress does not appropriate the missing funds, then may be doomed. Premium increases sufficient to overcome lost cost-sharing subsidies might accelerate an insurance death spiral that some believe already has begun.

In prior years, the forthcoming D.C. Court of Appeals decision would have been seen as a rest stop on the road to ultimate Supreme Court resolution. But with SCOTUS now split 4-4 on so many contentious issues, the D.C. Circuit may have the final word, perhaps late this year.