Affordable Care Act Review

Affordable Care Act Review

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.


CMS’ New Initiative Intended to Transform Primary Health Care

Posted in Uncategorized

CMS’ efforts to improve the delivery of primary health care moved into new territory this week when the agency announced a new five-year delivery model, Comprehensive Primary Care Plus (CPC+), which CMS’ chief medical officer described as “the future of health care.” CMC+ will launch in January 2017, and evolves from the Comprehensive Primary Care initiative that CMS began in 2013. The announcement of CMS+ comes on the heels of CMS’ March 2016 announcement that it met, ahead of schedule, its goal of tying 30% of Medicare payments to quality-and-value-based alternative payment models by 2016. CMS’ new goal is to make 50% of Medicare payments via alternative payment models by 2018.

CPC+ is CMS’ largest ever such model, and is expected to be implemented in up to 20 regions accommodating 20,000 physicians and clinicians and the 25 million people they serve. Under CMC+, Medicare will partner with commercial insurance plans and state Medicaid agencies to support delivery of advanced primary care by primary care practices (PCP).

PCPs participating in CPC+ will proceed along one of two tracks. Track 1 PCPs must help patients with serious or chronic diseases meet their health goals, give patients 24-hour access to care and health information, deliver preventive care, involve patients and their families in patient care, and work with other health care partners to deliver coordinated health care. Track 2 PCPs must, in addition to these services, provide patients who have complex medical and behavioral health needs with more comprehensive services, which may include systemic assessment of their psychosocial needs and an inventory of resources and supports to meet these needs.

Track 1 PCPs will receive a monthly care management fee in addition to fee-of-service payments under the Medicaid Physician Fee Schedule. Track 2 participants will receive an on-average higher monthly care management fee and a hybrid of reduced Medicaid fee-for-service payments and up-front comprehensive primary care payments. The hybrid payments are intended to give providers freedom to find ways to deliver health care outside of traditional person-to-person encounters.
CMS is soliciting payer proposals to partner with Medicare in CPC+ through June 1, 2016, after which it will identify regions in which PCP+ will be implemented. The geographic reach of selected providers will be a factor in determining the choice of the CPC+ regions. From July 15 to September 1, 2016, CMS will publish the CPC+ regions and solicit applications from practices in these regions. Practices will apply directly for the preferred track, however applicants for the more remunerative Track 2 must include in their application a letter of support from their Health IT vendor that discusses the vendor’s commitment to support the PCP with advanced Health IT capabilities.

[Sources: CMS launches largest-ever multi-payer initiative to improve primary care in America; Comprehensive Primary Care Plus; and Health Care Payment Learning and Action Network, all from]

So I Made This Little 1095-C Mistake. Big Deal?

Posted in Affordable Care Act, Government Employers, Insurers and Brokers, Private Employers

The 2015 Instructions for Forms 1094-C and 1095-C tell Applicable Large Employers how to furnish and file corrections to incorrectly filed Forms 1095-C. They don’t answer these two questions that arise between the March 31, 2016 deadline for furnishing Forms 1095-C to full-time employees and the May 31 paper filing deadline or the June 30 e-filing deadline.

  • What if I realize after March 31 that I miss-classified someone as a 2015 part-time employee or contractor?
  • What if I properly classified a 2015 full-time employee but gave her a Form 1095-C with incorrect codes on Line 14 or Line 16?

Are you assessable for the $250 penalty provided by 26 U.S.C. § 6722 even if you fix the problem before you file? And how do you fix the problem? Let’s begin with that Code section.

Section 6722 imposes that penalty for failing to furnish the Form 1095-C by March 31 or for including “incorrect information” on a timely Form 1095-C, with these exceptions.

  • The penalty is $50 if either mistake is corrected within 30 days of the March 31 deadline, and $100 if corrected by August 1, 2016.
  • If Form 1095-C was furnished timely but with good faith data mistakes, and if those mistakes are corrected by August 1, then the penalty for the first 10 corrected Forms is waived.

Even these penalties may be waived, as the IRS has said repeatedly in FAQ guidance, such as here:

[Q3] […] Accordingly, the IRS will not impose penalties 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.

[Q32] Does Notice 2016-04 affect the rules of sections 6721(b) and 6722(b) concerning the reduction of penalty amounts for issuers that make corrections by August 1? Yes. Because the deadlines under sections 6055 and 6056 for furnishing ACA statements to individuals and filing ACA information returns with IRS have been extended as described above in Q&A #18, the August 1, 2016 deadlines for reduction in penalty amounts to correct the failures described in sections 6721(a)(2) and 6722(a)(2) also are extended. For statements furnished to individuals under sections 6055 and 6056, any failures that reporting entities correct by April 30 and October 1, 2016, respectively, will be subject to reduced penalties. For returns filed on paper with the IRS under sections 6055 and 6056, any failures that reporting entities correct by June 30 or November 1, 2016, respectively, will be subject to reduced penalties. For returns filed electronically with the IRS under sections 6055 and 6056, any failures that reporting entities correct by July 30 or November 1, 2016, respectively, will be subject to reduced penalties. These extended dates have no effect on the penalty relief described in Q&A #3, above, for incomplete or incorrect returns filed or statements furnished to employees in 2016 for coverage offered in calendar year 2015.

If you tried hard but goofed a little, and fixed it, the IRS seems to be in an understanding mood, this first reporting year. Beware, however: because the regulations (26 CFR § 301.6722(b)(2)(i)) say that a dollar amount error is “never inconsequential,” Line 15 errors may not receive as much sympathy as Line 14 and Line 16 errors.

So now, how about “how”? Where is the guidance? There’s not much. Piecing together what we can read on related topics, we suppose that the IRS expects the ALE to furnish the correction as it furnished (or should have furnished) the original. But what if the original e-notice to the employee bounced back? Our guess is that the IRS would want you to furnish the correction by mail or in person, unless the employee has provided a new, valid e-mail address.

We are aware of no requirement that the employer explain separately what error was made, why it was made, or how it has been corrected. Furnishing the corrected Form seems sufficient.

We would like to see current, directly applicable IRS guidance on this, because the question is being frequently asked.


Heffalumps, Woozles and Limited Non-Assessment Periods: Very Confusel

Posted in Affordable Care Act, Government Employers, Private Employers

They’re far they’re near they’re gone they’re here.

They’re quick and slick, they’re insincere.

Beware, beware, be a very wary bear.

A Heffalump or Woozle is very confusel.

“Heffalumps and Woozles,” from “The Many Adventures of Winnie the Pooh.”

So, you were a 2015 Applicable Large Employer. You waited too late to outsource your generation, furnishing and filing of 2015 Forms 1095-C. Fortunately, you believe, you are permitted to file on paper, by May 31, 2016, because you will be filing less than 250 Forms 1095-C. You squeezed under 250 by ignoring employees who averaged less than 30 weekly work hours during 2015. Slick, huh? Maybe. We’re hearing variants of this question too often for comfort. We can’t guarantee that the IRS will share our concern, but here it is.

As usual, the best short summary of the applicable ALE reporting rules is found in the 2015 Instructions for Forms 1094-C and 1095-C. Read the “Full-time employee” definition in the right column on page 13. It ends with this tip:

An employer need not file a Form 1095-C for an individual who for each month of a calendar year is either not an employee of the employer or is an employee in a Limited Non-Assessment Period. However, for the months in which the employee was an employee of the employer, such an employee would be included in the total employee count reported on Form 1094-C, Part III, Column (c). Also, if during the Limited Non-Assessment Period the employee enrolled in coverage under a self-insured employer-sponsored plan, the employer must file a Form 1095-C for the employee to report coverage information for the year.

Some advisors have relied on this to recommend that an ALE generate, furnish and file no 1095-C for an employee who was not “full-time” under the look-back measurement method. Be a very wary bear.

First, “hours worked” is a subset of “hours of service.” Full-time status is based on the latter, which includes all hours for which compensation is due. There are rules for calculating hours of service for salaried and commission-paid employees. In borderline cases, counting only hours worked might misclassify full-time employees. But more troublesome is retroactive reliance on a Limited Non-Assessment Period that was not established properly, or at all, during 2015.

Read the definition’s first paragraph again. That’s “monthly measurement method” language. Monthly measurement is the default option. New hires (people who have served less than one full Standard Measurement Period) reasonably expected to work full-time must be measured that way. For them, the look-back measurement method is not an option. Employers had the option to use the look-back measurement method for part-time and variable hour new hires and for ongoing employees. If so, they may take advantage of the tip regarding months that employees are in a Limited Non-Assessment Period, unless the employees enjoy, in the same month, full-time status due to a preceding Standard Measurement Period. So, let’s read that definition, on page 14 of the Instructions.

Limited Non-Assessment Period. A Limited Non-Assessment Period generally refers to a period during which an ALE Member will not be subject to an assessable payment under section 4980H(a), and in certain cases section 4980H(b), for a full-time employee, regardless of whether that employee is offered health coverage during that period.

The first five periods described below are Limited Non-Assessment Periods only if the employee is offered health coverage by the first day of the first month following the end of the period, and are Limited Non-Assessment Periods for section 4980H(b) only if the health coverage that is offered at the end of the period provides minimum value. For more information on Limited Non-Assessment Periods and the application of section 4980H, see Regulations section 54.4980H-1(a)(26).

  • First Year as ALE Period. January through March of the first calendar year in which an employer is an ALE, but only for an employee who was not offered health coverage by the employer at any point during the prior calendar year. For this purpose, 2015 is not the first year an employer is an ALE, if that employer was an ALE in 2014 (notwithstanding that transition relief provides that no employer shared responsibility payments under section 4980H will apply for 2014 for any employer).
  • Waiting Period under the Monthly Measurement Method. If an employer is using the monthly measurement method to determine whether an employee is a full-time employee, the period beginning with the first full calendar month in which the employee is first otherwise (but for completion of the waiting period) eligible for an offer of health coverage and ending no later than two full calendar months after the end of that first calendar month.
  • Waiting Period under the Look-Back Measurement Method. If an employer is using the look-back measurement method to determine whether an employee is a full-time employee and the employee is reasonably expected to be a full-time employee at his or her start date, the period beginning on the employee’s start date and ending not later than the end of the employee’s third full calendar month of employment.
  • Initial Measurement Period and Associated Administrative Period under the Look-Back Measurement Method. If an employer is using the look-back measurement method to determine whether a new employee is a full-time employee, and the employee is a variable hour employee, seasonal employee or part-time employee, the initial measurement period for that employee and the administrative period immediately following the end of that initial measurement period.
  • Period Following Change in Status that Occurs During Initial Measurement Period Under the Look-Back Measurement Method. If an employer is using the look-back measurement method to determine whether a new employee is a full-time employee, and, as of the employee’s start date, the employee is a variable hour employee, seasonal employee or part-time employee, but, during the initial measurement period, the employee has a change in employment status such that, if the employee had begun employment in the new position or status, the employee would have reasonably been expected to be a full-time employee, the period beginning on the date of the employee’s change in employment status and ending not later than the end of the third full calendar month following the change in employment status. If the employee is a full-time employee based on the initial measurement period and the associated stability period starts sooner than the end of the third full calendar month following the change in employment status, this Limited Non-Assessment Period ends on the day before the first day of that associated stability period.
  • First Calendar Month of Employment. If the employee’s first day of employment is a day other than the first day of the calendar month, then the employee’s first calendar month of employment is a Limited Non-Assessment Period.

Ah, there are the catches. The fourth and fifth scenarios are written in present tense, but apparently referencing 2015, not 2016. Was the ALE actually using lawful initial measurement periods and associated administrative periods for 2015 new hires? Did they produce timely coverage offers to those measured as full-time? If so, but only if so, the Instructions suggest that one full-time month during an initial measurement period would not require the ALE to generate, furnish and file a Form 1095-C for an employee who averaged part time hours over the entire period.

How would the IRS know? Let’s skip the broader reasons why, “what the IRS doesn’t know won’t hurt me” is a bad business plan and dive right into the details. Such people, even for months spent in LNAP status, are to be counted as “employees” reported at Lines 23-35, column “c” of Form 1094-C. The IRS already will have their W-2 Forms, of course. If the column “b” count of full-time employees is just under 250 but the column “c” count exceeds 250, and if a Form W-2 employee not reported on Form 1095-C received a subsidy to buy insurance through an ACA Exchange (reported to the IRS), there may be § 4980H tax and § 6056 reporting inquiries. The employer will bear the burden to prove proper employee classification and reporting.

Code § 4980H: The Tax The Beatles Missed

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

If you drive a car, I’ll tax the street.

If you try to sit, I’ll tax your seat.

If you get too cold, I’ll tax the heat.

If you take a walk, I’ll tax your feet.

“Tax Man,” composed by George Harrison, from The Beatles’ 1966 album “Revolver.”

The Tax Man, it turns out, also may assess you for failing to offer substantially all your full-time employees and their dependents affordable, qualifying group health coverage during 2015. We’re swamped with employer reporting questions just now, but the assessment questions are beginning to trickle in. Who is this Tax Man? How will he notify you of this assessment? When? What are your rights if you disagree? How much time will you have to make what decisions? You deserved answers before you prepared your 2016 budget, but the Tax Man has told us almost nothing so far.

On May 20, 2015, the IRS told us this:

  1. How will an employer know that it owes an Employer Shared Responsibility payment?

The IRS will adopt procedures that ensure employers receive certification that one or more employees have received a premium tax credit. The IRS will contact employers to inform them of their potential liability and provide them an opportunity to respond before any liability is assessed or notice and demand for payment is made. The contact for a given calendar year will not occur until after the due date for employees to file individual tax returns for that year claiming premium tax credits and after the due date for applicable large employers to file the information returns identifying their full-time employees and describing the coverage that was offered (if any).

  1. How will an employer make an Employer Shared Responsibility payment?

If it is determined that an employer is liable for an Employer Shared Responsibility payment after the employer has responded to the initial IRS contact, the IRS will send a notice and demand for payment. That notice will instruct the employer on how to make the payment. Employers will not be required to include the Employer Shared Responsibility payment on any tax return that they file. As explained in question 2, no Employer Shared Responsibility payments will be assessed for 2014.

Since electronic Forms 1095-C must be filed by June 30, 2016, we read the paragraphs just quoted as telling employers to expect, sometime after June 2016, some sort of IRS “contact” regarding “potential liability,” followed by some sort of process for evaluating employer responses. After some period, the IRS may “send a notice and demand for payment,” including payment instructions. Must you pay first and contest later? Will the IRS serve “no liability” notices? We wish we could tell you.

We know where to look to read the answers to those questions – 26 CFR § 54.4980H-6, “Administration and procedure.” Go ahead, click the link. Or just trust us. It reads, in relevant part, “(a) In general. [Reserved]”. This end seems ungratefully dead. What follows is abracadabra about what the IRS may be hiding on the dark side of the moon.  Pay close attention. Quiz to follow.

The preamble to the employer mandate final rules said:

Any assessable payment under section 4980H is payable upon notice and demand and is assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68 of the Code. The IRS will adopt procedures that ensure employers receive certification, pursuant to regulations issued by HHS, that one or more employees have received a premium tax credit or cost-sharing reduction. 45 CFR 155.310(i). The IRS will contact employers to inform them of their potential liability and provide them an opportunity to respond before any liability is assessed or notice and demand for payment is made.

79 Fed. Reg. 8,566 (Feb. 14, 2014). However, § 4980H assessments are not penalties; they are non-deductible excise taxes. 79 Fed. Reg. 8,567. The two enforcement processes are not identical. And, as you have read here, HHS decided not to comply, for at least this year, with its obligation to notify employers of subsidy certifications. Apparently, employers will first learn about employees’ 2015 subsidy certifications when contacted by the IRS regarding associated 2016 tax assessments. Can these contradictions be reconciled?

Section 6671 in Code Chapter 68, subchapter B, tells us that, “penalties and liabilities provided by this subchapter shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as taxes.” Section 6672(b) forbids any § 6671 penalty to be assessed until after the Treasury Secretary has notified the taxpayer, in writing by mail. The statute gives IRS the time allowed by § 6501 for mailing this notice, but § 6501 has varying rules for different sorts of taxes, none of them § 4980H assessments. Three years is the general rule. A timely mailed notice opens a sixty-day window for evaluation of taxpayer objections. If none is heard, the Secretary may then serve a “notice and demand.” If objections are made, the Secretary must then make a “final administrative determination with respect to such protest.”

Once a notice and demand is served, we suspect that the IRS may proceed as described in 26 CFR § 601.104:

Under the law an assessment is prima facie correct for all purposes. Generally, the taxpayer bears the burden of disproving the correctness of an assessment. Upon assessment, the district director is required to effect collection of any amounts which remain due and unpaid. Generally, payment within 10 days from the date of the notice and demand for payment is requested; however, payment may be required in a shorter period if collection of the tax is considered to be in jeopardy.

Absent timely payment, the District Director may levy on the taxpayer’s property, after giving a ten-day advance notice.

Adding it all up, IRS may not be bound to assess in 2016 employer mandate taxes that accrued in 2015, despite lots of guidance that it will. Conceivably, it could double-up next year. A proposed assessment probably will arrive in the mail, addressed, we suspect, to the person who signed your 2015 Form 1094-C, at the address shown in Part I of Form 1094-C. You might have 60 days to lodge a protest in some form that we hope will be specified in that mailing. Very probably, you will bear the burden to prove that the proposed assessment is materially incorrect. To do that, you might need ready access to your employee hire and termination dates, hours of service data, your records of group health coverage offered, accepted and declined, your Forms 1094-C and 1095-C, and payroll records. Some employers may need also to prove minimum plan value.

Few employers are ready for this helter skelter. We urge the IRS not to just let it be. We can work it out, can’t we? Fill the hole at 26 CFR § 54.4980H-6. Any time at all.


How many rock and roll song titles are quoted or referenced in this article?

a. 3

b. 5

c. 8

d. 10

How many of those songs did The Beatles record?

a. 2

b. 4

c. 6

d. 8

Self-Funded Plan Discrimination Against Mental Health Treatment: Is Yours Doing This?

Posted in Coverage Mandates

On January 22, 2016, the court in Joseph and Gail F. v. Sinclair Services Company, D. Utah No. 2:14-cv-00505, held that a self-funded plan violated the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 by excluding residential treatment from its mental health coverages. In relevant part, the statute commands that treatment limitations applicable to mental health benefits must be “no more restrictive than the predominant treatment limitations applied to substantially all medical and surgical benefits,” and compels plans to assure that “there are no separate treatment limitations that are applicable only with respect to mental health . . . benefits.” 29 U.S.C. § 1185a(a)(3)(A)(ii). The plan in question defined a residential treatment facility as “[a] child-care institution that provides residential care and treatment for emotionally disturbed children and adolescents.” So, when the plan deleted coverage for residential treatment effective January 1, 2013, it targeted mental health benefits with no corresponding reduction of general medical and surgical benefits. Based on that holding, the court remanded the ERISA appeal to the plan administrator for a redetermination of benefits.

When amending a self-funded plan to manage claim exposure, take care not to eliminate a category of coverage that applies only to mental health treatment unless medical and surgical benefits are subject to substantially the same reduction.

Questionable Retaliation Theory Gets Traction

Posted in Affordable Care Act, Coverage Mandates, Government Employers, Private Employers

Since our earliest postings, we have warned of a notion, prevalent among employee counsel, that an employer plan sponsor unlawfully retaliates against an employee by reducing her work hours in order to deprive her of ACA “full-time” coverage offer eligibility.  The musings that we have heard and read rarely distinguish claims under ERISA § 510 (29 U.S.C. § 1140) and ACA § 1558 (29 U.S.C. § 218c). Pending review of judicial opinions addressing such claims, we have been skeptical. It seems to us that, if managing work hours to minimize ACA “full-time” exposure violates ERISA or the ACA, then managing weekly work hours of all employees to limit future exposure to FLSA claims once raised by some should violate the FLSA’s anti-retaliation provision, 29 U.S.C. § 215.  But, typically, non-discriminatory management of future exposure is permitted.  In the ACA context, it’s a main theme of the IRS employer mandate rules.

On February 9, 2016, without addressing those points, the court in Marin v. Dave & Buster’s, Inc., S.D. N.Y. No. 1:15-cv-03608 denied a defense motion to dismiss such a claim under ERISA § 510.  The court found sufficient Plaintiff’s evidence that a Times Square store manager and assistant manager had told employees that work hours were cut because the employer forecast that, absent such management, the ACA would impose as much as two million dollars of new expense in 2015.  The store’s number of full-time employees fell from over 100 to about 40.  That evidence was enough, said the court, to satisfy the requirement for proof of a specific intent to interfere with benefits.

This potentially disruptive opinion bears watching.  In the meantime, if you’re looking for a corporate logo, don’t pick a bulls-eye.