Lawyers, politicians, economists, climate scientists, fad diet peddlers . . . we all know that it’s child’s play to persuade people of what they want to believe. Perhaps that explains the persistence of so many questionable beliefs about ACA compliance. Here are three examples.
The Look –[way] back Measurement Method
The ACA commands or allows employers to identify their “full-time” employees in two ways, for different purposes. The “monthly measurement method” simply asks whether an employee averaged at least 30 weekly “hours of service” in a given month. It is used to count the monthly number of full-time employees to which the employer must add the monthly number of full-time equivalent employees to determine the employer’s status, or not, as an “Applicable Large Employer” (ALE) for the following year. Monthly measurement also is the default rule for identifying full-time employees who are due an offer of coverage. Coverage offers (and non-offers) to full-time employees must be reported the following year on Form 1095-C.
The “look-back measurement method” has nothing to do with ALE status determination. It’s an alternative method that employers may use for coverage offer and reporting purposes. New full-time employees must be offered coverage within the maximum “90-day” waiting period (or shorter period stated in the group health plan). But the full-time status, or not, of new variable-hour employees may be determined as much as a year after hiring, under the look-back measurement method, and coverage offers extended thereafter. Ongoing employees – i.e., those employed for at least one standard measurement period – may also have their full-time status determined under the look-back measurement method. With some exceptions, those “measured” as full-time during the measurement period must be treated as full-time for the associated stability period, and those not measuring up need not be treated as full-time during the associated stability period. Again, this applies to coverage offers and to coverage offer reporting.
Many employers have been advised that their Code § 4980H(a) tax exposure may be minimized by retroactive application of the look-back measurement method. We have yet to hear the legal basis for that advice. An ALE that did not offer 2015 minimum essential coverage to at least 70% of its full-time employees and their dependents has § 4980H(a) exposure if at least one full-time employee bought subsidized 2015 insurance through an ACA Exchange. We are aware of no IRS guidance stating or suggesting that an employer in 2016 may retroactively adopt the look-back measurement method in order to minimize the number of full-time employees used in the 2015 monthly assessment calculations. Maybe the IRS will cut you that slack, but don’t count on it.
A Rose by Any Other EIN
For many regulatory purposes for many years, federal agencies have treated nominally separate employers, with separate Employer Identification Numbers, as a single “controlled group” employer, based on common ownership and other indicia of control. Apparently, the IRS command to report 2015 coverage offers EIN-by-EIN (one Form 1094-C “Authoritative Transmittal” for each EIN) has encouraged employers to believe that each EIN will be viewed separately as an ALE, or not. Well, no.
An EIN within a controlled group is called an “Applicable Large Employer Member.” Under penalty of perjury, it must identify the group’s other members on Form 1094-C, Part IV (page 3). If, in the aggregate, the group averaged at least 50 monthly full-time employees (including FTE equivalents) in 2015, then it’s a 2016 ALE. The IRS will total the employees reported by all group EINs to make that determination.
Plop, Plop, Fizz, Fizz: Under-100 Relief
“Smaller large employers” – i.e., ALEs with less than 100 full-time employees (including equivalents) – may avoid § 4980H assessments that otherwise would be imposed in 2016 by filing their 2015 Form 1095-Cs with a 2015 Form 1094-C, checking Form 1094-C, Line 22, Box C to claim that relief. Many employers have been advised about the relief, but not that it is conditioned on the filing. Thus, many have not planned to file. We are unaware of any IRS guidance stating or suggesting that this relief will be extended to smaller large employers that fail to file as required. And, by the way, before checking Box C, read pages 15-16 of the Instructions to assure that you understand what you are certifying, under penalty of perjury, by doing so.
We glossed-over many conditions, qualifications and exceptions to keep this simple, because our least sophisticated readers are most in need. If you’re among them, get help yesterday.