From the Desk of Michelle Sheppard- Updated Affordability Percentage & Employer Reporting Reminders -
(Posted on 10/29/21)
The weather’s getting colder which means the season of 1/1 renewals is upon us! I wanted to send out a friendly reminder that the IRS has set new affordability percentages for plan years beginning in calendar year 2022. Applicable large employers (ALEs) use the affordability percentage to help make sure that their employer-sponsored coverage is deemed “affordable” by the ACA under the Employer Shared Responsibility Provisions.
The 2022 percentage is an decrease from the 2021 number, dropping from 9.83% to 9.61% in 2022. It’s important to speak to those employers before renewal to review contribution models in order to make sure that the group’s offer of coverage is still in compliance with the new 2022 numbers. As a reminder, employer-sponsored coverage is generally considered affordable as long as the single rate contribution that meets minimum value for the lowest-cost plan does not exceed the affordability percentage (9.61% in 2022) of an employee’s household income. While it can be difficult to know what an employee’s household income is, the IRS provides three safe harbors that employers can use to determine affordability where the household income is unknown. Additional requirements under the Employer Shared Responsibility Provisions note that coverage must also be offered at least 95% of their full-time employee workforce and dependent children.
In addition to the updated affordability percentage for applicable large employers, there are a few different types of employer reporting that may affect some of your groups. The following reviews employer reporting for applicable large employers (ALEs) and self-funded groups, the NJ state reporting requirements, and also a Massachusetts reporting requirement.
Employer Reporting (1094/1095 B&C)
This reporting is still in force and our applicable employers should continue to comply with this ACA requirement. Groups should take this time and make sure that they are aligned with the proper vendor to help them issue the 1094 and 1095 forms. Generally, the 1094-C & 1095-C forms will be issued by the same vendor that files the company’s W-2s. Or, the employer can vet out another TPA to assist them with the filing. Generally, you must file Forms 1094-C and 1095-C by February 28 if filing on paper (or March 31 if filing electronically) of the year following the calendar year to which the return relates, however, extensions may be provided.
As a reminder for self-funded groups - if a group is a part of a level or self-funded arrangement, the employer may be responsible to file/send proof of enrolled coverage (forms 1094/1095-B) to the IRS and employees. This is indicated on forms 1094-B and 1095-B. This form is used for individuals on the group plan to prove that they had coverage. Some self-funded carriers may provide reports or assistance with the filing, so please be sure to check with them. If a group is an ALE (over 50 full time equivalents) AND on a self-funded plan they are required to show both the proof of coverage to insured employees and the offer of coverage. In essence they are acting as the provider and the employer. For groups that fall into this category, the IRS has made it a little easier for groups to only fill out the 1094-C and 1095-C forms. This is the form that all ALEs must complete and also has a section for them to complete if they are self-funded.
NJ State Reporting
In addition to the federal filings, to enforce the NJ Health Insurance Mandate, NJ requires third party reporting to verify health coverage information for NJ residents. We are waiting on the 2022 deadlines however last year the filers had to submit coverage information electronically by March 31st. Employers need to make sure that they submit any required reporting to NJ, if applicable, as this state requirement is in addition to the federal reporting requirements. In some circumstances, employers may not need to file information directly to the state as their health insurance carrier may be sending on their behalf.
Massachusetts Reporting
Employers that have six or more employees in Massachusetts within the past 12 months are required to complete the Health Insurance Responsibility Disclosure (HIRD) form. This form is used to collect information about the employer sponsored insurance offerings. The HIRD form is available starting November 15 and must be completed by December 15 of the reporting year. This must be done electronically.
Below you’ll find links to copies of the new draft forms/instructions for 2022 and resources on the information above.
Please note that the final 1094/1095 B&C forms are not yet available but can be found on the IRS website once finalized.
FAQ on Employer Shared Responsibility Provisions - https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-employer-shared-responsibility-provisions-under-the-affordable-care-act
NJ Shared Responsibility Requirement - https://nj.gov/treasury/njhealthinsurancemandate/employers.shtml
MA Health Insurance Responsibility Disclosure (HIRD) FAQs - https://www.mass.gov/info-details/health-insurance-responsibility-disclosure-hird-faqs
The 2022 percentage is an decrease from the 2021 number, dropping from 9.83% to 9.61% in 2022. It’s important to speak to those employers before renewal to review contribution models in order to make sure that the group’s offer of coverage is still in compliance with the new 2022 numbers. As a reminder, employer-sponsored coverage is generally considered affordable as long as the single rate contribution that meets minimum value for the lowest-cost plan does not exceed the affordability percentage (9.61% in 2022) of an employee’s household income. While it can be difficult to know what an employee’s household income is, the IRS provides three safe harbors that employers can use to determine affordability where the household income is unknown. Additional requirements under the Employer Shared Responsibility Provisions note that coverage must also be offered at least 95% of their full-time employee workforce and dependent children.
In addition to the updated affordability percentage for applicable large employers, there are a few different types of employer reporting that may affect some of your groups. The following reviews employer reporting for applicable large employers (ALEs) and self-funded groups, the NJ state reporting requirements, and also a Massachusetts reporting requirement.
Employer Reporting (1094/1095 B&C)
This reporting is still in force and our applicable employers should continue to comply with this ACA requirement. Groups should take this time and make sure that they are aligned with the proper vendor to help them issue the 1094 and 1095 forms. Generally, the 1094-C & 1095-C forms will be issued by the same vendor that files the company’s W-2s. Or, the employer can vet out another TPA to assist them with the filing. Generally, you must file Forms 1094-C and 1095-C by February 28 if filing on paper (or March 31 if filing electronically) of the year following the calendar year to which the return relates, however, extensions may be provided.
As a reminder for self-funded groups - if a group is a part of a level or self-funded arrangement, the employer may be responsible to file/send proof of enrolled coverage (forms 1094/1095-B) to the IRS and employees. This is indicated on forms 1094-B and 1095-B. This form is used for individuals on the group plan to prove that they had coverage. Some self-funded carriers may provide reports or assistance with the filing, so please be sure to check with them. If a group is an ALE (over 50 full time equivalents) AND on a self-funded plan they are required to show both the proof of coverage to insured employees and the offer of coverage. In essence they are acting as the provider and the employer. For groups that fall into this category, the IRS has made it a little easier for groups to only fill out the 1094-C and 1095-C forms. This is the form that all ALEs must complete and also has a section for them to complete if they are self-funded.
NJ State Reporting
In addition to the federal filings, to enforce the NJ Health Insurance Mandate, NJ requires third party reporting to verify health coverage information for NJ residents. We are waiting on the 2022 deadlines however last year the filers had to submit coverage information electronically by March 31st. Employers need to make sure that they submit any required reporting to NJ, if applicable, as this state requirement is in addition to the federal reporting requirements. In some circumstances, employers may not need to file information directly to the state as their health insurance carrier may be sending on their behalf.
Massachusetts Reporting
Employers that have six or more employees in Massachusetts within the past 12 months are required to complete the Health Insurance Responsibility Disclosure (HIRD) form. This form is used to collect information about the employer sponsored insurance offerings. The HIRD form is available starting November 15 and must be completed by December 15 of the reporting year. This must be done electronically.
Below you’ll find links to copies of the new draft forms/instructions for 2022 and resources on the information above.
Please note that the final 1094/1095 B&C forms are not yet available but can be found on the IRS website once finalized.
FAQ on Employer Shared Responsibility Provisions - https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-employer-shared-responsibility-provisions-under-the-affordable-care-act
NJ Shared Responsibility Requirement - https://nj.gov/treasury/njhealthinsurancemandate/employers.shtml
MA Health Insurance Responsibility Disclosure (HIRD) FAQs - https://www.mass.gov/info-details/health-insurance-responsibility-disclosure-hird-faqs