Mid-Year Compliance Review
Late June begins the start of summer and thoughts turn to those lazy-hazy days of just relaxing. When it comes to the matter of compliance though, 2017 is not the time to “just kick back” and see what happens. In July, many employers will start to review their past compliance efforts and begin to look forward to the new employee benefit plan year. The following discusses some of the issues that employers should continue to monitor for the rest of the year.
Affordable Care Act
Under the Affordable Care Act (ACA) an Applicable Large Employer (ALE) is required to offer minimum essential coverage that is affordable and provides minimum value. Known as the employer mandate, an employer could be penalized if the employer fails to offer any coverage – whether “affordable” or not – to at least 95% of its full-time employees, (and their dependents) and at least one full-time employee enrolls in subsidized coverage on the Exchange. The penalty for 2017 is $2,260 (annualized) or $183.33 monthly multiplied for every full-time employee in the employer’s company, reduced by the first thirty full-time employees.
On the other hand, if an ALE does offer coverage to at least 95% of its full-time employees (and dependents), but the coverage is not affordable, then the employer will be subject to a penalty of $3,390 (annualized) or $282.50 monthly multiplied by just the number of those specific full-time employees to whom affordable coverage was not offered and who are receiving subsidized coverage on the Exchange during that month.
The affordability percentage is indexed and, as such, has gradually increased reaching 9.69% in 2017. However, 2018’s limit will decrease to 9.56%.
To assist with the enforcement of the employer mandate, ALEs are required to report offers of health coverage and enrollment in health coverage for their employees. Forms 1094-C and 1095-C are used by ALEs to report this information to the IRS. The “C” forms assist the IRS in determining an ALE’s compliance with the employer mandate and the eligibility of employees for the premium tax credit.
Upon the inauguration of President Trump and his signing of two Executive Orders, many employers erroneously believe that the ACA is no longer applicable. The IRS has given no indication that it is planning to not enforce the employer mandate, so an employer should proceed as if penalties for noncompliance will be issued.
The ACA is still in effect and actions need to be taken accordingly. Unless and until any legislation is finalized, stay the current course, and continue to comply with ACA employer mandate and reporting requirements as if nothing has changed.
To that end, employers should review their compliance with the Affordable Care Act:
• Determine whether the employer is or is not an Applicable Large Employer by reviewing to see if they had 50 or more full-time or full-time equivalent employees in 2016.
• If an ALE, ensure that in 2017 affordable, minimum value coverage is being offered to full-time employees and dependents (a full-time employee is one who works on average 30 hours a week).
• Continue to gather data as to what full-time employees have been offered coverage, accepted or waived it and whether coverage was affordable for the purpose of 1095-C and 1094- C reporting.
As a final note, in late June the Senate proposed its efforts to repeal and replace significant provisions of the Affordable Care Act, released a draft of the Better Care Reconciliation Act of 2017 (BCRA). Although the BCRA does not repeal the individual and employer mandate, they would be effectively eliminated by making the penalties $0 for tax years starting after December 31, 2015. But as already noted, until there is a new Act in place the ACA remains effective.
Equal Employment Opportunity Commission (EEOC)
The EEOC collects workforce data from all employers with 100 or more employees through an annual EEO-1 Report. The report, in its current form, collects data about gender, race, and ethnicity of employees by 10 different job groupings. In 2016 the EEOC revised the form in order to begin requiring employers to provide employee pay data.
This new information must be provided in the 2017 form, and to give employers time to collect that data, the deadline for 2017 will be extended by six months to March 31, 2018.
The EEOC’s goal in gathering this additional data is to identify businesses that may have pay gaps, and then target those employers who are discriminating on the account of gender—and possibly race or ethnicity—through enforcement actions. The EEOC plans to publish reports using aggregated data and to train its investigators to identify potential indicators of discrimination warranting additional investigation.
Thus, it would be in the best interest of those applicable employers to take the following action steps:
• Review pay practices to address and correct any areas of pay disparity based on gender or race/ethnicity before reporting to the EEOC;
• Review and if necessary revise job descriptions in order to determine which of the EEO-1 job categories each position should be reported under;
• Consider any time requirements and costs for data collection in order to generate the necessary reports; and
• Ensure proper understanding of how employees earn overtimes, bonuses, commissions and other W-2 box 1 wages.
Generally a “wellness program” refers to a program or activity to encourage employees to improve their health, thereby reducing overall healthcare costs. Programs run the spectrum of encouraging healthier lifestyles, such as exercising daily or stop smoking to obtaining medical information through the completion of health risk assessments or screenings for health risk factors. Financial incentives generally are offered to employees who participate or achieve certain health outcomes.
In 2016, the Equal Employment Opportunity Commission (EEOC) issued final rules applicable to employer-sponsored wellness programs as they relate to the American with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). These final rules are applicable to employer plan years beginning on or after January 1, 2017.
Besides the ADA and GINA, employer-sponsored wellness programs can be subject to other federal laws, including the Employee Retirement Income Security Act (ERISA) and the Health Insurance Portability and Accountability Act (HIPAA). It should be noted that compliance with one law does not guarantee compliance with other laws.
Any wellness program that includes a disability-related inquiry and/or medical exam is subject to this rule. The ADA rule provides the extent to which an employer may use incentives to encourage participation in wellness programs that require a response to a disability related inquiry or to undergo a medical examination. These inquiries or medical examinations include medical questionnaires, health risk assessments (HRAs), and biometric screenings. The incentive limits imposed by the ADA final rule are applicable to all wellness programs regardless of whether offered only to employees enrolled in the employer sponsored health plan, all employees regardless of enrollment in the group health plan, or offered as a stand-alone benefit without any group health plan coverage.
An employer’s wellness program is required to be voluntary. Voluntary means an employer cannot:
• Require an employee to participate in the program;
• Deny coverage under the employer’s group health plan or limit coverage under the plan for employees not participating in the wellness program; and
• Take any adverse action, retaliate against, or coerce employees who choose not to participant.
The regulations provide a notice requirement to employees and guidelines on incentive limitations under both the ADA and GINA, and were effective for plan years beginning on or after January 1, 2017.
Employers should take the time to review their benefit programs and identify any wellness program it may be offering in 2017. It could be an employer is inadvertently offering a wellness program that is included as part of a benefits option offered by its insurer. Thus, employers should take the following into consideration:
• Is the wellness program reasonably designed to promote health or prevent disease?
• Are employees required to answer any disability related questions or have medical examinations to which the ADA would apply?
• Is it ensured that participation in any wellness program is voluntary?
• Has the confidentiality of any medical condition or history information been maintained?
• Do provided incentives meet the limitations imposed by the ADA, GINA and HIPAA?
• Are reasonable accommodations being offered to disabled employees as to participation in any wellness program?
• Does any smoking cessation program require testing, such that it comes within the EEOC limitations for incentives?
JRG Advisors, which manages the ChamberChoice program, is available on a consultative basis to help assist Chamber members with compliance related issues. For more information, call 1-800-377-3539.