Smart Benefits: 2020 ACA Compliance Checklist
Monday, November 25, 2019
Plan Design Changes
Out-of-Pocket Maximums
Under the ACA, health plans are subject to limits on cost-sharing for essential health benefits (EHB). The ACA’s overall annual limit on cost-sharing (also known as an out-of-pocket maximum) applies to all health plans, whether fully-insured or self-insured.
A health plan’s out-of-pocket maximum for EHB may not exceed $8,150 for self-only coverage and $16,300 for family coverage, effective for plan years beginning on or after January 1, 2020.
Note that the ACA’s cost-sharing limit is higher than the out-of-pocket maximum for HSA-compatible high deductible health plans (HDHPs).
HSA and HDHP Limits
The IRS has made cost-of-living adjustments to the applicable dollar limits for HSAs and HDHPs for 2020:
Health FSA Contributions
The IRS has announced that the FSA dollar limit on employee salary reduction contributions will increase from $2,700 (for 2019) to $2,750 (for 2020).
Summary of Benefits & Coverage (SBC)
Health plans and health insurance carriers must provide an SBC to enrollees to help them understand their coverage and make coverage decisions. Plans and insurers must provide the SBC to participants who enroll or re-enroll during an open enrollment period, as well as to participants who enroll at other times during the plan year.
Employer Shared Responsibility Rules
Under the ACA’s employer shared responsibility rules, applicable large employers (ALEs) are required to offer affordable, minimum value (MV) coverage to their full-time employees and their dependents, or risk being liable for a penalty.
An ALE will be subject to penalties if one or more full-time employees receive a subsidy for purchasing health coverage through an Exchange. An individual may be eligible for an Exchange subsidy either because the ALE: (1) does not offer coverage to that individual; or (2) offers coverage that is not affordable or does not provide minimum value.
Applicable Large Employer Status
The ACA’s employer shared responsibility rules apply only to ALEs. ALEs are employers with 50 or more full-time employees (including full-time equivalents) on business days during the preceding calendar year. If you haven’t already, now is the time to determine your ALE status for 2020.
Employer Mandate Penalties
ALEs may be subject to a penalty for (1) failure to offer coverage to full-time employees and their dependents – the “part a” penalty; or (2) offering coverage that is not affordable or does not provide minimum value – the “part b” penalty.
For 2020, the penalty for failure to offer coverage is $2,570 per full-time employee, excluding the first 30 full-time employees. The penalty for offering coverage that is unaffordable or does not provide minimum value is $3,860 per full-time employee who receives a premium tax credit for Exchange coverage.
Affordability of Coverage
For plan years beginning in 2020, the IRS has announced that coverage will generally be considered affordable if the employee’s required contribution for the lowest cost self-only health plan offered is 9.78% or less of his or her household income for the taxable year. The IRS has created three safe harbors that employers may use in place of the employee’s household income to determine affordability: W-2, Rate of Pay, and Federal Poverty Level.
ACA Reporting Requirements
The ACA requires ALEs to report information to the IRS and to their full-time employees regarding the employer-sponsored health coverage they offer using Forms 1094-C and 1095-C. The ACA also requires employers with fewer than 50 full-time employees who sponsor a self-insured health plan to report health plan enrollment using Forms 1094-B and 1095-B.
2019 Forms 1095-B and -C must be provided to employees by January 31, 2020. (In past years, IRS has extended that deadline, but as of this writing, no such extension has been granted for 2019.) Forms 1094 and 1095 must be filed with the IRS by February 28, 2020 (or March 31, 2020, if filing electronically).
ACA Exchange Notice Requirements
Employers are required to provide all new hires with a written notice that contains information about the ACA’s health insurance Exchanges and describes the availability of premium tax credits and the effects of obtaining coverage through an Exchange.
The U.S. Department of Labor has issued model Exchange notices for employers to customize and use. The notice may be provided by first-class mail, or may be provided electronically if the requirements of the DOL’s electronic disclosure safe harbor are met.
Rob Calise is the Managing Director, Employee Benefits of The Hilb Group of New England, where he helps clients control the costs of employee benefits by focusing on consumer-driven strategies and on how to best utilize the tax savings tools the government provides. Rob serves as Chairman of the Board of United Benefit Advisors, and is a board member of the Blue Cross & Blue Shield of RI Broker Advisory Board, United HealthCare of New England Broker Advisory Board and Rhode Island Business Healthcare Advisors Council. He is also a member of the National Association of Health Underwriters (NAHU), American Health Insurance Association (AHIA) and the Employers Council on Flexible Compensation (ECFC), as well as various human resource associations. Rob is a graduate of Bryant University with a BS in Finance
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