Noncalendar Plan Years & the Employer Mandate in 2014

Noncalendar Plan Years & the Employer Mandate in 2014      

February 20, 2013 

By Larry Grudzien

Attorney-At-Law

An employer's health plan's plan year begins on September 1 each year.  If the employer is a "large employer" under health care reform, when is the employer subject to the employer mandate, January 1, 2014 or September 1, 2014?

The employer mandate is generally effective on January 1, 2014. However, two transition rules apply that may delay the assessment of penalties until the first day of your first plan year that starts on or after January 1, 2014. The transition rules say that if the employer  maintained a noncalendar year plan as of December 27, 2012, and all of its  full-time employees are offered affordable coverage that provides minimum value no later than that first day of the plan year that starts in 2014, penalties will not be assessed for the months prior to the first day of the plan year that starts in 2014 for:

1. Any employee (whenever hired) that would be eligible for coverage, as of the first day of the first plan year that begins in 2014 under the eligibility terms of the plan as in effect on December 27, 2012; and

2. Any other employees if (a) the employer's noncalendar year plan was offered to at least one third of its employees (full-time and part-time) at the most recent open season; or (b) its noncalendar year plan covered at least one quarter of its employees.

Therefore, for any employees who are eligible to participate in the plan under its terms as of December 27, 2012 (whether or not they take the coverage), the employer will not be subject to a penalty for those employees until the first day of it noncalendar plan year that starts in 2014 if employees are offered affordable coverage that provides minimum value no later than that first day of the plan year that starts in 2014.

For any other employees that were not eligible to participate under the terms of the plan in effect on December 27, 2012, if the employer offered coverage under its noncalendar year plan starting on September 1, 2012 to at least one third of your employees, or if the plan covered at least one quarter of its employees, the employer could avoid liability for a penalty until September 1, 2014 if it expands the plan to offer coverage that is affordable and meets the  minimum required value to the full-time employees who had previously not been offered coverage. For purposes of determining whether the plan covers at least one quarter of the employees, the employer can use any day between October 31, 2012 and December 27, 2012 for doing the calculation.

For More Information:

If you have any comments or questions regarding any of above information, please do not hesitate to call Robert Slayton at 630-779-1144 or Larry Grudzien at (708) 717-9638.

IRS Issues Guidance on Health Insurance Premium Tax Credit -Clarification

IRS Issues Guidance on Health Insurance Premium Tax Credit -Clarification

February 5, 2013

By Larry Grudzien, Attorney-At-Law

The IRS issued a final regulations on when an employer-sponsored plan is considered "affordable" for an individual related to the employee for purposes of eligibility for a premium tax credit. Under Health Care Reform, employees may be eligible for a premium tax credit to purchase health insurance through the future health insurance exchanges if, among other reasons, the employer plan is deemed unaffordable.

The final regulations clarify that for taxable years beginning before January 1, 2015, an eligible employer-sponsored plan is affordable for related individuals if the portion of the annual premium the employee must pay for self-only coverage does not exceed 9.5% of the taxpayer's household income.

An employer plan will be affordable for family members if the cost of self-only coverage does not exceed 9.5% of the employee's household income. In other words, for purposes of whether family members are eligible for tax credits, the affordability of family coverage is not taken into account; all that matters is that the cost of self-only coverage is affordable to the employee

For purposes of applying the affordability exemption from the individual

mandate in the case of related individuals, the required contribution is based on the premium the employee would pay for employer-sponsored family coverage.

For an employee eligible under an employer plan, affordability (for individual mandate exemption purposes) will be based on whether the cost of self-only coverage exceeds 8% of the employee's household income. For a related individual (such as a spouse or child), however, affordability for this purpose will be based on whether the cost of family coverage exceeds 8% of household income. Under these rules, members of an employee's family may qualify for an individual mandate exemption, even though the offer of affordable employer coverage to the employee would require the employee to enroll or risk paying a penalty.

These final regulations apply to taxable years ending after December 31, 2013.

For a copy of the final regulations, please click on the link below:

 http://www.gpo.gov/fdsys/pkg/FR-2013-02-01/pdf/2013-02136.pdf

If you have any comments or questions regarding any of above information, please do not hesitate to call me (Robert Slayton) at 630-779-1144 or Larry Grudzien at (708) 717-9638.