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2013 ACA Deadlines: What Employers Should be Thinking About Right Now

2013 is a relatively light year in the overall scope of health care reform implementation. Few mandates or requirements have 2013 effective dates. And so much will be happening in 2014 that it tends to overshadow 2013. But employers still have a number of things to be thinking about this year. Here are ten items to consider putting on your checklist.

1. SBCs. The requirement to distribute a summary of benefits and coverage (SBC) in connection with open enrollment applies to open-enrollment periods beginning on or after September 23, 2012. So employers with fiscal-year plans may still be getting ready for their first covered open-enrollment periods. For employers that have already distributed SBCs, any mid-year change in plan terms that affects the content of the SBC must be described in a notice of modification given at least 60 days in advance of the effective date of the modification. Also, distribution of the SBC is not a one-time event. It may be required annually or even more frequently, such as in connection with special enrollments or upon request.

2. W-2 Reporting. Currently, only large employers are required to comply with the obligation to report the aggregate cost of applicable employer-sponsored coverage in box 12 (code DD) of an employee’s W-2. Large employers generally are employers that issued 250 or more W-2s in the preceding calendar year. So whether an employer is subject to this requirement can change from year to year, depending on changes in the number of employees and W-2s issued. Employers that were exempt from this requirement for 2012 W-2s (i.e., W-2s issued earlier this year) may need to re-evaluate whether they are still exempt from this requirement for 2013 W-2s, based on the number of W-2s they issued for 2012. If an employer has become subject to the reporting requirement, steps should be taken to ensure the appropriate data is being collected to allow for proper reporting on the 2013 W-2s.

3. Additional Medicare Tax. The 0.9% increase in the Medicare tax applicable to wages and other earned income in excess of a threshold amount ($200,000 for a single individual and $250,000 for married filing jointly) took effect January 1, 2013. For employers, the principal effect of this is the requirement to withhold the additional tax from all wages paid to employees in excess of $200,000. The obligation to withhold does not depend on whether the employee has other income or will actually be subject to the tax. For example, a married employee with $240,000 in wages and no other household income would not actually owe the tax. But employees cannot opt out of tax withholding. Withholding is required once $200,000 in FICA wages have been paid.

4. PCORI Trust Fund Tax. The Patient Centered Outcomes Research Institute (PCORI) trust fund tax must be paid with respect to plan years ending on or after October 1, 2012. The tax is due (and a return must be filed) by July 31 following the calendar year in which the plan year ends. So calendar-year plans and any other plans with plan years that ended on or after October 1, 2012 and before December 31, 2012, will need to ensure the PCORI tax is paid by July 31, 2013. For fully insured plans, this will be handled by the insurance carrier. But employers with self-insured plans, including HRAs (whether integrated or stand-alone), will be responsible for calculating and paying the tax and filing the required return on IRS Form 720.

5. Contraception Mandate. Under guidance issued by HHS in February 2012, nonprofit religious organizations that object on religious grounds to covering some or all contraception services were provided with a one-year nonenforcement safe harbor that allowed them to defer compliance with the contraception mandate until the first plan year beginning on or after August 1, 2013. Proposed regulations issued in February 2013 would expand on that relief by providing a permanent “accommodation” option for nonprofit religious employers. Nonprofit religious employers would be excused from directly providing women’s contraception or sterilization services, so long as certain requirements are satisfied, including self-certifying that the employer is eligible for the accommodation. It is expected that those rules will be finalized in the next few months, and nonprofit employers that want to rely on them will need to make sure all required steps are taken by their first plan years beginning on or after August 1, 2013.

6. Employer Exchange Notice. Under Section 18B of the Fair Labor Standards Act, which was added by the ACA, employers are required to provide employees with a notice describing coverage options that may be available to them through the public insurance exchanges. This requirement was scheduled to take effect March 1, 2013, but compliance has been deferred until further guidance is issued. No rules have been provided yet, but the Department of Labor has said it expects that distribution of the notices likely will be required by late summer or fall, in order to get them out before the beginning of the public exchange open-enrollment period on October 1, 2013. It is also anticipated that the DOL will provide model notice language.

7. Stand-Alone HRAs. Under FAQ guidance issued earlier this year, it appears that stand-alone health reimbursement arrangements (HRAs) will no longer be permitted after 2013, because they will be deemed to violate the ACA’s prohibition on annual and lifetime limits. HRAs that are integrated with major-medical coverage will be allowed to continue, and most contributions to stand-alone HRAs made before January 1, 2014 will continue to be available to reimburse medical expenses incurred on or after January 1, 2014. But employers who have relied on stand-alone HRAs as part of their benefit packages will need to consider how that piece will be replaced or eliminated in connection with their planning for 2014.

8. Transitional Reinsurance Fee. The transitional reinsurance fee is a fee assessed against health plans (both fully insured and self-insured) in 2014, 2015, and 2016 to fund the transitional reinsurance program established by the ACA to help reinsure risk in the individual insurance market. The fee is calculated in a manner similar to the PCORI tax in that it depends on the average number of covered lives under the plan. But the per-life rate is much higher than the PCORI tax. For 2014, the transitional reinsurance fee is $63 per covered life. So employers, particularly those with self-insured plans, will want to take this into account when budgeting for 2014 health care costs.

9. Employer Shared Responsibility. Of course, one of the big changes coming in 2014 will be the implementation of the employer shared responsibility (or “play-or-pay”) mandate. But employers subject to those rules will not want to wait until 2014 to begin planning for them. Employers who intend to “play” will need to ensure they begin offering qualifying health coverage to virtually all full-time employees in 2014. For most employers, the determination of which employees are full-time will be made by reference to hours worked during a look-back measurement period. For plan years beginning in 2014, that look-back period is likely to extend into 2013 (and in some cases as far back as late 2012). So employers need to be thinking now about how they want that look-back period to work and will need to make sure systems are in place to collect the data (e.g., hours of service) necessary to determine each employee’s status during the look-back period.

Note: I'll be discussing implementation of the play-or-pay rules in more detail during a break-out session at the upcoming Foulston Siefkin Labor & Employment Law Seminar on May 7 (Wichita) and May 14 (Overland Park).

10. Somewhere Out There. Two more key mandates - automatic enrollment for large employer health plans and nondiscrimination rules for fully insured health plans - are lurking. They are not being enforced until guidance is issued, and it is not clear when guidance will be provided. But at this point it remains possible that guidance implementing one or both mandates will be released yet this year, to take effect for plan years beginning in 2014. Employers will want to keep an eye out for those rules, as either of them are likely to require advance planning to ensure appropriate implementation.

Whew! Even without a lot of new rules taking effect in 2013, there is much for employers to be doing and thinking about right now. And a little advance planning now will go a long way toward smoothing the transition to full implementation of the ACA in 2014.


Don Berner Image
Don Berner, the Labor Law, OSHA, & Immigration Law Guy
Boyd Byers Image
Boyd Byers, the General Employment Law Guy
Jason Lacey Image
Jason Lacey, the Employee Benefits Guy
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