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HB Counsel Client Alert – ACA Reporting Deadlines Loom: Texas v. Azar Decision Changes Nothing…Yet

Judicial Challenge to the Affordable Care Act (“ACA”)

You have likely heard about the serious challenge to the ACA making its way through the courts.  In Texas v. Azar, 20 Republican attorney generals, governors of the states of Maine and Mississippi, and two individual plaintiffs challenged the constitutionality of the individual mandate following the Tax Cuts and Job Reform Act, which reduced the individual mandate penalty to $0 as of January 1, 2019.

Plaintiffs argue the individual mandate without a penalty is no longer sustainable under the Supreme Court’s decision in National Federation of Independent Business v. Sebelius, which upheld the mandate under Congress’ taxing power.  They further argue that the entire ACA should be struck down because the mandate was “essential” to the law.

On December 14, 2018, the federal judge in the Texas v. Azar case issued a sweeping ruling invalidating the entire ACA.  Judge O’Connor’s decision holds that the ACA is unconstitutional.  The result of this ruling, if it is ever implemented, is that the entire ACA would no longer have effect.  After following this law for eight and a half years, the health care industry, as well as employer plan sponsors would find themselves in considerable chaos.

 

 ACA Remains the Law

On December 30, 2018, Judge O’Connor issued a stay of his December 14, 2018 ruling.  The stay bars any application of his order until the ruling in his case is upheld or overturned.  Parties to the lawsuit immediately appealed the decision.  The US Court of Appeals for the Fifth Circuit is expected to make a determination regarding the appeal later this year.

Both the White House and the Centers for Medicare & Medicaid Services issued statements stating that the ACA remains the law of the land pending appeal, a determination echoed by numerous legal authorities.  All aspects of the law continue to have effect.  For practical purposes, nothing has changed except the decision now hangs over the country and Congress as an unsettling reminder of the political fight over healthcare reform.

Given that the ACA is still the law of the land, employers have information reporting deadlines approaching, as outlined below.

 

ACA Reporting Deadlines Quickly Approach

The ACA requires Applicable Large Employers (“ALEs”) to provide written statements of health coverage provided to employees.  Employers that employed on average 50 or more full time employees, including full time equivalents, during 2017 are considered ALEs for 2018.

ALEs must provide statements of health coverage to employees and former employees who were full time employees during the reporting period (2018) utilizing IRS Form 1095-C.

  • ALEs offering self-insured plans must complete the entire 1095-C (Parts I, II & III); and
  • ALEs offering fully-insured plans must complete 1095-C, Parts I (employee demographic information) & II (employees offered and coverage month-by-month), while the insurance carrier will issue a separate 1095-B (individuals covered on the plan month-by-month).

ALEs must use Form 1094-C to report required information about whether or not the employer offered affordable minimum essential health coverage (“MEC”) and enrollment in MEC for eligible employees.  Form 1094-C transmits Form 1095-C to the IRS.

ALEs are responsible for furnishing employees and former employees with a Form 1095-C by Thursday, January 31, 2019.

Employers are responsible for filing copies of Form 1095-C, along with Form 1094-C to the IRS by Thursday, February 28, 2019, if filing by paper, or Monday, April 1, 2019,[1] if filing electronically[2] (same as Form 1094-C).

The penalty for not filing an information return with the IRS generally is $260 for each return.  The penalty for providing an incorrect statement to employees/enrollees is $260 for each erroneous statement.  In most cases, the total penalty for all reporting failures cannot exceed $3,193,000 per calendar year, although if violations are due to “intentional disregard,” the $260 penalty can increase to $530 per failure, and there is no cap on the total penalty amount.[3]

Correcting a reporting failure within 30 days of the due date reduces the penalty amount; therefore, if a reporting failure is identified, it should be corrected as soon as possible.

While many IRS employees remain furloughed due to the ongoing government shutdown, all deadlines with the IRS remain, unless notice is provided otherwise.  Once furloughed IRS workers return to work, the IRS may still assess penalties against ALEs for reporting failures.

The content herein is provided for educational and informational purposes only and does not contain legal or tax advice.  Please contact our office if you have any questions regarding what disclosure and reporting requirements apply to your employee benefit plans.

Dated:  January 28, 2019

[1]   The regular due date, March 31, falls on a Sunday in 2019.  IRS instructions are for employers to file on the next business day, which is Monday, April 1.

[2]   ALEs that file 250 or more information returns with the IRS must file the returns electronically.

[3]   Note that the above penalty amounts are subject to indexing, and these numbers reflect the penalties for those returns and statements that were due in 2017.

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