Chaz Posted January 18, 2013 Share Posted January 18, 2013 The proposed regulations on the employer shared responsibility clarify that employers must cover the dependents (i.e., children to age 26 but not spouses) of FT employees. But the penalties under both 4980H(a) and (b) only apply to the extent that the employer receives a Section 1411 Certification that a FT employee obtains a subsidy/credit for obtaining coverage on the Exchange. Despite the coverage mandate, it is still not clear to me that there is any penalty if an employer provides affordable coverage to all its FT employees but not to their dependents because no FT is eligible for coverage on the Exchange. What am I missing? Link to comment Share on other sites More sharing options...
leevena Posted January 20, 2013 Share Posted January 20, 2013 The proposed regulations on the employer shared responsibility clarify that employers must cover the dependents (i.e., children to age 26 but not spouses) of FT employees. But the penalties under both 4980H(a) and (b) only apply to the extent that the employer receives a Section 1411 Certification that a FT employee obtains a subsidy/credit for obtaining coverage on the Exchange. Despite the coverage mandate, it is still not clear to me that there is any penalty if an employer provides affordable coverage to all its FT employees but not to their dependents because no FT is eligible for coverage on the Exchange. What am I missing? Don't know I am answering what you want to know, so I apologize ahead of time. 1. The employer mandate does not require coverage for all dependents, it requires plans to offer coverage to children to 26. So it is possible for the employer to offer medical coverage to just employees, dependents to 26 and not any spouses. 2. You are correct regarding the penalty, it is triggered when an employee enrolls at the exchange and receives the subsidy. Does this answer your question(s)? Link to comment Share on other sites More sharing options...
Chaz Posted January 21, 2013 Author Share Posted January 21, 2013 1. The employer mandate does not require coverage for dependents, it requires plans that offer dependent coverage to childen to offer coverage to children to 26. So it is possible for the employer to offer medical coverage to just employees and not any dependents. Section 4980H(a) provides that, starting in 2014, in order for a large employer not to be required to pay the "pay-or-play" penalty it must "offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A (f)(2))." There is similar language in 4980H(b). While I understand that this does not require employers to provide coverage to dependents, they need to in order to avoid the penalty. But do they? The penalty only applies to the extent that an employee receives a credit/subsidy on the Exchange (not, presumably, a dependent). This is the gist of my question. Treasury discussed the issue in the preamble to the proposed regs, but I do not know if the proposed regs definitely place a monetary penalty on not providing dependent coverage. Link to comment Share on other sites More sharing options...
leevena Posted January 21, 2013 Share Posted January 21, 2013 For 2014 IRS 4980H requires each large employer to either offer at least 95% of its full-time employees health coverage, not their dependents. Send me your email address via the message function here and I will forward to you a document. Link to comment Share on other sites More sharing options...
Chaz Posted January 21, 2013 Author Share Posted January 21, 2013 For 2014 IRS 4980H requires each large employer to either offer at least 95% of its full-time employees health coverage, not their dependents. Send me your email address via the message function here and I will forward to you a document. There is a bit of a grace period for 2014 as long as the employer "takes steps" to towards satisfying the dependent rules. Perhaps I should have said 2015. Link to comment Share on other sites More sharing options...
Ken Davis Posted March 19, 2013 Share Posted March 19, 2013 Chaz stated "While I understand that this does not require employers to provide coverage to dependents, they need to in order to avoid the penalty." With respect to the quoted sentence, is an employer able to provide coverage (mandatory) to all employees and dependents and avoid the 4980H penalty even if the coverage is not affordable or does not provide minimum value? It appears that providing coverage overrides the affordability and minimum value requirements, with the result that the employee does not have a coverage month. This means no subsidy under IRC 36B or PPACA 1402, and no penalty under 4980H. See 36Bยฉ(2)ยฉ(iii). Might not make economic sense, but I suppose it could in the right circumstances. Might have some usefulness to governmental self-insured plans. Thanks, Ken Davis Link to comment Share on other sites More sharing options...
Chaz Posted March 19, 2013 Author Share Posted March 19, 2013 Ken, I am not sure that I fully understand your question. Are you asking whether employers can "force" (through mandatory coverage) their employees to be covered under an unaffordable and/or non-minimum value plan such that the employees won't be eligible for coverage on the exchange and therefore there will be no penalty? If so, I believe that the proposed regulations address this by providing that employers have to give employees the ability to opt out of employer-based coverage and get coverage on the exchange. Let me know if I have misinterpreted your question. Link to comment Share on other sites More sharing options...
GMK Posted March 19, 2013 Share Posted March 19, 2013 ... is an employer able to provide coverage (mandatory) to all employees and dependents and avoid the 4980H penalty even if the coverage is not affordable or does not provide minimum value? As I read it, the answer is no. If the coverage offered by the employer to its workers is not affordable or does not provide minimum value (either one), then the employee can choose to buy coverage in an exchange and receive a premium tax credit. If an employee receives a credit or subsidy, the employer pays the penalty. Chaz's question is much more interesting. If no employee receives a credit or subsidy for exchange coverage, but a dependent of an employee gets coverage in an exchange and receives a credit or subsidy, is the employer penalized? Link to comment Share on other sites More sharing options...
Ken Davis Posted March 19, 2013 Share Posted March 19, 2013 Chaz, Basically that is what I was asking. But you do bring up an interesting point, which is the definition of "offer of coverage." If an offer of coverage must offer both the opportunity to enroll and to decline to enroll, then doesn't mandatory coverage with no opt-out fail to be an "offer of coverage"? If so, this seems to bring in 4980H(a), which brings me back to 36B which says that for any employee covered by an employer plan the affordability or minimum value tests need not be met in order to escape the 4980H penalty. If an employee has mandatory coverage with no opt-out, can't they still obtain coverage under an exchange? I'm trying to piece all of this together to get a good understanding of how 4980H works, and have many questions. And seem to have more questions the more I read. Thanks, Ken Link to comment Share on other sites More sharing options...
GMK Posted March 19, 2013 Share Posted March 19, 2013 I found these flow charts helpful, especially the first one: http://healthreform.kff.org/the-basics/employer-penalty-flowchart.aspx http://healthreform.kff.org/en/the-basics/requirement-to-buy-coverage-flowchart.aspx http://healthreform.kff.org/the-basics/access-to-coverage-flowchart.aspx Link to comment Share on other sites More sharing options...
GMK Posted March 21, 2013 Share Posted March 21, 2013 A flow chart of what coverages (and if subsidies/credits) are available through an exchange: http://www.naic.org/documents/committees_b_consumer_information_130319_flow_chart.pdf Link to comment Share on other sites More sharing options...
Chaz Posted March 21, 2013 Author Share Posted March 21, 2013 I note that there is no mention of a penalty for not providing dependent coverage in any of the flow charts. Link to comment Share on other sites More sharing options...
GMK Posted March 21, 2013 Share Posted March 21, 2013 Agreed. The flow charts are meant to address Mr. Davis' concerns. FWIW, I think the "Are you employed with employer plan available?" question in the last flow chart will be replaced with something like "Are you eligible for coverage under a plan offered by an employer?" (for when a dependent calls the exchange). It's hard to imagine that they would not include a penalty for failure to meet a pay or play requirement, but that is what it appears to be. Link to comment Share on other sites More sharing options...
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