ACA Subsidies -- Employer Rights

[elmobob14]

Do employer have a right to object or challenge an individual's claims to a subsidy on the exchange?

As you know, individuals are eligible for a subsidy if, among other things, they weren't offer coverage by an employer or if the coverage that was offered didn't provide minimum essential coverage or wasn't affordable.

Is there guidance or has anyone addressed whether the employer can contest an individual's claims for coverage or what the process would look like?

[Flyboyjohn]

The way the process is supposed to work is the Marketplace will contact you (employer) to verify the accuracy of the employee's representations (remember when you had to provide a contact name and number in the Marketplace opening notice you gave on 10/1?)

Whether it's actually happening or not is anybodies guess, probably the least of their worries at the moment

[lvena]

An employee can claim to have a right to the subsidy, but that means nothing. It is up to the exchange to review and decide. If the employee receives the subsidy then the employer is subject to the $3k fine at which point the employer could challenge if the employer believes that the $3k fine is being assessed incorrectly.

Does this help?

[elmobob14]

Thanks Flyboyjohn. Do you know of guidance that spells out how verification is going to work or that shows that the Marketplace has the responsibility to contact the employer? I don't doubt you, I'm just trying to get more information to see how it works.

Ivena, you note that the employer could challenge the $3k/year fine if it believes that it's incorrectly assessed. This is what I'm interested in. Has there been any guidance that tells the employer how to go about doing this?

[lvena]

Thanks Flyboyjohn. Do you know of guidance that spells out how verification is going to work or that shows that the Marketplace has the responsibility to contact the employer? I don't doubt you, I'm just trying to get more information to see how it works.

Ivena, you note that the employer could challenge the $3k/year fine if it believes that it's incorrectly assessed. This is what I'm interested in. Has there been any guidance that tells the employer how to go about doing this?

Sorry, I don't know. Since it is a tax cost I would assume through the normal tax protocols, but don't hold me to it.

[Flyboyjohn]

With respect to the protocols the Federally Facilitated Marketplaces are supposed to follow in verifying avaialbility of "adequate" and affordable" employer coverage I know there are voluminous regulations and procedures out there but don't have a citation, sorry. Maybe after folks start applying we'll get some first hand reports from clients on contact/calls they're receiving from the Marketplace.

With respect to contesting the penalty later, the process will be the IRS will recieve "reporting" data from employers, insurers and Marketplaces in early 2016 and then from individual taxpayers/households on 2015 1040s, grind it all through their computers and send "Dear Employer" letters (probably earliest November 2016) suggesting that a penalty might be due for such & such employees for such & such months in 2015. Letter will say if you agree, send check, if not send response as to why our proposed assessment is wrong. That's when I start making the big bucks as an ACA advisor.

[J Simmons]

If an employee applies for an Exchange subsidy and the Exchange determines, based on the application, that the employee is entitled, the Exchange will send the employer a "section 1411 certification". The employer will have 45 days to contest it. The employer will be able to provide information of what MEC (minimum essential coverage) was offered to the employee, at what cost to the employee in share of the premium. The employer will also be able to provide information about what the employee is paid by the employer. The employer will not, of course, be provided information about what the rest of the employee's household might earn. But if the employer has opted for the design-out safe harbor, the question is whether the employee would have to pay more than 9.5% of what the employer paid the employee for employee-only coverage. So the employer could prove that it has offered employee-only coverage at a cost to the employee of no more than 9.5% of what the employer pays that employee. This is the IRC 4980H(b) penalty.

As for the IRC 4980H(a) penalty, by March 31 after the end of each calendar year (beginning with 3/31/2016 for 2015), the employer will have to file a new IRS Form 1094-C, giving a month-by-month count of its Full-time Employees (per new federal definition and counting rules, Prop. Treas. Reg. 54.4980H-3). The Forms 1095-C send to individual employees (and copied to the IRS) will report which employees were offered MEC for which months in the reported year. The IRS computers will cross-check to determine if for each calendar month of the reported calendar year that the employer offered MEC to at least 95% or all but 5 of its Full-time Employees. If it has not met that breadth requirement, then if even on Full-time Employee applies and qualifies for Exchange subsidized coverage, the employer will face the 4980H(a) penalty = (# of Full-time Employees - 30)*$167/month. The IRS will calculate such penalties for each month of the closed and reported calendar year, and send the employer a billing for its 'shared responsibility' assessment.