- Have any questions? Call now
- (845) 486-4200
Despite parental misgivings over testing, law leaves little discretion for districts
April 4, 2014
Written by: David S. Shaw, Esq.
Editor’s Note: The Obama administration has announced that it is suspending until 2015 reporting requirements under the Affordable Care Act, which removes the mechanism the government would use to impose fines on employers for failure to provide health insurance in 2014. “We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mark J. Mazur, assistant secretary for tax policy at the U.S. Department of the Treasury, said in a July 2 blog post that announced the change.
Despite the delay, pressure remains on employers to take steps to comply with the Affordable Care Act and new reporting procedures. Other ACA requirements remain in effect, and Mazur said the administration encourages employers to “voluntarily implement” reporting in 2014. Under the ACA and the Internal Revenue Code, employers with at least 50 full-time employees can be required to pay a penalty if one or more full-time employees are denied coverage and then qualify for federally subsidized insurance through a Health Insurance Exchange. Those with incomes between one and four times the federal poverty level may qualify.
School districts have particular challenges in complying with reporting requirements because substitute teachers and other “variable hour” employees can become full-time equivalents if they work more than 130 hours per month.
On Board asked school attorney David Shaw what the delay means for school districts. His response is below.
While President Obama and the Treasury Department informed the nation earlier this month that certain insurer, self-insurer and large employer reporting requirements, as well as the employer “play or pay” penalty provisions of the Affordable Care Act, will not be enforced until 2015, many obligations remain in place. On July 9, the Treasury Department issued Notice 2013- 45, which stated that other provisions of the act must be implemented consistent with the original timeframes set forth in the act.
Unless federal officials announce further changes, school districts should proceed as previously planned and under the assumption that the delayed compliance requirements will become effective as of Jan. 1, 2015. It should not be assumed that penalty, insurer and employer reporting requirements will not take effect until the annual start date of your district’s health insurance plan year, regardless of whether your district is self-insured or uses an outside health plan.
Accordingly, districts should:
- Ascertain the full-time employee count. The district needs to know the number of full-time equivalent (FTE) employees and the FTE count during 2014. Full-time under the ACA means those who work at least 30 hours per week and 130 hours per month. The count should include variable hour employees (e.g., substitute teachers) who prove to be full-time based upon a standard measurement period (e.g., five months commencing with the 2014 plan year). The FTE count should be made after that period of time to ascertain if the total FTE count exceeds 200, in which event automatic enrollment of future full-time employees must be effectuated as of the beginning of the 2014 plan year (e.g., Jan. 1, 2014 for NYSHIP and July 1, 2014 PNWHIC).
- Ascertain the grandfather status of each plan. Get written confirmation from the health insurance plan(s) offered in the district regarding their status as “grandfathered” or “non-grandfathered” and if they provide “minimum essential coverage,” as well as benefits of “minimum value” as these terms are defined in the ACA. If a plan is grandfathered, the premium cost share for the plan(s) cannot exceed a change of more than 5 percent measured back to the effective date of the ACA – March 23, 2010. [Example: If the employee premium contribution rate was 5 percent of the total premium cost on that date, it may not be increased beyond 10 percent at any future time.]
- Ensure benefits are delivered in a non-discriminatory way. If insurance is through a self-insured group health insurance plan, the IRS could determine that the greater health benefits provided to the highly compensated employees (top 25 percent) than those offered to the lesser compensated (bottom 75 percent) should be reported as taxable income. It is unclear if premium share differences are to be considered a benefit for the purpose of this test (Sec. 105[h] IRC). If the health plan is fully insured, but not grandfathered, then failing the non-discrimination test will result in a penalty to be paid by the employer equal to $100 per day, per plan participant, capped at 10 percent of the employer’s total health insurance cost for the previous year or $500,000, whichever is less (see Section 105[b] IRC).
- Complete administrative duties required by law. See chart below.
