September 12, 2018
Despite legal challenges and the repeal of the individual mandate late last year, the ACA Employer Shared Responsibility Provisions have prevailed. This week, these employer provisions will be put to further test with a House vote on the Save American Workers Act of 2018. Yet, due to budget impact and lack of Senate support it is unlikely this bill will become law.
House leaders hope to vote on H.R. 3798, known as the Save American Workers Act of 2018, this week. The bill includes the following changes:
- Eliminate enforcement of the employer mandate for 2015 through 2018
Over the past several months, the IRS has continued to assess potentially large penalties to employers that may not be complying with ACA employer requirements. If this law was enacted, the penalties would be eliminated and enforcement of non-compliance for these years would end. Instead, the mandate would apply beginning January 1, 2019.
- Change definition of “full-time employee” from 30 to 40 hours a week
Under current law, employees who work 30 hours or more are considered full-time and eligible for healthcare benefits. By changing the definition of a full-time employee to 40 hours, the number of employees who are eligible under the law would decrease.
- Change the Form 1095 reporting requirement to individuals
Currently, eligible employers are required to provide Form 1095 to individuals each year. If enacted, the new law would only require employers to provide Form 1095 if requested by the individual. The proposed bill would not change the requirement to report to the IRS.
- Further postpone the Cadillac Tax
The start date of the 40 percent excise tax on high-cost health benefits packages would be pushed out from December 31, 2021 to December 31, 2022.
What does this mean for employers?
If the bill were to pass, which as explained below is highly unlikely, the greatest gain for employers that are required to follow the employer mandate is the welcomed avoidance of penalty assessments for years 2015 to 2018. Most employers that complied with ACA employer provisions for these years would see minimal value, as IRS report submission requirements would not change. Employers would, however, have the flexibility to refrain from offering coverage to employees who work less than 40 hours (an increase from 30). And, employers that would be subject to the Cadillac tax would also benefit from its delay.
Why the act is unlikely to become law
In order for the bill to become a law, it first needs to pass through the house and second through the Senate. Finally, the bill must be signed by President Trump.
The Congressional Budget Office has estimated that provisions in the act will cost $51.6 billion over the next decade and cause one million people to lose their employer-sponsored coverage.
Democrats have come out against the bill, criticizing it for its potential impact to budget and ACA marketplace stability. With multiple preceding bill failures in the House and Senate and over 50 percent of the public recently reporting a favorable view of the ACA, successful passage—particularly through the Senate—is highly unlikely.
What should employers do now?
The employer mandate remains in effect and is being enforced, and employers should not take risks. Applicable large employers should continue to deploy active ACA compliance management based on the Employer Shared Responsibility IRC 4980H in effect today in order to mitigate penalty/fine risks and reduce the likelihood of receiving an IRS assessment letter (If you do receive a 226-J letter, please see our blog for instructions on how to respond or contact your Health e(fx) Account Manager for support).
Ninety-nine percent of Health e(fx) clients say our technology is superior to competitors. Our technology helps users actively manage their compliance monthly, which removes uncertainty and risk, particularly at the end of the year. Reporting due dates are just around the corner. Let us know how we can help, and we’ll continue to keep you up to date of legislative matters.