Like many businesses in the for-profit sector, nonprofit organizations need to ensure they are continuing to comply with the Affordable Care Act (ACA). Organizations that fail to comply may face stiff penalties.
Shared Responsibility Payments
Generally, the ACA requires that any employer with an average of at least 50 full-time employees (including full-time equivalents, or FTEs) must provide its employees and their dependents with qualifying health care coverage. An employer that fails to do so may incur liability for shared responsibility payments, which can be significant.
For nonprofit organizations with between 50 and 99 full-time employees, mandatory reporting requirements apply in 2015, but shared responsibility payments will not be required until 2016, provided certain conditions are met.
Nonprofits with 100 or more full-time employees must meet shared responsibility payments for the 2015 tax year and thereafter. However, an exemption may be available if qualified coverage is provided to 70% of employees in 2015 and 95% in 2016. Reporting is required. If your organization is affected, you will need to track and verify the required information.
In its monthly Payroll Industry conference call, the IRS projected the annual per-employee Section 4980H(a) penalty to be $2,080 for 2015 and $2,160 for 2016 and the annual per-employee Section 4980H(b) penalty to be $3,120 for 2015 and $3,240 for 2016.
Payment or Reimbursement of Health Expenses
Organizations that maintain health reimbursement arrangements (HRAs) should make sure their arrangements are in compliance with IRS Notice 2013-54. In this notice, the IRS announced that HRAs constitute “group health plans” and are, therefore, subject to the ACA’s market reform rules. Specifically, a group health plan may not impose annual dollar limits on essential health benefits and must provide certain preventive services without imposing cost-sharing requirements. An HRA can satisfy these rules by being sufficiently “integrated” with a group health plan under specific guidelines.
Notice 2013-54 also addresses employer payment plans (EPPs). An EPP is any arrangement under which an employer directly pays for or reimburses an employee for all or part of the premium for the employee’s individual health insurance policy. The Notice provides that employers maintaining EPPs generally will be subject to an excise tax under Internal Revenue Code Section 4980D.
However, qualified “small employers” (with fewer than 50 full-time employees) are permitted to maintain EPPs through June 30, 2015, without incurring the excise tax. As of May, Congress was still attempting to determine how to resolve this issue.
Under Section 4980D, an employer that fails to meet group health plan requirements may incur an excise tax of up to $100 per day per affected participant.
“. . . HRAs constitute ‘group health plans’ and are, therefore, subject to the ACA’s market reform rules.”
If you have any questions about your nonprofit organization, please contact Warady & Davis LLP at (847) 267-9600.
This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and accordingly assume no liability whatsoever in connection with its use. ©2015