10 Steps and 57 Pages to get Small Business Tax Credit Under the ACA / SHOP Program

SHOP Steps 3-2015

Last week, I attended a seminar regarding how to take clients through the Small Business Health Options Program.  Starting in 2015, employers could earn a potential tax credit, but would the credit would only be available if the employer and employees all purchased coverage through http://www.healthcare.gov

The speaker used 57 slides and 60 minutes to describe the 10 set process.  Approximately 300 agents were in attendance.  Given the small monetary return in the tax credits, and the amount of time expected to be required to follwo the 10 steps, the general consensus among those in attendance was that the return on investment would not be strong enough to merit the time required.

Prior to this year, small employers were able to apply for the tax credit with a simple tax form as they filed their federal taxes.

Trokey –Zenefits is a Technology Company First and Benefits Adviser Second

Kevin Trokey has an excellent article here:  Don’t Let Zenefits Drink Your Milkshake


I
n this article, Trokey explains that Zenefits founder, Parker Conrad, has admitted that the company focus has always been Technology, and that Insurance Broker services are only a way to pay the bills.  They would give away the hub (technology) and make money off of the spokes (insurance products and benefit options.

He illustrates the Zenefits business model as follows.  Note that Technology is the dominant element, and insurance and service needs come secondary.
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In contrast, Trokey illustrates the model that successful Brokers and Consultants use for long term success.  Note how the client is in the middle of the diagram, with all activities rotating around the client.  This is the model that I have operated under in my 13 years with Accelerated Benefits.  Clients love it!
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Trokey finally identifies the market that Zenefits will pursue.  That is, Brokers who follow the OLD model of service where they sell insurance products first, and helping the client is secondary.  This model is on its way out.
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Dave Petno is an Employee Benefits Consultant / Broker from Ohio.

12 Employees and $787,925 in Drug Expenses

fabryzymeAs the old saying goes, Medical Insurance is expensive because Medical Care is expensive.  Perhaps we should modify that statement to say that medical insurance is expensive  because Prescription Drugs are expensive.  

Here is an actual prescription drug report from an Ohio-based company.  It is interesting to note that the top 12 employees of this company spent $787,925 in only 6 different medications.
wb expensive drugs 2014Here is a breakdown of the top 6 medications:
fabryzyme1)  Fabrazyme:  1 Patients, Total Cost:  $314,974. Fabry’s Disease
tasigna2)  Tasingna:  2 Patients, Total Cost $181,845 Leukemia
gleevec3)  Gleevec:  1 Patient, Total Cost 98,325  Leukemia
humira4)  Humira:  4 Patients, Total Cost 80,738  Rheumatoid Arthritis
Rebif5) Rebif Rebidose: 1 Patient, Total Cost 60,874 MS
enbrel6)  Enbrel:  3 Patients, Total Cost $51,166  Rheumatoid Arthritis

New ACA Tax Forms 1094-C and 1095-C

ACA Tax FormsIn the world of the Affordable Care Act  (the ACA or Obamacare), employers who have over 50 FTEs are designated as Applicable Large Employers (ALEs).  For them, 2015 marks the beginning of a whole new reporting mandate where ALEs must document employee health plan offers, participation and exemptions.  Employers who are ALEs must file Forms 1094-C and 1095-C annually by February 28 if filing by paper, and March 31 if filing electronically.

1094-C:  ALE Employer will complete one form for each business Unit
1095-C:  ALE Employer will complete one form for each and every employee who receives a W2

Here are the forms, and a brief explanation.

1094-C:  Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns

Page 1 Part I and II Employer Demographic Information

1094-C 1Page 2  Specific Employee Counts

1094-c 2

The employer fills out one of these forms per each business unit.  The information includes a month by month count of all Full Time Employees (30 hours per week or more) as well as a count of Total Employees on a month/month basis.   The form also provides space for any Transitional Relief Codes.

1095-C:  Employer-Provided Health Insurance Offer and Coverage (See explanation below)

1095-cALEs will be required to produce one 1095-C form for every employee who receives a W-2 form for 2015 and beyond.

1095-C Part I: Basic demographic information.
1095 Part 1

1095-C Part II: Employee Offer and Coverage Options

1095 Part 2

The employer will need to complete lines 14, 15, and 16 on a month-specific basis for each employee.

For line 14, there are 10 different Code options to describe whether and how an employee was eligible for coverage.  The Code from code 1A  to 1H.  1A will be the most common code that is used for employers who offer coverage to an employee and their family at a contribution amount that is below the 9.5% affordability threshold.  There are also codes to cover virtually any situation including employee not offered (1H), coverage only offered to employee only (1B) and other alternatives.

For line 15.  The employer must enter the LOWEST monthly payroll deduction amount that an employee would be required to contribute in order to participate in the lowest-cost, single-only coverage offered by the employer.  Note:  This number can change during the year due to a plan renewal, or if the employer changes contribution amounts.

For line 16:  There are 8 different codes that are available.  The codes range from 2A to 2I.  The codes cover whether the employee was enrolled in coverage (2C), Employee not employed during the month (2A), employee not full-time (2B), employee in waiting period or limited assessment period (2D), and several other situations.

1095-C Part III Covered Individuals (Self Funded Employers ONLY)
1095 Part 3
On this section, ONLY self funded employers need to give an accounting of the employee and any family members, and whether they are covered by the company sponsored plan during any given month during the year.

Note that all family members must be listed.  The form asks for:
(a) Name of Covered Individuals
(b) Social Security Number
(c) Date of Birth of Individual if SSN not available.
(d) Was Individual covered for entire 12 month period?
(e)  If not, which months was the Individual covered.

Conclusion:  These tax forms will obviously require additional record-keeping for 2015.  ALEs would be wise to begin tracking and gathering information as soon as possible to be properly prepared.

Actual IRS Tax Forms can be found here:

http://www.irs.gov/uac/About-Form-1094-C
http://www.irs.gov/uac/About-Form-1095-C

Dave Petno
Consultant
Accelerated Benefits
330-294-1085
dpetno@gmail.com