Association Health Plan Updates
The Internal Revenue Service (IRS) has confirmed that an employer providing coverage through an association health plan (AHP) has no relevance to the Employer Mandate. In other words, the Employer does not have to comply with the Employer Mandate requirements simply because they provide coverage through an AHP. This change is part of the recently revised IRS frequently asked questions (FAQ) information pertaining to the Employer Mandate. This means specifically, only employers with 50 or more full-time equivalent employees in the prior calendar year will be subject to the Employer Mandate.
As defined by the IRS – an AHP is an ALE that is subject to the employer shared responsibility provisions depends on the number of full-time employees (and full-time equivalent employees) the member employer employed in the prior calendar year and is unrelated to whether the employer offers coverage through an AHP.
The Department of Labor (DOL) has also issued an ERISA Compliance Assistance guide for employers who wish to participate in an AHP.
AHPs under these new rules are effective in the marketplace as of September 1, 2018. However, insurance carriers have not been quick to offer AHPs. Most of the carriers have indicated they want to review the new rules before deciding.
Individual Mandate Update
The Individual Mandate penalty under federal law will become $0 starting with the 2019 tax year. That means it’ s still on the books for this 2018. The maximum annualized penalty is the greater of $695 or 2.5% of income. For those that must pay the 2.5% penalty, it is capped at the national average bronze plan premium. The IRS has released Rev. Proc. 2018-43 which indicates this average is $283 per month per individual ($3,396 annualized) for 2018. The penalty applies up to five family members. The Individual Mandate penalty is applied on a monthly basis for those who were uninsured for only part of the year and where no exemption can be claimed.
Please contact us for more details on either of these two new changes.