Download: 2018 ACA Compliance Checklist

Schools, cities, and counties with group health plans should be aware of changes to certain ACA (Affordable Care Act) requirements for 2018.

Cost Sharing Limits

Check your plan’s cost-sharing limits:

• Review your plan’s out-of-pocket maximum to make sure it complies with the ACA’s limits for the 2018 plan year ($7,350 for self-only coverage and $14,700 for family coverage).
• If you have an HSA-compatible HDHP, keep in mind that your plan’s out-of-pocket maximum must be lower than the ACA’s limit. For 2018, the out-of-pocket maximum limit for HDHPs is $6,650 for self-only coverage and $13,300 for family coverage.

• If your plan uses multiple service providers to administer benefits, confirm that the plan will coordinate all claims for essential health benefits across the plan’s service providers or will divide the out-of-pocket maximum across the categories of benefits, with a combined limit that does not exceed the maximum for 2018.

• Confirm that the plan applies the self-only maximum to each individual in the plan, regardless of whether the individual is enrolled in self-only coverage or family coverage.

Affordability of Coverage

Under ACA, an Applicable Large Employer’s (ALEs) health plan is considered affordable if the employee’s required contribution to the plan does not exceed 9.5% of the employee’s household income¹ for the taxable year (as adjusted each year). This percentage is adjusted to 9.56% for 2018.

This is the first time since these rules were implemented that the affordability contribution percentages have been reduced. As a result, some employers may need to reduce their employee contributions for 2018 to meet the adjusted percentage.

Penalties for ACA Reporting Violations

Employers with self-funded or insured plans, may need to comply with IRS reporting obligations which may include Section 6055 and 6056. The penalty amounts for failures related to returns and statements required to be filed or furnished in 2018 are as follows²:

*For failures due to intentional disregard, the penalty is equal to the greater of either the listed penalty amount or 10 percent of the aggregate amount of the items required to be reported correctly.

Health FSA Contribution Limit

The IRS increased the pre-tax contributions employees can make on their health FSA (Flexible Spending Account) from $2,600 to $2,650 for taxable years beginning in 2018. This limit doesn’t apply to employer contributions to the health FSA. Make sure to communicate this limit to employees as part of your open enrollment process.

Employer Shared Responsibility Penalties

Under the ACA’s employer shared responsibility rules, ALEs are required to offer affordable, minimum value health coverage to their full-time employees (and dependent children) or pay a penalty.

An ALE will be subject to penalties if one or more full-time employees receive a subsidy for purchasing health coverage through an Exchange. An individual may be eligible for an Exchange subsidy either because the ALE:

• Does not offer coverage to that individual; or
• Offers coverage that is “unaffordable” or does not provide “minimum value.”

Penalty for ALEs Not Offering Coverage (4980H(a) Penalty)

An ALE will be subject to a penalty if it does not offer coverage to “substantially all” (at least 95%) full-time employees (and dependents) and any one of its full-time employees receives a premium tax credit or cost-sharing reduction toward his or her Exchange plan.

Under the ACA, the monthly penalty assessed is equal to the ALE’s number of full-time employees (minus 30) X 1/12 of $2,000 (as adjusted), for any applicable month. The adjusted amount for 2018 is $2,320.

Penalty for ALEs Offering Coverage (4980H(b) Penalty)

ALEs that do offer coverage to substantially all full-time employees (and dependents) may still be subject to penalties if at least one full-time employee obtains a subsidy through an Exchange because:

1. The ALE did not offer coverage to all full-time employees; or

2. The ALE’s coverage is "unaffordable" or does not provide "minimum value."

The monthly penalty assessed on an ALE for each full-time employee who receives a subsidy is 1/12 of $3,000 (as adjusted) for any applicable month. However, the total penalty for an ALE is limited to the 4980(a) penalty amount. The adjusted amount for 2018 is $3,480.

Download our 2018 Compliance Checklist for detailed information. Employers should review these changes and ensure that they are still in compliance. Contact your Employee Benefits Consultant if you have any questions.

Additional Resource:

2018 IRS Contribution Limits

¹“Household income” means the modified adjusted gross income of the employee and any members of the employee’s family. IRS have provided safe harbors that ALEs may use to determine affordability based on information that is available to them (since employers may not have access to household income information).

²Penalties may be waived if the failure is due to reasonable cause and not to willful neglect, or may be reduced if the failure is corrected within a certain period of time. Also, lower annual maximums apply for reporting entities that have average annual gross receipts of up to $5 million for the three most recent taxable years.