On Thursday, June 25th, 2015, the U.S. Supreme Court issued its final ruling in King v Burwell. The Supreme Court upheld the availability of subsidies in all 50 states, including those 34 States utilizing the Federally Facilitated Exchange. The Supreme Court reasoned that Congress intended subsidies to be available in all states when the Affordable Care Act (ACA) was drafted. As a result, eligible individuals in all states may continue to receive subsidies.
Approximately, 87% of health insurance customers, using the exchanges, qualified for a tax credit (subsidy) to help pay for their coverage. Subsidies typically accounted for about 72% of the premium cost for the policies purchased on the State and Federal Exchanges. The average subsidy received by 8.7 million people is $272/month ($3,264/year).
The Supreme Court’s decision affirms the Internal Revenue Service’s (IRS) Regulatory Approach, thereby preserving the “Employer Mandate” (Pay or Play). Employers should plan their compliance strategies based on the assumption that the regulations issued under it are here to stay.
Applicable Large Employers (ALE’s) with 50+ full-time equivalents, will need to complete Parts I – II – III of the 1095 C Form, and provide to each employee, along with the W-2, no later than 2-1-2016 (accounting for the entire calendar year of 2015). If fully-insured, the carrier will complete Part III on the 1095 B Form.
Small employers with less than 50 employees, who are self-funded, will need to complete and file the 1095 B Form. If fully-insured, no reporting is required.
Importantly, the Supreme Court’s decision does NOT alter employer responsibilities under the ACA “Employer Mandate” and its related tax reporting obligations. Given the complexity of these reporting requirements, and the fact that the ACA “Employer Mandate” penalties will be assessed to employers based upon these reports, Employers of all sizes need to be planning now in order to be ready to fulfill their reporting obligations by end of year.
In looking ahead, the 2018 ACA “Cadillac Tax” looms!
Same Sex Marriage
On Friday, June 26th, 2015, the U.S Supreme Court issued a 5–4 landmark marriage ruling that will prove to be both challenging and beneficial to employers. The Supreme Court determined that states must issue marriage certificates to same-sex couples, as well as recognize same-sex marriages performed in other states. This helps employers in simplifying their benefits, since all spouses will now be treated uniformly throughout all 50 states.
The challenges surrounding the Supreme Court’s decision depend upon whether the employer is public or private, as well as whether the group is self-insured or fully-insured. Insured plans and public employers will have to comply with the new law!
Self-insured employers are not required to comply with State and local laws affecting their plan’s administration because ERISA (Employee Retirement Income Security Act) exempts those laws. This permits employers the flexibility to choose not to offer coverage to same-sex spouses. Private employers are also not required to recognize same-sex spouses or provide equal treatment.
A word of caution to all private employers: you can still face litigation alleging Sex Discrimination under Title VII of the Civil Rights Act of 1964. Likewise, individuals within the LGBT community can bring valid claims under Title VII.
Please refer to the TRS website for specific information regarding enrollment eligibility criteria for TRS-Care and TRS-ActiveCare for guidance on how to comply with the U.S. Supreme Court’s June 26 opinion in Obergefell v. Hodges regarding the legality of same-sex marriages.