Affordable Care Act (ACA) Guidance
Implementing the ACA
The Affordable Care Act (ACA) affects CalPERS' program areas, members, employers, stakeholders, and systems in various ways. As your health benefits purchaser, CalPERS ensures our health plans comply with all relevant provisions of the ACA and provides information to our contracting agencies and schools. Most ACA provisions affecting our plans are seamless to members; however, employers have certain responsibilities to comply with the ACA and must become familiar with its requirements and make policy decisions based on individual business needs and practices.
Changes to CalPERS' health plans due to the ACA include:
- Extending coverage for dependent children up to age 26
- Implementing federal maximum out-of-pocket payment limitations, in addition to protections already available under CalPERS' plans
- Implementing prohibition on rescissions rules
- Providing no-cost preventive services
- Removing lifetime dollar limits and restrictions on annual limits
Employer Shared Responsibility
Under the Shared Responsibility for Employers Regarding Health Coverage (PDF) final rule, applicable large employers (ALEs) - generally defined as employers with 50 or more full-time or full-time equivalent employees in the prior year - are required to offer to at least 95 percent of their full-time employees - generally defined as working 30 or more hours per week - health coverage that is both affordable and provides minimum value. These requirements are known as the "employer shared responsibility" to offer health coverage or the "employer mandate." If ALEs fail to meet these requirements, they may be subject to penalties if a full-time employee enrolls in a qualified health plan for which the employee receives a premium tax credit.
Refer to the Internal Revenue Service (IRS) website for more information on Employer Shared Responsibility. In addition to providing methods for identifying full-time employees, the employer shared responsibility rule also provides clarification regarding the full-time status of adjunct faculty, educational employees, seasonal employees, student work-study program participants, and volunteers.
IRS Reporting Requirements
Beginning with tax year 2015, the ACA requires health plans and ALEs to report to the IRS information on minimum essential coverage and the coverage provided to full-time employees.
The ACA requires most Americans to have qualifying health insurance called "minimum essential coverage." Under the ACA's individual shared responsibility requirement (also referred to as the "individual mandate"), most Americans must maintain minimum essential coverage, qualify for an exemption, or potentially pay a federal tax penalty to the IRS.
All of CalPERS' health plans meet the minimum essential coverage requirement.
Under the Information Reporting of Minimum Essential Coverage (PDF) final rule, health plans are required to report annually, by March 31 (if filing electronically), member and dependent minimum essential coverage information to the IRS using Form 1095-B (PDF) and its instructions.
Health plans must also furnish related statements to covered individuals by January 31 of each year. For tax year 2017, IRS Notice 2018-06 (PDF) extended the deadline for furnishing the 1095-B statement to individuals from January 31, 2018 to March 2, 2018.
Retirees enrolled in a Medicare or Medicare Advantage plan may receive a Form 1095-B if they meet certain conditions. The Centers for Medicare & Medicaid Services (CMS) will be mailing Form 1095-B to the following:
- Beneficiaries under age 65 with Medicare Part A
- Beneficiaries who enrolled in Medicare Part A for the first time in 2016
- Beneficiaries who had Medicare Part A coverage for part of 2016
Information reported under Form 1095-B will assist the IRS in determining whether individuals are complying with the ACA's individual shared responsibility requirement.
Refer to the IRS' Information Reporting by Providers of Minimum Essential Coverage and our Circular Letters for more on ACA reporting requirements, and visit the CMS website for information related to retirees.
Under the Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer-Sponsored Plans (PDF) final rule, the ACA requires ALEs to annually report to the IRS information about compliance with the employer shared responsibility provisions and the coverage offered (or not offered) to their full-time employees. ALEs are also required to furnish related statements to their full-time employees about their information reported to the IRS.
ALEs are responsible for annually reporting to the IRS by March 31 (if filing electronically) on their full-time employee health coverage using Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) (PDF) and its instructions.
ALEs must also provide a statement, generally a copy of Form 1095-C, to their full-time employees by January 31 of each year about the information reported to the IRS. For tax year 2017, IRS Notice 2018-06 (PDF) extended the deadline for furnishing the 1095-C statement to full-time employees from January 31, 2018 to March 2, 2018.
The IRS will use the health coverage information reported by ALEs to verify compliance with the employer mandate to offer coverage, and to help identify individuals who are ineligible for premium tax credits on the Health Insurance Exchanges (e.g., Covered California) due to the offer of employer-sponsored coverage.
For additional resources on reporting requirements for ALEs, visit the IRS' Information Reporting by Applicable Large Employers and Question and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C.
Starting at the end of 2017, the IRS may have sent CalPERS' impacted ALEs Letter 226-J (PDF) which notifies them of any potential employer shared responsibility payment they may owe for the 2015 calendar year. This letter may be sent to ALEs if the IRS determines that a premium tax credit was allowed for one or more of their full-time employees enrolled in a Health Insurance Exchange. ALEs will have 30 days from the date of the letter to respond to the proposed assessment; therefore, ALEs should ensure Forms 1094-C and 1095-C are readily available for their review.
As a reminder, for calendar year 2015 the IRS offered several forms of transition relief, including exempting ALEs with 50-99 full-time/full-time equivalent employees in the prior year from the 95 percent requirement described in the Employer Shared Responsibility section above. Instead, ALEs with 100 or more full-time/full-time equivalent employees could meet the requirement by offering coverage to at least 70 percent of their full-time employees. All ALEs became subject to the 95 percent requirement beginning in 2016.
For additional information regarding Letter 226-J, refer to Circular Letter 600-070-17 (PDF) and visit the IRS' webpages Understanding your Letter 226-J and Q&A on Employer Shared Responsibility Provisions Under the Affordable Care Act (Question 55-58).
Covered California Appeal Notice to Employers
Beginning in August 2016, CalPERS' large and small employers may receive a Notice (PDF) from Covered California regarding employees who have enrolled in a Covered California health plan, received an advanced premium tax credit (APTC), and provided employer contact information on their application. ALEs who do not meet the ACA's health coverage requirements are subject to employer-shared responsibility payments if at least one full-time employee receives an APTC through Covered California.
Employers may wish to appeal this notice with the U.S. Department of Health and Human Services (HHS), within 90 days of the date of the notice, if they believe there are mistakes regarding the assertions made by the employee (e.g., that the employee was not offered affordable, minimum value coverage and he or she works full-time for a large employer).
The notice emphasizes that an HHS appeal will not determine whether an employer actually owes the employer shared responsibility payment penalty. Only the IRS can make this determination through the Letter 226-J process described above.
Summary of Benefits & Coverage and Uniform Glossary
The Summary of Benefits and Coverage (SBC) documents and Glossary of Health Coverage and Medical Terms (PDF) are intended to help individuals better understand their health coverage and more easily compare health plan options. Employers and members may access all CalPERS plans' SBCs in our Plans & Rates section (subsection Health Plans) as well as through our health plans' websites.
SBC and glossary information must be provided at:
- Enrollment for a newly eligible employee
- Renewal, or if renewal is automatic, no later than 30 days prior to the first day of the new plan year
Excise Tax on High Cost Employer-Sponsored Health Coverage
The excise tax on high cost employer-sponsored health coverage (sometimes referred to as the "Cadillac Tax") is a 40 percent tax on the aggregate cost of employer-sponsored health coverage, both fully-insured and self-funded, that exceeds annual dollar thresholds as defined by section 4980I(b)(3)(C) of the Internal Revenue Code.
The excise tax applies to the excess benefit, if any, above the following thresholds, indexed to inflation:
- $10,200 per year for individual coverage
- $27,500 per year for all other coverage (i.e., employee plus one, family coverage, etc.)
The excise tax applies to all applicable employer-sponsored health coverage, as defined, regardless of employer size or plan type. Under Congressional Bill H.R. 195 (PDF), the excise tax start date has been postponed from 2020 to 2022.
For additional information on the excise tax on high cost employer-sponsored health coverage, refer to the IRS' Affordable Care Act Tax Provisions for Employers.
The following items are considered applicable coverage and subject to the excise tax:
- Employee pre-tax contributions to Health Flexible Spending Arrangements (FSA)
- Employee pre-tax contributions to Health Savings Accounts (HSA)
- Employer and employee share of the total health plan premium
- Employer contributions to HSAs
- Employer flex contributions used for Health FSAs
- Executive physical programs
- Health Reimbursement Arrangements (HRA)
- Governmental plans
- Multi-employer plans
- Retiree (non-Medicare) coverage
The following items are expected to be excluded from applicable coverage:
- Employee after-tax contributions to an HSA or HRA
- Long-term care coverage
- Stand-alone dental and vision coverage provided under a separate policy
- Excepted benefits, including workers' compensation, liability insurance, disability income insurance, and employee assistance programs
Employers are responsible for calculating the excise tax liability for each responsible party, including third-party administrators and health insurers. Employers also must notify each party of their portion of the tax liability and report this information to the IRS.
Refer to employer responsibilities by plan type:
|Plan Type||Roles & Responsibilities|
|Health Savings Accounts
Health Reimbursement Arrangements
Flexible Spending Arrangement pre-tax employer contributions
As the IRS issues additional guidance and develops regulatory language around the implementation of the excise tax, CalPERS will communicate with employers to help them understand their roles and responsibilities.
Fees Related to the ACA
The ACA contains fee requirements that impact CalPERS and our health plans. Employers don't need to pay these fees; CalPERS factors the fees into our annual health premiums:
- Patient-Centered Outcomes Research Institute Fee (2012-18)
- Health Insurance Providers Fee (Ongoing fee beginning in 2014; Congress suspended the collection of this fee for the 2019 plan year.)
For additional information on these fee requirements, refer to the IRS' Tax Provisions for Other Organizations.