Most children can count to 10 in preschool. The average child can count to 200 at age six. But, employee benefit professionals know that counting – when counting employees — is anything but easy.
The reason that counting employees isn’t easy is that it depends why they’re being counted. Different laws at the federal and state level count employees in different ways. This is particularly true for laws that impact employee benefits.
The Affordable Care Act (ACA) requires that employers count employees to determine whether an employer is an “applicable large employer” or ALE. An ALE is subject to the employer shared responsibility requirements of the law. First an employer needs to consider if the firm is part of a controlled group. Then, an employer must determine the number of full-time and full-time equivalent employees. Employers must make this determination of ALE status each year. The IRS guidance on determining ALE status can be found here.
COBRA, the federal employee continuation law requires a different method of counting employees. COBRA requires that employers count full-time and part-time employees. A part-time employee is counted as a fraction equal to the number of hours worked divided by the hours an employee must work to be considered full-time. A more detailed explanation of counting employees for COBRA purposes can be found in An Employer’s Guide to Group Health Continuation Coverage Under COBRA.
State continuation laws may count employees differently than COBRA.
Medicare Secondary Payer (MSP) provisions require yet another counting method. The MSP provision applies to group health plans of employers with 20 or more employees. Generally speaking, MSP looks to employees on the payroll. But, the technical aspects of counting employees are more involved as Section 10.3 of the Medicare Secondary Payer (MSP) Manual Chapter 2 reveals.
Form 5500 filing requirements for welfare plans add yet another counting complication. A welfare benefit plan that covered fewer than 100 participants as of the beginning of the plan year may be exempt from the filing requirements. The instructions for Form 5500 provide the details.
Other laws or regulations that may require different counting methods include:
- Family and Medical Leave Act (FMLA)
- Pregnancy Discrimination Act (PDA)
- Age Discrimination Employment Act (ADEA)
- PCORI fee
- Form W-2 cost of health benefits requirement
- Numerous other federal and state laws.
Employees who have enjoyed the benefit of health savings accounts (HSAs) may be in for a taxing surprise when they enroll in Medicare. That’s because Medicare enrollment disqualifies someone from contributing to an HSA.
Working employees may sign up for premium free Medicare Part A when they are first eligible for coverage at age 65. Signing up for Part A or signing up for social security, which triggers enrollment in Part A, requires a person to cease making HSA contributions. A person who signs up for social security is automatically signed up for Medicare Part A.
By claiming social security benefits after age 65, an automatic retroactive coverage period for Part A is triggered. The retroactive period is limited to six months or the entitlement date for Medicare, whichever is shorter. HSA contributions made during this Part A retroactive period may result in an IRS penalty.
Working aged employees or spouses can delay enrollment in Medicare Parts A and B if they are enrolled in an employer group health plan. Before considering this option, it’s important to understand whether the employer plan will assume coordination with Medicare benefits. If Medicare is the primary payer, the employee could have to pay the expenses that Medicare would have paid out of their own pocket.
Employees should discuss their Medicare and HSA options with their benefits advisor and accountant well in advance of reaching age 65.
Here are some resources that are helpful in understanding Medicare for employees:
Medicare.gov “I have employer coverage”
Coordination of Benefits brochure
Medicare & Other Health Benefits: Your Guide to Who Pays First
Health Savings Accounts (HSA) and Medicare
Medicare Part A & Part B sign up periods
IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
Anyone approaching Medicare age is sure to be swamped with mail regarding the coverage options to consider. For many people, these mailers are put aside or disregarded as “junk mail.” But, Medicare enrollment is an important decision which has both medical care and financial implications.
Individuals are finding that a process intended to make Medicare enrollment simpler is sometimes leading to undesired consequences. CMS allows insurance companies to automatically enroll individuals who have current healthcare coverage into a Medicare Advantage (MA) plan offered by the insurance company when the person first becomes eligible for Medicare.
This process is called “seamless conversion enrollment.” Individuals will receive a written notice at least 60 days prior to the Medicare Advantage coverage effective date. Someone who doesn’t wish to have the MA coverage offered must opt-out of the coverage before the coverage begins.
CMS has released a list of insurance companies that have received approval for “seamless conversion.” It can be found here. CMS has suspended approving additional carriers pending a review of “seamless conversion” amid complaints that have surfaced from Medicare enrollees.
“Seamless conversion” may help people who wish to remain with their known insurance company. But, it’s important that anyone enrolled in the MA plan ascertain that any desired medical providers continue to be part of the MA plan.
Selecting any insurance plan – whether as a senior citizen or at any age – is a complicated and confusing obligation. A health insurance broker can help navigate the many options and advise on the most appropriate policy to fit an individual’s needs.