Changes to some Affordable Care Act (ACA) requirements take effect in 2022 for employers sponsoring group health plans. To prepare for 2022, employers should review these upcoming requirements and develop a compliance strategy.
The ACA’s overall annual limit on cost sharing (also known as an out-of-pocket maximum) applies for all group health plans, whether insured or self-insured. Under the ACA, a health plan’s out-of-pocket maximum for may not exceed $8,700 for self-only coverage and $17,400 for family coverage, effective for plan years beginning on or after January 1, 2022.
An employee’s annual pre-tax salary reduction contributions to a health Flexible Spending Account (FSA) must be limited to $2,850 for taxable years beginning in 2022.
Health plans and health insurance issuers must provide a Summary of Benefits and Coverage (SBC) to applicants and enrollees to help them understand their coverage and make coverage decisions. Plans and issuers must provide the SBC to participants and beneficiaries who enroll or reenroll in a health plan. In the past SBCs were only required for health plans but in 2022 SBCs are now required for Dental and Vision plans also.
An Applicable Large Employer’s (ALE) health coverage is considered affordable if the employee’s required contribution to the plan does not exceed 9.61% of the employee’s household income for 2022.
The ACA requires ALEs to report information to the IRS and to their full-time employees regarding the employer-sponsored health coverage they offer. The IRS will use the information that ALEs report to verify employer-sponsored coverage and administer the employer shared responsibility provisions. This reporting requirement is found in Code Section 6056.
- Returns are due in early 2022 for health plan coverage of- fered or provided in 2021.
- Returns generally must be filed with the IRS by February 28 (or March 31, if filed electronically) of the year after the calendar year to which the returns relate.
- Written statements generally must be provided to employ- ees no later than January 31 of the year following the calen- dar year in which coverage was provided.
Under both Sections 6055 and 6056, each reporting entity must file all of the following with the IRS:
- A separate statement for each individual; and
- A single transmittal form for all of the returns filed for a
given calendar year.
Under Section 6056, entities will file Forms 1094-C (a transmittal) and 1095-C (an information return) for each full-time employee for any month. Entities reporting under both Sections 6055 and 6056 will file using a combined reporting method on Form 1094-C and Form 1095-C.
Employers are required to provide all new hires and existing employees with a written notice about the ACA’s Health Insurance Exchanges. This notice must be provided at the time of hiring. In general, the notice must:
- Inform employees about the existence of the Exchange and describe the services provided;
- Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer’s plan does not meet certain requirements; and
- Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of the employer contribution to employer-pro- vided coverage may be excludable for federal income tax purposes.
Have a great holiday season and wishing you a healthy and prosperous New Year.