June 2016 Newsletter

June 1, 2016

Summer Internships

In an ACA World

It’s the end of the summer and Billy the intern heads back for his fall semester at college after a valuable internship experience that helped both his future and your company. Almost a year later, your company receives a letter from the IRS with a startling fine for failing to offer Billy health benefits. For most, this scenario seems absurd-but it’s a real issue if the process is not handled correctly.

For companies subject to penalties under the Affordable Care Act (ACA), typically companies with 50 or more full-time equivalent employees, the management of interns is not as straightforward as it used to be. In the era of ACA, interns not tracked closely can create a liability for employers-particularly in the area of health benefits eligibility. Here’s what you need to know:

If your company is subject to the ACA employer mandates and your company is offering a paid, full-time (30 hours/week or more) internship to someone working beyond your waiting period, that intern would at that point be eligible for benefits like that of a normal employee. With that said, there are three safe harbor exceptions to be aware of, in which you can place these interns: variable-hour employees (if they really have variable hours), seasonal employees, and the requirement to not cover up to 5% of employees. If an intern falls into one of the first two categories, you can place them in a measurement period in which case they need to satisfy the period before being eligible. However, if the intern does not fit into either of those categories, the employer is still allowed to not cover up to 5% of the otherwise eligible employee population, and the intern could possibly be included in that safe harbor. (If the intern fits into the 5% exception, there would be no penalty to the employer if the intern was able to purchase individual health coverage at the governmental Marketplace and received a tax subsidy.)

Interns who meet the criteria and work past the waiting period, whether offered coverage or not, are to be reported on the new Form 1095‑C sent to the IRS.

On this issue of internships and ACA penalties, the Society for Human Resource Management (SHRM) recommends that if you intend to define interns as seasonal employees, to state that in the offer letter. Further, it recommends to monitor the work and hours of interns closely and remember that they should not be considered a long-term substitute for hiring regular employees.

If you have any questions on this topic, please contact Stephen McNeil for more information — [email protected].

All in the Family

People Section

The company is family based, with children from both partners’ sides working at the company together. Keith McNeil says that the younger generation brings fresh ideas, different perspectives and a better understanding of technology issues…Stephen McNeil, the son of Keith McNeil, echoes the sentiment, saying, “We don’t have the normal issues a family business has. It’s brought us closer as a family. Both families interact really well.”Read entire article here…

Warning! The Newest Hot Offer

… is (unfortunately) coming to you

They’ve done it before…and they’ll do it again…and they’re doing it right now.

As medical rates continue to increase along with additional employer cost burdens, there are always those who would relieve you of your money…by telling you how to save money.

A few years ago, there was a flurry of promises directed at employers dealing with Medical Reimbursement Plans (not insurance, so perfectly legal) that allowed the employer to deduct the cost of expenses (true) but also have the employee deduct the expense from their pay on a tax free basis (false). The encroachment of this type of scheme was so pernicious that the IRS had to step in on three separate occasions to decry the practice — and then repeat themselves for good measure.

It often starts with a vague video tease. Someone has a secret plan. Bolstered by their “discovery” of little known tax provisions, supported by a letter from a random CPA that skirts the primary issues and says there is a way…that is until the IRS issues a letter or a ruling saying that these schemes are patently illegal and giving a pretty fair summary of why that is the case.

The latest series of these messages surfacing are about a way to use “wellness” to save money, courtesy of the Affordable Care Act. There are variations on the theme, but the common elements they present are:

Employees pay large premiums to participate in a wellness plan through pre-tax salary reductions under a cafeteria plan.

The employee then gets involved in wellness activities to generate an incentive which they use to generate enough income to offset the salary reduction.

The wellness program is supposedly designed to be exempt from the Affordable Care Act limitations on wellness incentives (it isn’t).

A portion of the FICA savings is used to pay an administrative fee to the promoter.

The remainder of the FICA savings is credited to a benefit account to pay for additional incentives.

That all sounds great, except two weeks ago the IRS Chief Counsel issued a memorandum that in no uncertain terms outlawed this entire scheme, reiterating, as they have done so often, that there is no means of “double dipping” permissible under current, former (and probably future) tax law.

We want to help our clients, and their employees, manage the cost of health care any way we can. We write the gamut of pre-tax plans, set up wellness programs and develop any number of plan design, choice and contribution structures tailored to your specific needs. So when you see a good deal coming, run…in our direction, so we can clear up any confusion and have a constructive conversation about the opportunities that actually exist and work.

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