The Patient Protection and Affordable Care Act (ACA) is the largest restructuring of the U.S. healthcare system and funding practices to date. Now more than ever, companies need to ensure their global travelers are kept in the loop on how their healthcare coverage could be affected. All U.S. citizens and green card holders must maintain minimal essential coverage (MEC) under ACA guidelines or risk tax penalties. Managing employees’ expectations during this period of implementation will be challenging, so it is important for employers to stay well informed. Additionally, companies need to know how new and changing rulings affect their responsibilities.
How will the ACA apply to non-U.S. citizens entering the U.S. to work?
The Patient Protection and Affordable Care Act will uniquely affect expatriates due to the complexity of domestic and foreign laws. Due to these challenges, the government has granted an extended transition period for expatriates through December 31, 2016. This extended period applies to expatriates and their dependents who by “good faith expectation” will be enrolled for six months or more on a group-insured health plan.
The individual mandate applies only to U.S. citizens, not nonresident aliens. If on assignment the employee becomes a resident for income tax purposes, then the MEC applies.
Foreign insurance coverage plans for expatriates could possibly qualify, but the plan must be government regulated.
How will the ACA apply to U.S. citizens and green card holders leaving the U.S. to work abroad?
In most cases, U.S. citizens living abroad will be subject to the MEC requirement. However, employees will be deemed as meeting the MEC if they are on assignment for an uninterrupted period that includes an entire taxable year or are present in a foreign country for at least 330 full days during a period of 12 consecutive months. Expatriates may be deemed to have MEC if companies provide insurance coverage for U.S. persons working abroad through a government-regulated insurance provider and comply with the notice/reporting requirements of the ACA.
When will companies be subject to ACA penalties and fines?
There have recently been further rulings delaying the ACA’s employer share responsibility requirement:
- Employers deemed an “applicable large employer” (having at least 50 but fewer than 100 full-time employees) will have until 2016 to meet the requirements stating the employer must not reduce the size of its workforce or the overall hours of service of its employees in order to satisfy the workforce size condition. Beginning February 9, 2014 and ending on December 31, 2014, the employer must not reduce the size of its workforce or the overall hours of service of its employees in order to satisfy the workforce size condition. In other words, they must not eliminate or materially reduce the health coverage if it was offered as of February 9, 2014.
- Employers deemed an “applicable large employer” (having 100 or more full-time employees) during 2015 will be subject to a penalty for failing to provide minimum essential coverage (MEC) if it fails to report 70% of its full-time employees. In 2016, that full-time employee percentage will increase to 95%. Penalties are also gradual in accordance with the percentages listed above for each year, with a $2,000 fine per year multiplied by the number of full-time employees over 80 for any month coverage is not offered.
Excise tax penalties may be applicable if other mandates are not adhered to, such as:
- Elimination of pre-existing conditions
- Offering first-dollar coverage for preventive care such as mammograms, prostate exams, etc.
- Offering coverage to dependents up to the age of 26
- Continuing to meet privacy of health care information requirements
- Continuing to meet Cobra requirements
- Continuing to meet mental health parity requirements
What steps should companies take to prepare their expatriate population and protect themselves from penalties?
Companies should begin to prepare for future mandates that may be applicable to their expatriate population. Some proactive steps include:
- See if your company qualifies as an “applicable large company” who may be subject to ACA requirements and penalties
- Identify U.S. citizens and green card holders within your company who are working abroad, including business travelers who may be currently traveling under the company’s radar
- Check with your foreign healthcare insurance provider to ensure it is government regulated and adheres to the ACA notice and reporting requirements
- Start documenting your global travelers’ time in and out of the country along with stability periods in order to minimize risks that could trigger penalties for failure of coverage
- Communicate with your global traveler population the importance or working with HR to ensure they are never without coverage resulting in their generating unnecessary penalties and fines for the company
Companies are urged to contact their healthcare providers, tax provider, and/or relocation provider to help companies start preparing now in order to prevent costly fees and fines later. For always up-to-date information on this subject, visit http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions-Home
For information or questions about this blog post, please contact Pam Buchanan, Lexicon Consulting Services, +1-904-858-1255 ext. 1979 or via email at firstname.lastname@example.org.
Sources: PWC and SHRM (PWC 2/11/14: United States: Consider the Affordable Care Act’s Impact on Globally Mobile Employees; SHRM 3/5/14: How Does the Affordable Care Act Impact Expatriate Employees)