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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

To learn more about ACA employer requirements, employers may refer to the ACA Employer Guidance (PDF) document, review the information below, and search our Circular Letters.

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.

Minimum Essential Coverage

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. Starting in 2019, with the passage of the Tax Cuts and Jobs Act (PDF), the individual shared responsibility penalty was reduced to zero but the provision still requires individuals to report health coverage to the IRS.

All of CalPERS' health plans meet the minimum essential coverage requirement.

Form 1095-B

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 may also furnish related statements to covered individuals by March 2 of each year. The IRS issued proposed rules (PDF) on December 6, 2021, granting health plans an automatic 30-day extension to furnish form 1095-B to individuals from January 31 to March 2. In addition, the IRS is allowing health plans to make Form 1095-B available upon request if health plans meet specific conditions, including posting a clear notice on their website with contact information and providing the form within 30 days from the date of request.

Retirees enrolled in Medicare Part A (including Medicare Advantage plans) will receive by mail a Qualifying Health Coverage Notice (PDF), in addition to Form 1095-B, from the Centers for Medicare & Medicaid Services (CMS).

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.

Health Coverage Offered by ALEs

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.

Form 1095-C

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 March 2 of each year about the information reported to the IRS. The IRS issued proposed rule on December 6, 2021, granting ALEs an automatic 30-day extension to furnish form 1095-C to employees, from January 31 to March 2.

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.

Letter 226-J

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. 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 56-59).

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

For additional information about SBC requirements, see our Circular Letter (PDF) or visit the Department of Labor website.

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.

However, on December 20, 2019, Congress passed the Further Consolidated Appropriations Act of 2020 (PDF) which, in part, repealed the excise tax on high cost employer-sponsored health coverage. The repeal of the excise tax removes the need to plan for implementation.

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.

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:

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