Attention Employers – Are you subject to the ACA reporting requirements due to employees January 31, 2016?
This is important information regarding Employer Reporting Requirements of the Affordable Care Act beginning in 2016 (for health coverage offered on or after January 1, 2015). Internal Revenue Code (IRC) Section 6056 requires Applicable Large Employers (ALEs) and employers of all sizes with self-insured plans to file information returns with the Internal Revenue Service (IRS) to report applicable healthcare information. An ALE must file Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, for each full-time employee, and the related Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns. These reporting requirements help administer the employer shared-responsibility mandate and the individual mandate added as a part of the Patient Protection and Affordable Care Act.
MKS&H is concerned that businesses such as yourself may be unaware of these new reporting requirements as this is the first time it is mandatory to file these forms. Although we are not experts with respect to the legal and regulatory aspects of the ACA, our firm wishes to inform you of some of the reporting requirements we believe could impact your company. Certain aspects of these new information-reporting requirements are highlighted below, based on information from the Internal Revenue Service. However, this letter does not address everything you may need to know as an employer in order to comply with the ACA requirements.
Who Needs to File?
Employers with Employer-Sponsored Self-Insured Plans
Employers of all sizes that offer employer-sponsored self-insured coverage, including Health Reimbursement Accounts (HRA) will also be required to report information to the IRS and to affected individual employees about individuals who have minimum essential coverage under the employer plan and therefore have met the individual shared-responsibility requirement for the months that they are covered under the plan. Small Self-Insured Employers would file Forms 1094-B and Forms 1095-B; Large Self-Insured Employers would file the necessary information using Part III of Forms 1094-C and 1095-C.
Employers with 50 or More Employees
For calendar year 2015, employers with 50 or more full-time employees (including full-time equivalent employees) and all self-insured employers, regardless of size (see below), must report healthcare coverage information both individually to their employees and to the IRS. Reporting is mandatory for 2015. Full-time employees are those who worked an average of 30 hours or more per week for more than 120 days in a year. Healthcare.gov has some tools, including a Full-Time Equivalent Employee (FTE) Calculator, to help determine an entity’s filing obligation as determined by the number of its FTEs.
Small Employers with Fewer Than 50 Employees That Are Members of a Controlled or Affiliated Service Group
Small employers with fewer than 50 full-time employees (including full-time equivalents) will be required to file Forms 1095-C and 1094-C if they are members of a controlled or affiliated service group that collectively has at least 50 full-time employees (including full-time equivalents). Companies could be in a controlled or affiliated service group if they have common owners, provide services for each other, or work together to provide services to third parties.
What Are the Filing Deadlines?
The federal filing deadlines for this new ACA reporting are consistent with W-2 and 1099 reporting. Form 1095-B or Form 1095-C, as applicable, must be provided to employees by January 31, similar to W-2 forms. However, for 2015, these deadlines have been changed. The statements must be provided no later than March 31, 2016. You will meet the requirement to file if the form is properly addressed and mailed by the due date.
Due dates for the required forms are as follows: Form 1095-C must be provided to each employee by March 31, 2016; Form 1094-C (transmittal) and copies of each Form 1095-C are due to the IRS by May 31, 2016, or by June 30, 2016 if filing electronically. If your organization files 250 or more Forms 1095-C, you will be required to file electronically.
What Are the Fines and Penalties for Not Complying with the Reporting Requirements?
Employers who fail to report will be subject to fines. The penalty is $100 per violation, up to a maximum of $1.5 million per year. However, employers that report within 30 days of the deadline will be fined $30 per violation. Those that file within five months of the deadline will be fined $60 per violation. The penalties will increase to $250 per violation next year, with a maximum of $3 million per year, with $50 per violation if filed within 30 days, and $100 per violation if filed after 30 days.
Entities that intentionally disregard the reporting requirements face a penalty of $250 per violation this year and $500 per violation in 2016, with no cap on the potential liability.
What Actions Should an Employer Take to Prepare?
Given the complexity of information required to be reported and the potential size and impact of the penalties, employers need to ensure that adequate procedures are in place for determining and documenting each employee’s full-time or part-time status month-by-month, as well as procedures to collect information about health coverage and enrollment month-by-month. Even what might seem a simple count of full-time employees is much more complex for employers that hire variable-hour or seasonal employees.
We strongly encourage you to take the extra time now, if you have not already done so, to discuss your reporting requirements with all of your applicable service providers (plan administrator, payroll vendor, and/or a qualified legal representative, etc.) to help you determine your company’s readiness for complying with the new information-reporting requirements for employers under the ACA. Be certain to clearly designate responsible parties for the data collection and form preparation.
If your company would like our firm to assist you with the preparation of the 2015 Form 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns and the applicable 2015 Form 1095-C: Employer-Provided Health Insurance Offer and Coverage, please contact your tax advisor as soon as possible for information regarding the nature of the services we can provide.