"Think of ACA Reporting as an additional W2 with different information."
We're hoping ACA Reporting is old news for you, that you've been collecting the necessary information all year, and you're ready to go!
But since we've received some frantic calls from companies who have this nagging feeling their advisors aren't really "on top of it," and they don't feel confident in what to do -- here is ACA Reporting 101. It's like when you first learned to ride a bike. We'll hold on until you get your balance, and then let go as you fly.
We've also given you a year-end checklist (especially for California employers in light of recent changes).
The purpose behind the new Affordable Care Act reporting requirement is to make certain Applicable Large Employers (ALE) report whether each individual employee is covered by minimum essential coverage, and that an offer of minimum essential coverage that provides minimum value was made to each full-time employee. But -- it's not quite that simple, as you're about to see.
Since we're approaching the end of the year, we are going to preface a discussion of ACA Reporting with some loose ends that you also need to make sure you "tie up."
Year-End HR Considerations
(Especially for California Employers)
1. Review your Independent Contractors:
Who are you paying via 1099? Recent court decisions and administrative rulings have narrowed the definition significantly. January 1 is the best time to make sure everyone is properly classified. When in doubt, classify "employee" then consult with your attorney.
2. Review your employee's salary classification:
If the DOL's proposed amendments to increase the salary threshold for employee overtime exemptions pass, don't be caught off guard.
Take a look at all of your employees that are currently below the proposed threshold:
3. Organize your personnel files:
Take the time to organize your employee files and I-9 Forms:
Make sure your accounting, human resources, and payroll administrators are all collaborating to ensure compliance with the new reporting requirements on paid sick leave.
You want to avoid being one of the California employers being hit with the recent plague of PAGA suits . You can't afford to assume your third-party payroll provider has it covered.
5. Analyze compensation practices.
Make sure your compensation policies and practices are ready for when the California Fair Pay Act goes into effect January 1st. You now must evaluate employees by job duties, not titles, to ensure equal compensation for women and men. If you find a disparity in pay, either fix it or be ready to explain.
ACA Reporting 101
We must place a disclaimer here. This content is provided as a general guide. Us this guide to consult with your 1) benefit advisor 2) tax advisor 3) payroll advisor 4) legal advisor for specific advise regarding your particular circumstances.
Are you ready? Here we go!
Form 1094-C and 1095-C Reporting
Applicable Large Employers are required to file annual Affordable Care Act reports with the IRS verifying that they made offers of coverage to all full-time employees on IRS Forms 1094-C and 1095-C.
Form 1094-C is a summary report provided to the IRS that includes:
The IRS will be using the information you provide to determine the pay-or-play penalty, and to assess eligibility for individual premium tax credit for coverage purchased in the Health Insurance Marketplaces.
You provide Form 1095-C to both the IRS and to each of your full-time employees. It includes information regarding the specific employee's group health coverage and whether spouses and dependents are covered.
Similar to a Form W-2 and Form W-3, a separate Form 1095-C should be provided to each of your full-time employees and then filed with the IRS using the transmittal Form 1094-C.
Determine Your ALE Status
According to the ACA definition, an Applicable Large Employer (ALE) averages at least 50 full-time or full-time equivalent employees. Note that the reporting requirement applies to you for 2015 even if you were under 100 full-time employees and not subject to the pay-or-play penalty in 2015. (If you have less than 50, go to this link to see your ACA reporting requirements: https://www.irs.gov/Affordable-Care-Act/Employers/Tax-Considerations-for-Employers-with-Fewer-than-50-Employees)
Decide Whether to Outsource ACA Reporting
You have to make the call (urgently at this point) as to whether you are up to handling ACA reporting or if you need to outsource.
Consult Advisors Regarding Reporting Questions
True to form, the IRS rules for ACA reporting are quite detailed, and you may be subject to different special rules. You would be wise to ramp up your reporting preparation efforts at this point, if you have not already
done so, and to review the following guidance with your advisors, staff, and vendors:
IRS Report Filing and Employee Statement Plan
The Form 1094-C and Form 1095-C must be provided to the IRS at the same time as your Forms W-2 and W-3.
-waivers of electronic filing requirement
-filing/providing substitute returns or employee
-filing corrected forms
"Incorrect reports gets you a one-time pass -- failing to file gets you a penalty."
Decide Who was a Full-time Employee for at Least One Month of the Year
Each ALE member must file a Form 1095-C for:
Generally, you should work to identify full-time employees, using your method of choice under the ACA, prior to the ACA reporting deadline. Then you can confirm which employees must receive Form 1095-C and complete Form 1094-C.
You must report your total employee and total full-time employee counts for each month on Form 1094-C based on a consistent "snapshot" methodology (e.g., on the first day of the month, last day of the month, etc.).
The IRS' final instructions revised the methodology to allow you to base your employee count on the number of employees as of the 12th day of each month.
This step does not apply if you are eligible for the 98 percent offer rule described in the instructions for Forms 1094-C and 1095-C above.
Determine the Types of Coverage Offered and How Each Type Should be Reported
ALE with Employees Covered under a Self-Insured Plan.
If you offer coverage through a self-insured health plan sponsored by your company, you must complete Form 1095-C, Parts I, II, and III, for any employee who enrolls in the health coverage, whether or not they are a full-time employee for any month of the calendar year. You also will need to complete the Form 1095-C for each full-time employee.
ALE with Employee Covered under an Insured Medical Plan.
If you offer coverage through an insured group health plan sponsored by your company, you will need to complete Form 1095-C, Parts I and II. You should not complete Part III.
ALE with Employees Covered under a Multi-Employer Plan. Relying on the multi-employer plan interim rule relief for a given month means you'll need to complete Form 1095-C, Parts I and II and, in Part II, you will enter 1H on line 14, skip line 15, and report 2E on line 16, regardless of whether the employee was eligible to enroll or enrolled in coverage under the multi-employer plan.
The instructions for line 16 create an exception to the 2C enrollment code for the 2E multi-employer interim rule relief code.
While the IRS may change the requirements for reporting multi-employer plan coverage for 2016 and future years, the instructions for 2015 resolve much of the ambiguity that has been plaguing multi-employer plans about the need to exchange data with employers.
You might still need to obtain offer and enrollment information from the multi-employer plan if there are full-time employees who receive offers of coverage but:
(a) the employer has no obligation to contribute on
(b) they are offered coverage that is not affordable,
(c) they are offered coverage that does not provide
minimum value, or
(d) they are offered coverage that does not cover
eligible individuals' dependent children.
HIPAA issues regarding if such a data exchange between multi-employer plans and contributing employers were required still have not been addressed by the IRS and HHS.
Employees Eligible for COBRA
According to the final IRS 2015 instructions, an offer of COBRA coverage at termination of employment should not be reported as an offer of coverage in your ACA reporting -- regardless of enrollment. However, COBRA coverage offers due to a reduction in hours are reported in the same manner as an offer of that type of coverage to any other active employee.
Tax reporting penalties effective for 2015 filings which, if assessed, apply in addition to the Employer Mandate penalties that would be assessed under the ACA, are listed in the IRS' final instructions.
Form 1094-B and 1095-B Reporting
If your company sponsors a self-insured health plan, providing minimum essential coverage (MEC), or otherwise provides a MEC to your employees, you must prepare annual ACA reports reflecting enrolled employees' months of coverage.
Most will fulfill their reporting obligations by using Forms 1094-B and 1095-B (though ALEs sponsoring self-insured coverage can instead use Forms 1094-C and 1095-C). 2015 Forms:
For employees covered by multiple types of MEC, the instructions to Forms 1094-B and 1095-B clarify certain special reporting rules that apply. In two situations, only one type of MEC would need to be reported:
Taxpayer Identification Numbers and Social Security Numbers
According to the IRS' final instructions for Forms 1094-B and 1095-B, Form 1095-B furnished to recipients may truncate social security numbers (SSNs), taxpayer identification numbers (TINs), or your company's employer identification number (EIN), but not the
filer's EIN. For now, you will not be subject to penalties for failure to report a TIN if you comply with the regulatory procedures for soliciting TINs, with certain modifications described in detail in IRS Notice 2015-68.
"Responsible Individual" Defined
The "responsible individual" is the person who, based on a relationship to the covered employee, the primary name on the coverage, or some other circumstances, should receive the statement.
Generally, the statement recipient should be the
taxpayer (tax filer) who would be liable for the individual shared responsibility payment for the covered employee.
Further, the preamble to the regulations under Section 6055 makes clear that "[a] responsible individual is a primary insured, employee, former employee, uniformed services sponsor, parent, or other related person named on an application who enrolls one or more individuals, including him or herself, in minimum essential coverage."
79 Fed. Reg. 13220 (March 10, 2014).
Get In Gear
The deadlines to furnish statements and file reports are right around the corner. Now is the time for you to organize your data and develop your plan for compliance.
We know you can do it, so we're letting go to let you fly! Wheeeeeeeee!
IRS - "Affordable Care Act"
Fox Rothschild LLP.
Sahara Pynes, November 11, 2015.
"Year-End HR Considerations | California Employment Law" http://californiaemploymentlaw.foxrothschild.com/2015/11/articles/wageandhour/year-end-hr-considerations/
Nicole D. Bogard M'Alyssa Mecenas. 11/10/15
"Health Care Reform Reporting Is Coming: Is Your Company Prepared?"
Fisher & Phillips LLP.
Lorie Maring. "ACA Reporting 101" 11/2/15
Rylan Klaseen & Associates
Serving Southern California: