Affordable Care Act Employer Reporting

Mike Burt, CPA (Jul, 2015)

Both employers and employees have now had some time to digest the Affordable Care Act (ACA) since the IRS mandated it.  There have been multiple repeals of the start dates for compliance, but now the time is here when employers must begin complying with the new laws.  To better understand some of the ACA terminology, listed below are some definitions of commonly used terms related to it.

  • Applicable Large Employer (ALE) – An employer having 50 or more full-time equivalent employees in the preceding calendar year.
  • Full-Time Employee – An employee who averages a minimum of 30 hours per week.
  • Minimum Essential Coverage (MEC) – This includes almost all employer-sponsored medical coverage.  However, this does not include dental, vision, Flexible Spending Accounts, or Employee Assistance Programs.
  • Minimum Value – This is equivalent to a Bronze plan on an insurance exchange.  To have minimum value, an insurance plan must pay at least 60% of the benefit costs.
  • Affordable Coverage – The employee’s share of insurance premiums for the lowest cost individual coverage option.  This may not exceed 9.5% of an employee’s income subject to certain safe harbors. 
  • Qualifying Offer – An employer must offer a full-time employee Minimum Essential Coverage that also provides Minimum Value.  For 2016 and forward, an employer with over 50 full-time employees must offer coverage to at least 95% of full-time employees.  For 2015, there is relief in that only employers with over 100 full-time employees have to offer coverage to 70% of their full-time employees.

An employer should review the following items in performing their due diligence to fulfill their reporting requirements:

  • Collect employee social security numbers
  • Collect employee insurance information
  • Determine which reporting requirements apply
  • Determine the filing deadlines
  • Determine who is responsible for filling out the forms
  • Determine if the forms need to be electronically filed, or can be paper filed
  • Determine if penalties apply

Employers have two types of reporting they need to be aware of.  The first is Employer Shared Responsibility reporting under IRS Code Section 6056.  This reporting encompasses an employer’s compliance with Minimum Value, affordability requirements, and determining if an employee qualifies for an insurance subsidy.  The second reporting requirement concerns Minimum Essential Coverage reporting under IRS Code Section 6055. 

IRS Code Section 6056 reporting applies only to Applicable Large Employers.  Reporting must be provided by employers to the IRS by February 29, 2016 (normally due by February 28 each year, however, it not only falls on a weekend in 2016, but is also a leap year).  The employer is responsible for reporting this for both fully insured and self-insured insurance plans.  An ALE determines this reporting requirement at the separate entity level and not at the consolidated level (each ALE member files a separate Form 1094-C Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns).  IRS Form 1095-C Employer-Provided Health Insurance Offer and Coverage needs to be completed for each full-time employee.

IRS Code Section 6055 reporting applies to all employers.  Under IRS Code Section 6055, employees are provided with the necessary information by their employer or insurance carrier to determine if minimum essential coverage was received.  In the upcoming year employees must be provided this information by February 1, 2016 (normally due by January 31 each year, but it falls on a weekend in 2016).  Employers or insurance carriers must provide reporting to the IRS by February 29, 2016 (normally due by February 28, however, it not only falls on a weekend in 2016, but is also a leap year).  This is done on IRS Form 1094-B Transmittal of Health Coverage Information Returns, IRS Form 1094-C Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, IRS Form 1095-B Health Coverage, and IRS Form 1095-C Employer-Provided Health Insurance Offer and Coverage.

For fully insured insurance plans, the issuer or insurance carrier is responsible for this reporting under IRS Code Section 6055.  For self-insured health coverage plans, the employer is responsible for this reporting (size of the company does not factor in).  In a controlled group, each separate employer has its own reporting obligation.  No reporting is required for the following:  Health Savings Accounts with high-deductible health plans, wellness programs provided with MEC, self-insured HIPAA excepted benefits, and Health Reimbursement Arrangements with MEC.

The C series forms are used with ALEs who have a self-insured plan.  Form 1094-C and Form 1095-C are filed with the IRS.  A covered employee receives Form 1095-C.  However, for non-employees, Forms 1094-B and Form 1095-B are used.

The B series forms are used with employers who are not ALEs that have a self-insured plan, as well as an issuer of a group or individual insurance policy.  Form 1094-B and Form 1095-B are filed with the IRS.  A covered employee also receives Form 1095-B.   

The Internal Revenue Service recently stated on July 2, 2015 that employers are now able to request extensions of time to file information returns regarding the ACA, as well as providing ACA statements to payees.  The applicable forms that can be extended include Form 1094-B, Form 1094-C, Form 1095-B, and Form 1096-C.  Employers will need to complete a revised Form 8809 (Application for Extension of Time to File Information Returns) once revised by the IRS to request an automatic 30-day extension of filing.  The IRS will also grant an additional 30-day filing extension if both the IRS granted the first automatic 30-day extension and the second extension is filed before the first 30-day extension expires.

With the complexity of the new ACA regulations employers need to remain proactive in staying abreast of new ACA legislation and reporting requirements.  Please feel free to contact your Dermody, Burke & Brown tax advisor to further discuss any questions you may have.

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