Dr. Seuss once said that “sometimes the questions are complicated and the answers are simple.” Well, he clearly did not have the employer shared responsibility provisions of the Patient Protection and Affordable Care Act (”ACA”) in mind.
Each tax season seems to bring new challenges for taxpayers. Last year’s challenge was the Tangible Property Regulations which, while providing major tax savings to some taxpayers, still required much time and effort in the compliance process. This year’s compliance challenge offers no tax savings as a carrot; merely the opportunity to own up to penalties owed. And it’s not a one-time event – it will require ongoing effort and attention at the busiest time of the year for your accounting/tax department, right after year-end.
If you are an applicable large employer (“ALE”) – meaning that you had an average of at least 50 full-time employees during 2014 – then you are subject to the employer shared responsibility provisions of the ACA and must report information about your health plan to the government and to your covered employees. There is some transition relief. For 2015, the reporting threshold is 100 full-time employees during 2014. Those employers have two years to comply with the requirement that they cover 95% of their workers. ALE with 50 to 99 employees don’t have to report compliance until 2016, meaning their first reports will be due in 2017.
An ALE can be a single employer or a group of related entities under common control. It can be a for-profit or a not-for-profit entity. It can be pretty much anyone or anything. It might be you.
The basics are as follows:
- An ALE must file Form 1095-C for each employee who was a full-time employee for any month of the calendar year by February 29, 2016 (March 31, 2016 if filed electronically). A copy of the form must also be furnished to the employee by January 31, 2016. Some of the information on this form (who was employed when, social security number, date of birth) will come from payroll records. Other information (which individuals obtained coverage, type of coverage offered, employee share of lowest cost monthly premium, etc.) may come from HR records or your health insurance provider.
- Form 1095-C is transmitted with Form 1094-C, which requires more information than a normal transmittal form including, among other things, whether health insurance was offered to at least 95% of full-time employees and their dependents and whether such insurance was considered affordable and met the minimum value requirement.
- If you offer health insurance to non-employees (such as those availing themselves of COBRA), you can elect to report that coverage on either Form 1095-C/1094-C or Form 1095-B/1094-B. The latter merely verifies that individuals have minimum essential coverage that complies with the individual coverage requirements.
- The IRS announced recently that the filing deadline for Forms 1094-C, 1095-C, 1094-B and 1095-B may be extended for 30 days by filing Form 8809 (Application for Extension of Time To File Information Returns), which is being revised to include check boxes for these forms. An additional 30-day extension is also available if the first automatic 30-day extension was granted by the IRS and the additional extension is requested before the first extension expires. Extension of the deadline to provide ACA forms to employees may be obtained by submitting a letter to the IRS that contains information to be specified in an upcoming revision to IRS Publication 1220 (Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G). Such extensions are not automatic.
The draft instructions for the 2015 Forms 1095-C/1094-C run about 14 dense pages. The information required to complete the forms is extensive and not resident with any one department within your organization. You need to be working now with your payroll and HR departments as well as your health insurance provider and outside payroll service (if you have either or both) to make sure the information is being collected now and monthly through the end of the year to facilitate the most efficient compliance with these new reporting requirements.
As always, we are here to help, so please reach out to your Friedman LLP professional with any questions you may have as you gear up for this new year-end responsibility.