IRS Reporting Under the Affordable Care Act
Author: Brandon Baum
Two of the most notable Patient Protection and Affordable Care Act (ACA) health insurance mandate provisions occurred in 2015: certain individuals to maintain coverage and certain large employers to offer coverage to full-time employees. To measure compliance with these provisions and assess penalties for noncompliance, the IRS designed Forms 1095 and 1094. Employers required to furnish these forms during the inaugural 2015 reporting period can likely attest that preparing and completing the initial filing wasn’t easy. With the 2016 filing period, affected employers should remind themselves of the rules and gear up for filing.
In 2016, reporting requirements remain largely unchanged, i.e., applicable large employers (ALEs) are required to furnish Form 1095-C to applicable employees and file Form 1094-C with the IRS. Self-insured employers not defined as ALEs will furnish Forms 1095-B to covered employees and file Form 1094-B with the IRS.
Determining ALE Status
For 2016, an employer must determine its status as an ALE by calculating the number of full-time equivalent individuals it employed during 2015. For purposes of this analysis, employees of affiliated group members must be aggregated. For each month during 2015, the employer combines full-time employees (those working 30 hours a week or 130 hours a month) with full-time equivalent employees. At the end of the year, the sums of all 12 months are combined and the result is divided by 12. If the average number of employees calculated is 50 or more, the employer is an ALE.
2016 Compliance Dates
The IRS originally intended for 2016 forms to be due as outlined in §6055 and §6056 of the Internal Revenue Code. However, following consultation with stakeholders, the IRS determined that a substantial number of employers need additional time to gather and analyze information to prepare Forms 1095-B and 1095-C to be furnished to individuals. Therefore, the IRS released Notice 2016-70, which extends the due date for furnishing Forms 1095-B and 1095-C to individuals by 30 days. While this notice provides relief of the January 31 deadline, no such relief has been issued for the February 28 and March 31 due dates to the IRS. With the complexity of the reporting, employers are still encouraged to furnish 2016 forms as soon as they are able.
Failure to file or late filing of these required forms could subject an employer to significant information reporting penalties.
Social Security Number Solicitation
Missing or incorrect Social Security numbers (SSN), especially for covered dependents, was a common issue during 2015 ACA reporting. As a result, the IRS issued guidance indicating that employers generally will not be subject to penalties for failure to report a correct SSN if:
- The initial solicitation is made at an individual’s first enrollment, or if already enrolled, the next open season
- The second solicitation is made at a reasonable time thereafter
- And the third solicitation is made by December 31 of the year following the initial solicitation
Employers should document these solicitation requests throughout the year to help reduce the potential risk of penalties.
“Play or Pay” Transition Relief Eliminated
Beginning in 2016, an ALE must offer minimum essential insurance coverage to 95 percent of its full-time employees or face a penalty of $180 times the number of full-time employees subtracted by 30. This penalty is calculated monthly and is triggered if just one full-time employee qualifies for and obtains subsidized Health Insurance Marketplace coverage.
An employer also may face a penalty if it doesn’t offer affordable insurance providing minimum essential value. This penalty is triggered when one full-time employee qualifies for and receives subsidized Health Insurance Marketplace coverage. The penalty is $270 per month per full-time employee who receives the subsidized coverage. In situations where both penalties apply, the penalty is limited to the lesser of the two.
BKD, LLP will once again provide employers a compliance solution looking to ease their stress in meeting these reporting requirements. The BKD solution also gives clients the opportunity to closely work with an ACA advisor who will assist in determining appropriate coding for Form 1095-C, full-time employee count, electronic filing through the IRS AIR platform and other processing needs. BKD clients also will have direct access to our comprehensive reporting guide and information gathering templates designed to help ease your reporting process.
Additional information on ACA compliance is available here.