Preparing for Round 2 of ACA Reporting

With the first round of Affordable Care Act (ACA) reporting requirements successfully completed months ago, you may be thinking you’re in the clear for a smooth 2016 reporting year. However, there are several important changes you should keep in mind in order to remain compliant with ACA regulations:

  • Deadlines Last year, the IRS extended the due dates for employers to file the ACA forms. For 2016 reporting, the filings of the forms revert back to the original due dates as follows:
    • ACA Forms due to employees – January 31, 2017
    • ACA Forms paper-filed with IRS – February 28, 2017
    • ACA Forms e-filed with IRS – March 31, 2017
  • Expiration of Transition Relief In 2015, the IRS granted transition relief in order to ease into the ACA reporting requirements for ALEs with 50 to 99 full-time employees. This transition relief expired in 2016. All ALEs are now subject to the ACA employer mandate.
  • Increase in Coverage Threshold For 2016, an ALE is now liable for a penalty if at least one full-time employee receives a premium tax credit and:
    • The employer did NOT offer coverage to at least 95% (70% in 2015) of full-time employees and their dependents or
    • The health coverage offered by the employer is not affordable minimal essential coverage under the ACA.
  • Accuracy Penalties – Last year, the IRS granted large employers penalty relief for any incorrect or missing data on Forms 1094-C and 1095-C if the employer made a good faith effort to comply. This good faith effort provision has not been extended to 2016 reporting. Employers need to identify any issues with their reporting, plan ahead for gathering and updating information and set aside time to test for coding or processing errors. Furthermore, to avoid IRS validation error notices on e-filed forms, confirm that employee names and SSNs match the IRS records.
  • Exchange Notices – The employer will be notified by a letter, known as Section 1411 Certification, if any employee receives a premium tax credit to purchase health insurance through the ACA’s Health Insurance Marketplace. In order to be eligible for this credit, the employee attested that the employer did not offer health coverage, or offered coverage that did not meet ACA standards. To avoid any “play or pay” penalties, the employer has the burden of proof to show that coverage meeting ACA standards was offered to that employee.

What are the Penalties for Non-Compliance?

The ACA penalizes large employers that do not offer coverage (or offer coverage not meeting ACA standards).  For 2016, penalties for not offering coverage to 95% of full-time employees is $2,160 per full-time employee (minus up to 30 full-time employees).   The general penalty for offering coverage not meeting ACA standards is $3,240 per full-time employee receiving a premium tax credit.

Failure to file complete and accurate Forms 1094-C by the deadline can result in penalties of $250 per form, up to $3 million per year.  For Form 1095-C, the penalty is $500 per form.

What About Small Employers?

An employer with less than 50 FTE employees is subject to ACA reporting if it sponsors a self-insured health plan or if it is part of a controlled group which in aggregate has 50 or more FTE employees.

Substantiating Compliance

All employers, regardless of employee count, are encouraged to keep records of every calculation and determination.  For example, small employers should document FTE computations to support their non-ALE status.  Large employers subject to the ACA should retain records indicating acceptance or declination of health coverage. A waiver of coverage should be signed by those full-time employees declining coverage and retained by the employer.

For more information on form requirements and the calculations for determining your ALE status, please review our guidelines on ACA reporting basics issued earlier this year or contact Gina Perrone at [email protected].

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