Start laying the groundwork for the ACA now

Group in conference roomSeveral major requirements of the Affordable Care Act (ACA) for employers go into effect in early 2016, so it’s wise to begin planning now, to avoid doing lots of calculations at the last minute. You must know how to report information the IRS requires and how to identify full-time employees — and what to do to get there.

ACA reporting applies to employers with 50 or more full-time, plus full-time equivalent, employees, who must report coverage information for the first time for calendar year 2015. Even though these coverage statements are presented annually to employees and the IRS, the form submitted must indicate for each month whether the employee was covered under a health insurance plan, what level of coverage was offered and certain premium information — in other words, a lot of detail.

Employers must give each full-time employee a Form 1095-C by Feb. 1, 2016 (usually by Jan. 31, but Jan. 31, 2016, falls on a Sunday), and transmit all the employees’ forms to the IRS no later than March 31, 2016. The form indicates the premium and coverage information. If the health insurance plan is fully insured, the employee will also get a Form 1095-B, listing additional information, from the insurance company.

The employer sends the IRS a 1094-C transmittal form with a copy of each employee’s 1095-C; a 1094-B transmittal form, from the insurance company, goes with a copy of each employee’s Form 1095-B. The actual filing deadline for these transmittal forms depends on whether an employer or an insurer files on paper (Feb. 29, 2016) or electronically (March 31, 2016).

The 1094-C transmittal form requires that an official of the employer attest that the information is “true, correct and complete” under penalties of perjury, so employers need to take the information reporting very seriously. Fines are $200 for each Form 1095-C, or each employee, for failure to file with the IRS, failure to include all required information or submission of incorrect information — for up to a $3 million penalty for the year. Allowances are made for 2015 for employers who make a good-faith effort to comply.

For a comprehensive look at what the IRS requires and how to identify full-time employees, see
How to comply with ACA reporting requirements and identify full-time employees.
Steps to support a smooth process

The following activities support a smooth implementation process:

  • Make a detailed list of all information needed to complete the forms and determine exactly where the information will come from.
  • Meet with all parties who have the information to discuss the processes needed to complete the forms.
  • Locate where the data is stored including time and attendance records, the payroll system, the HR information system and insurance company/third party administrator information.

To prepare the forms properly, the employer must know whether an employee was full-time for each month. To determine full-time status by month, you need to do the following:

  • Track paid hours.
  • Apply complex rules that vary based on factors such as salaried versus hourly employees, or new versus ongoing employees, and whether an employee has been rehired.

All this leads to finally being able to prepare the IRS forms, deciding who will do a final review for accuracy and how they will be distributed.  

Regarding implementation and who will complete the tasks, cover these basics:

  • Address common law employee issues (important if you use contractors).
  • Identify full-time employees for each month.
  • Calculate whether the 70%/95% thresholds of ACA requirements are satisfied. (For more on this, see What to do about health care coverage and excise tax.)
  • Determine which affordability safe harbor to use. (The employee portion of the premium for the lowest-cost self-only coverage cannot exceed 9.5% of his or her household income, regardless of whether the employee enrolled in the lowest-cost self-only plan. The IRS has created safe harbors that provide methods for calculating whether this requirement was satisfied.)
  • Determine a contact telephone number for employees’ Forms 1095-C, and a contact name and number for Form 1094-C (the transmittal form to the IRS).
  • For self-insured plans, identify covered individuals (employee, spouse and dependents) and their Social Security numbers.
  • Identify related employers and their number of full-time employees.
  • Process forms and distribute them to employees and the IRS.

An effective date of early 2016 will be here before you know it. It’s important to familiarize yourself with ACA compliance requirements so that you avoid last-minute number-crunching and reduce the chances for errors.

Eddie Adkins
+1 202 521 1565

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