Compensation and Benefits Bulletin
Actions you need to take to comply with the Affordable Care Act’s (ACA’s) reporting requirements to each full-time employee and the IRS (Forms 1095-C and 1094-C) will depend greatly on your role in your organization. Employers in all industries are facing realities related to the filings due in early 2016, including the herculean efforts needed from various groups in the organization to fully comply. The benefits administration, HR, financial reporting and tax departments, as well as executives responsible for these groups, should each have ACA action items to address over the next few months.
Executives are ultimately responsible for their organization’s compliance with major legislation. Despite detachment from the details, executives are expected to understand risk areas related to ACA compliance. At this point, they should know if their organization has exposure to excise taxes related to offering health care coverage to employees, and they should be confident that processes and procedures exist to capture and report required information to both employees and the IRS in 2016.
Call to action: Take a holistic approach to ACA compliance, document aspects of the ACA you have completed and identify any remaining work. Working with an adviser to identify potential risks will support development of a solid action plan for ongoing compliance.
Typically HR has been given responsibility for filing the information returns with the IRS and with employees that will be due for the first time in 2016. Because of the intricacies of determining who is a full-time employee — an integral part of accurate filings — many HR groups are figuring out how their current vendors can help them comply or are interviewing new vendors. With many vendors facing capacity issues as soon as late summer, organizations should choose vendors as soon as possible.
Call to action:
Have processes in place for identifying full-time employees, collecting necessary information to be reported to employees and the IRS, and populating and filing the forms. Do so soon, before vendors reach capacity and will no longer accept new clients.
Benefits administration, financial reporting and tax
HR should be talking to the benefits administration, financial reporting and tax departments about compliance. As HR works toward compliance, critical issues include understanding financial statement implications such as whether proper internal controls are in place and whether there is a need to recognize an excise tax liability, creating an audit trail for work performed and understanding if changes to the health plan are needed.
Call to action:
Professionals in the benefits administration, financial reporting and tax groups should be talking to individuals responsible for reporting information to identify items to address for 2016. Open communication between these groups will help the organization address risk in a timely way. Because the percentage of full-time employees who need to be offered health coverage to avoid excise taxes increases to 95% in 2016, including these groups in periodic update calls now will support making changes that are effective for the 2016 plan year.
It takes the efforts of multiple groups in an organization to stay on track with ACA reporting requirements. This year’s reduction to 70% of full-time employees needing to be offered health coverage to avoid excise taxes allows employers to analyze their work force and make changes for the 2016 plan year to meet the increased 95% threshold that applies starting in 2016. Working together across the organization now will lessen the burden later.
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