Many large employers struggled through their first Affordable Care Act (ACA) reporting season, spending unforeseen time and money in preparing and filing Forms 1094-B/C and 1095-B/C. They’re asking how they can improve the process for 2016 given the approaching Jan. 31, 2017, deadline for distribution to employees. One way is to apply the lessons they and their colleagues learned from the past year.
The IRS extended the due dates for ACA reporting for 2015, but at this point, there’s no extension for 2016 reporting. Large employers must distribute Forms 1095-C to employees by Jan. 31, 2017, and must file their Form(s) 1095-B, along with copies of the Forms 1095-C, with the IRS by March 31, 2017 (if filing electronically). With the forms distribution deadline only eight months away, many employers will need to act now to improve their current process.
What you should know
During the past reporting season, employers faced issues including the following:
What to do now
Lack of ACA compliance — Organizations learned during the 2015 reporting season that they weren’t as compliant as they initially thought. Their plans didn’t correctly identify full-time employees using the look-back or monthly methods, and/or the plans weren’t affordable for certain employees.
Risk of significant penalty exposure for 2016 — Many large employers also realized they didn’t offer health coverage to all full-time employees as defined under ACA. This didn’t expose them to penalties because of the lowered threshold of 70% for full-time employees offered coverage for 2015, but employers quickly realized they would need to make changes to meet the 2016 threshold of 95% for full-time employees offered coverage.
Extremely complicated forms (especially the 1095-C) — Many employers didn’t realize the complexity and data requirements of the ACA forms and therefore didn’t allocate sufficient time and resources to properly complete the forms. It was difficult to determine the coding required on Form 1095-C, lines 14 and 16, and vendor guidance was lacking.
Inadequate vendor solutions — Many employers believed they had purchased a comprehensive, automated ACA solution, when in reality, the product required significant manual work. Many software solutions forced employers to manually enter information and they couldn’t monitor the organization’s compliance with ACA on a monthly basis.
System limitations — Some employers’ payroll and benefits systems had limitations that made it difficult to gather all the necessary data to prepare the forms.
Inaccurate reporting guidance — Some third parties — including unions, trade associations, benefit providers and plan administrators — gave incorrect advice to clients regarding who was responsible for preparing the forms and what codes should be used for Form 1095-C, lines 14 and 16.
Review your organization’s 2015 ACA reporting experience and plan for the preparation of the 2016 forms.
- Prepare a 2016 filing timeline — The automatic extension for 2015 isn’t in effect for 2016. The 2016 Forms 1095-B and 1095-C must be distributed to employees by Jan. 31, 2017, and the 2016 Forms 1094-B and 1094-C must be e-filed by March 31, 2017. With this in mind, employers should begin planning a timeline for when they will prepare, mail and file the 2016 Forms 1095-B and 1095-C, and make sure they have the resources to meet that timeline.
- Start the data and information gathering process now — The penalties for the employer-shared responsibility requirements are assessed monthly. Employers should be analyzing their data on a monthly basis to determine that at least 95% of their full-time employees are offered coverage each and every month.
- Re-evaluate your 2015 vendor selection — Some of the less expensive software products lack functionality and require more work by the customer to properly prepare the forms. Now that we’re in the second year of reporting, some software products may have been made more efficient and less expensive for customers.
- Re-evaluate your organization’s ACA compliance — With the 70% threshold increasing to 95% in 2016, employers have less margin for error regarding ACA compliance. It’s important to monitor compliance more closely in 2016, gather the right information and have the right processes and procedures in place.
- Hire a technical ACA consultant — The ACA consultant should understand the ACA provisions (including the annual reporting requirements) and should be able to help identify compliance gaps. Engaging a third party, rather than relying on free advice, can help identify compliance errors and incorrect coding, reducing potential penalty exposure related to incorrect coding.
As employers look to comply with the 2016 ACA reporting requirements by Jan. 31, 2017, they should take time to evaluate their current process and look for improvements. Analyzing new vendors, understanding changes in their software solution and making changes earlier in the reporting year will help as the second-year deadlines approach. If you’re struggling with starting the improvement process, engaging a consultant can help to identify issues and prioritize efforts.
For more information, please contact Carol Czarnecki, +1 312 602 8401.
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