Beginning in 2016, many employers will have to comply with the annual health care reporting requirements under the Affordable Care Act (ACA). The reporting requirements promote transparency regarding health plan coverage and costs. They also provide the IRS with the information needed to enforce the employer and individual mandates and determine eligibility for premium tax credits for individuals purchasing coverage through the health insurance marketplace.
The ACA-required reports to the IRS and to employees on health care coverage provided and/or offered (or not offered) in 2015 are due within the first quarter of 2016. Yet despite these looming deadlines, many employers are still not prepared. It is time for employers to get serious about their reporting obligations. Let’s take a look at why.
The reporting deadlines will be here before you know it
The ACA requires an annual statement to be provided to employees by January 31. Annual reports must be filed with the IRS on or before February 28, or by March 31 if filing electronically. However, because January 31 and February 28 fall on a Sunday in 2016, those two deadlines are extended by one day.
The penalties for noncompliance are steep
An employer may be penalized for:
- Failing to file information returns or furnish employee statements on time;
- Failing to include all the required information; and
- Including incorrect information.
The penalties include $250 for each failed information return, up to a total penalty of $3 million in a calendar year and $250 for each failed employee statement, up to a total penalty of $3 million in a calendar year. These amounts may increase if an employer intentionally disregards the reporting requirements.
However, the IRS understands employers are concerned with meeting their new reporting obligations and provides transition relief for returns filed and statements furnished in 2016 for 2015 coverage. As a result, penalties will not be imposed for incorrect or incomplete returns/statements, if an employer can show that it made good-faith efforts to comply with the reporting requirements.
The annual reporting requirements apply to most employers
Applicable large employers (ALEs) are required to report the terms and conditions of the health care coverage they provide. An ALE is an employer with at least 50 full-time employees, including full-time equivalent employees, during the preceding calendar year. Additionally, providers of minimum essential coverage, including small employers with self-insured plans, are required to report information on each individual to whom such coverage was provided.
The information that employers need to gather is vast
ALEs may file using Forms 1094-C and 1095-C. Small employers (non-ALEs) with a self-insured plan may file using Forms 1094-B and 1095-B. Examples of information that these forms call for include:
- The name and Social Security Number (or birth date if a Social Security Number is not available) of every individual covered under the plan.
- The months each individual was enrolled in coverage.
- Whether any safe harbor provisions apply.
- A certification as to whether the ALE offered its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage.
- Each full-time employee’s share of the lowest cost monthly premium (self-only) for coverage providing minimum value.
- The number of full-time employees for each month of the calendar year.
This is just the tip of the iceberg. Gathering all of the required information takes time, so an employer would be wise not to wait until the last minute.
What’s your organization’s biggest challenge when it comes to complying with the annual reporting requirements? Leave a comment below to let us know. In the meantime, check out these resources to help you Prepare for the ACA Reporting Requirements.