After four long years of discussion, confusion, delay and public exchange glitches, the Affordable Care Act (ACA) has gone into full effect. For those employers that are prepared, it’s mostly business as usual. For those that procrastinated and thought it would be easy to implement closer to reporting time, the realization that requirements may not be so simple is likely beginning to set in.
Most employers have taken the necessary steps to ensure they offer minimum essential and minimum value coverage for their eligible populations in 2015. However, there is continued confusion regarding who is measurable under the definition of a full-time employee, which includes both current workers and new hires.
Furthermore, the reporting hurdle—with the IRS demanding correct and timely information to ensure auditable and defensible compliance with the Employer and Employee Responsibility Mandates (is this sounding tedious yet?)—is no piece of cake. The major complicating factor is that all of the required information has never been housed in one system before. Disparate data from multiple systems must be managed, accumulated and reported along with the offer of coverage and new indicator codes specific to 4980H. This is complex information that is not currently managed or calculated in most employer systems.
Required Reporting—IRC §6055 and §6056
Beginning in January 2016 for the 2015 plan year, large employers will be required to fill out, print and mail a greater number of tax forms than ever before. These forms demand detailed data specific to each employee’s insurance coverage—not to mention their dependents! With required data ranging from employee ACA full-time status to proof of coverage to employer’s share of premium costs and more, you need to ensure you have taken the steps necessary to harness all disparate information and confirm that it is valid and up-to-date.
IRC §6055 and §6056 dictate that the following information must be reported to employees and the IRS annually:
- Information about the entity providing coverage, including contact information
- Which individuals are enrolled in coverage, with identifying information and the months for which they were covered
- Employer information, including contact information and the number of full-time employees
- For each full-time employee, information about the coverage (if any) offered to the employee, by month, including the lowest employee cost of self-only coverage offered
IRS transmissions are due no later than February 28 each year (March 31 if filed electronically). Employee statements must be furnished on or before January 31 of the year immediately following the calendar year to which the employee statements relate (i.e., the same day as Form W-2).
Key Reporting Provisions
The final reporting regulations include the following key provisions, which give the basic structure for what must be collected, accumulated, and reported beginning in 2016 for the 2015 calendar year:
Single, Combined Form for Information Reporting
- Employers that self-insure are allowed to report in a single, consolidated form that can be used to report to the IRS and employees under both §6055 and §6056
- This simplifies the process and helps to avoid duplicative information submissions
Simplified Option for Employer Reporting
- Employers who provide a qualifying offer of coverage to any of their full-time employees are allowed to use this simplified option
- A simplified alternative to the monthly, employee-specific information that the general rules require
For more details regarding these provisions, you can view the treasury.gov FACT SHEET here.
The data requirements, draft forms and mandates on both the employer and employee are now in full effect. Large employers must begin the task of ensuring all the proper data is gathered, accumulated and maintained. Given that much of the required data will be reported with new and complex indicator codes, a great deal of programming and testing will be required to ensure that correct and timely reporting is ready for the 2015 calendar year—that is, if your plan is to manage this task in-house.
If systems are already in place to measure eligibility but annual form creation/submission is not yet programmed (or a vendor has not yet been selected), then action needs to be taken sooner rather than later. The Applicable Large Employer (ALE) is responsible for both reporting and penalties, and the complexity of managing this task is difficult with existing system limitations. A third-party administrator (TPA) may be used to create and send the reports, but the ultimate liability remains at the employer level.
Now that you know everything that’s involved, don’t let yourself get penalized for failure to comply with ACA reporting regulations!
Allison Manno is Vice President of Compliance at Health E(fx)—an integrated ecosystem partner of Benefitfocus and a leading provider of best-in-class ACA solutions that achieve clarity, compliance and control for employers and HR data stakeholders. With Health E(fx) customers already transmitting required Sections 6055 and 6056 for 2014 (voluntarily), all requirements for both IRS and employee notice reporting under the ACA are automatic and have already been implemented within the Health E(fx) solution!