As the inaugural year for the Affordable Care Act (ACA) is coming to a close, it is imperative to look towards the future. The ACA environment is dynamic and ever changing. As many employers have focused on a Good Faith Effort (GFE), many have neglected to look towards the horizon; the 2016 filing season. Even though the 2015 filing season is not over, it is important to monitor and maintain information for 2016. It should be noted that much of the information and standards in the 2015 season are changing for 2016.
Moreover, there are many differences in the 2015 filing versus the 2016 filling seasons.
For the 2015 season only 70% of employees needed to be offered minimum essential coverage (MEC). In 2016, this number jumps to 95%. Additionally, a Good Faith Effort will not apply to 2016, and currently, there will not be any transition relief offered. This means penalties can and will be assessed for 2016.
Using minimum essential coverage as an example, if 95% are not offered coverage a penalty will be incurred. To the IRS, it is irrelevant how close an employer is to 95%. For the sake of penalties, the IRS does not care if an employer has offered coverage to 1% or 94.9%, the same penalty will be assessed. The penalty is simply as follows:
$2000 X # of Employees=Total Penalty Amount
However, the IRS does subtract 30 employees.
For example, if a company has 1000 full time employees, the IRS would use 970 as the number of employees to assess the penalties. It must be noted that going forward the $2000 penalty will be adjusted each year for inflation. In 2016 this penalty will be assessed $2160.00 per employee.
Another major change is dealing with Safe Harbor Percentages.
Below we can see the increasing changes with respect to the filing years to come:
|Safe Harbor Percentages|
Even though these changes are less than a percent, they are tied to offering minimum essential coverage, which in turn is a driving factor for penalty assessment.
Both of these examples show that for the 2016 filing season the IRS will not hold anything back when it comes to assessing penalties. Looking towards the future, employers must remain diligent and proactive in order to obtain correct information from both the employees and the IRS.
Many employers have underestimated the complexity of ACA filing for the first year. ACA filing is not a “set it and forget it” situation. It requires much interaction on the employer’s part. Because the Affordable Care Act creates such a dynamic environment, it is best practice to monitor the IRS and their communication channels. By monitoring the IRS and keeping a strong foothold on the current ACA regulations, the ambiguous landscape that is ACA will gradually become clearer.
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