The U.S. Supreme Court ruling in the King v. Burwell case forces every employer to answer this question:
“What’s your strategy for ACA compliance?”
To find that answer, here are talking points to review:
What’s your strategy for producing the new IRS Form 1095-C for employees and then filing its transmittal, Form 1094-C, with the IRS?
· If you’re an applicable large employer (ALE), these new ACA forms are mandatory.
· Employers that do not submit an annual ACA return or provide individual statements to all full-time employees will be subject to a penalty of $100 per required return, with a maximum annual penalty of $1.5 million.
· IRS Form 1095-C must be prepared and given to affected employees by February 1, 2016. Distribution to individual employees and submission to the IRS mirrors the W-2 reporting deadlines.
· If you’ve chosen a “pay” strategy – to absorb the shared responsibility payment for not offering coverage – you still must produce the forms to document this decision.
Are you ready today to monitor eligibility and meet affordability standards in order to avoid the potential of employer shared responsibility payments?
These are two areas that open up an employer to possible shared responsibility payments – not offering coverage to eligible employees and, if coverage is offered, not meeting minimum value or affordability standards. Keep in mind that failure in any month to offer either will be highlighted on IRS Form 1095-C.
How have you determined eligibility for employees who must have access to employer health care coverage?
- Which of the two ACA-defined measurement methods are you using to determine eligibility?
- Monthly measurement period
- If an employee works 130 hours in one month, they will be deemed as being full-time and be eligible for employer-sponsored health coverage – with coverage starting no later than the first day after two full months from the month the employee worked at least 130 hours.
- Look-back measurement period
- Establishing a measurement period in which an employee’s hours of service are averaged in order to determine if that employee had, on average, 130 hours a month
- Employees meeting the full-time status during a measurement period should be provided access to health care coverage during the corresponding stability period regardless of their hours of service then
- How are you monitoring eligibility of newly hired employees who complete their initial measurement periods?
If you have over 250 full-time employees and full-time equivalents, you’re required to submit IRS Form 1094-C (the transmittal of their 1095-Cs) in electronic form.
· How will you do that?
There are e-filing requirements for the two new IRS forms related to ACA reporting. Filers of 250 or more information returns must file the returns electronically. The 250-or-more requirement applies separately to each type of return and each type of corrected return.
The employer reporting requirements under the ACA break down activity on a monthly basis. In order to meet these requirements, are you prepared to:
· report hours of service monthly?
· report coverage options with regard to offers of coverage monthly?
· accurately identify – on a monthly basis – who selected coverage?
Unlike other employer reporting of employee information to the IRS which provides summary information on a quarterly or annual basis (such as Forms 941 and W-2), IRS Form 1095-C requires recaps on a monthly basis.
Every employer needs to accurately allocate hours of service and coverage options on a month-by-month basis in order to meet the submission requirements for ACA forms.
If your company has decided to not offer eligible employees coverage and you are considered an applicable large employer, are you aware that you still need to meet the reporting requirements?
Regardless of a company’s “pay or play” strategy, generation of IRS Form 1095-C is a requirement. Saying you’re going to just “pay” won’t make production of this form optional.
Form 1095-C is a statement about the availability of health insurance at each applicable workplace. If coverage isn’t available, a document stating that must be produced and filed.
Waiting for the IRS to grant additional relief for employer reporting responsibility under the ACA?
· Are you prepared if that relief doesn’t come?
The original start date of the penalty-assessment period for the employer mandate was January 1, 2013. Employers have had two reliefs that pushed compliance back to January 1, 2015. Chances for this happening again are dim.
The reason for two rounds of transition relief was that reporting templates and formats weren’t available for employers to begin readying their information systems accordingly.
That’s no longer the case.
Another major reason employer relief will not come is that the individual mandate took effect in 2014. Although the penalty for individuals not obtaining coverage was light in 2014 ($95), that penalty is rising in 2015 and 2016. The goal is to allow individuals to avoid those penalties by either securing coverage through the employer or an exchange.
Are you betting that it will take years before the IRS gets up to speed with the enforcement mechanism for ACA penalties?
The IRS’s new AIR system (Affordable Care Act Information Returns) has cost nearly $800 million in development. Enforcement is the main focus of this massive XML interchange for the crunching of ACA returns.
Because of such sophisticated administration of data feeds from insurers, the exchanges, individuals and employers, the penalties for ACA returns showing non-compliance will come lickety-split.
Back story for this ACA reality: Keep in mind that when this legislation was created in 2009, the U.S. deficit was at its highest since 1945. So crafting of this legislation centered on not worsening the deficit. A funding mechanism was, therefore, built in.
According to the Office of Management and Budget, the IRS will need to collect $15 billion a year in employer shared responsibility penalties over the next 10 years as part of the ACA funding mechanism.
· Employer takeaway from King v. Burwell: Supreme Court nixes ACA avoidance