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Time is short to meet new IRS reporting requirement on ACA

11/05/2015

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By: Cindy Tresider and Terri Mangrum

Time is growing short for businesses to get ready to meet a new reporting requirement that goes into effect in January. Companies with 50 or more full-time-equivalent employees must report and file with the IRS in 2016 their offer of health coverage to their full-time employees for the 2015 plan year.

The new Form 1095-C (although different in appearance) is similar to the W-2 in that it is provided in January to all employees. Although the 1095-C form itself is not extensive, it requires employers to gather a broad scope of information to complete it. Companies that have not implemented a plan of action need to do so now if they are going to meet the deadline. Later in this article are some tips for planning.

The 1095-C reports the offer of health coverage, the affordability of the coverage and the employee’s action taken in regards to the offer of coverage. The 1095-C also alerts the IRS as to whether the employer is meeting the requirements of the ACA. If not, penalties may be charged to the employer.

The complexity of preparing the 1095-C is that it requires that many inter-office departments and out-sourced vendors work together. Your payroll provider, your benefits administrator and your human resources manager hold crucial pieces of information. For example, the employer needs to confirm the number of full-time and full-time equivalent employees, confirm that the plan meets the minimum essential requirements set forth in health care reform, determine if the health plan is affordable to the lowest paid full-time eligible employee and identify who was offered coverage throughout the year and what each employee did with the offer. Self-insured plans require additional reporting that includes covered dependents and terminated employees who were offered and/or accepted COBRA options.

The Form 1095-C must be distributed to each employee who worked 30 hours or more per week or 130 hours in any one month of the 2015 plan year. The information entered on the form is done using a combination of codes: Series 1 Codes (Offer of Coverage) and Series 2 Codes (Safe Harbor).  These codes are reported for each month of the year and are quite complex. Care must be taken to enter the correct combination of codes based on the employee’s employment status, eligibility and coverage offer throughout the year.  In addition, employers must file a Form 1094-C, which serves as a transmittal or cover sheet when sending copies of the 1095-Cs to the Internal Revenue Service.

To do the job well, employers need to make the following determinations:

  1. Have I determined that I am an Applicable Large Employer and must report?
  2. If I must report, do I have the workforce or resources in place to manage and generate the employee information and scope of coverage activity?
  3. Do I understand both series of codes and how to apply them to each individual full-time employee’s circumstance? 
  4. Have termination dates been reported correctly?
  5. Do I have the technology in place that will produce the required forms?
  6. Have I considered what supplies will be needed to produce and distribute the forms?
  7. Do I have a process in place if penalty notices are received?  How will I know if the penalties are accurate?
  8. Should I consider outsourcing the process?

Unfortunately, not all this information is retained in one convenient place or system.  Due to the complexities of reporting, employers should act now to determine their next steps to be ready to report in early 2016.

Publication

The Tennessean

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