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Why it's important to address ACA requirements now

10/20/2015

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By Cindy Tresider and Terri Mangrum

The Affordable Care Act is here and can no longer be denied. Beginning in 2016, employers with 50 or more full-time-equivalent employees will report and file with the IRS their offer of health coverage to their full-time employees.

This reporting is done on a Form 1995-C, and just like the W-2, it is provided to the employee as well as the IRS. Many employers are just now realizing the broad scope of information required to complete this filing requirement and are scrambling to implement a plan of action.

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

ACA reporting requires that many interoffice 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. This information may be collected from a payroll system, a benefit enrollment system, a benefits broker or an insurance carrier. If an employer has not already begun to gather this information, they should begin doing so immediately.

The Form 1095-C is required to be distributed to each employee who worked 30 hours or more per week or 130 hours in any given month of the year. The form is essentially a snapshot of the employee’s year as it relates to insurance eligibility, coverage and employment status. 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 offered 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-C’s 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 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 one convenient place or system. Due to the complexities of reporting, employers should act now to determine what their next steps to be ready to report in early 2016.

Cindy Tresider is benefits manager for LBMC Employment Partners, and Terri Mangrum is flexible compensation & compliance manager for the firm. Both assist employers in complying with the ACA.

Why it's important to address ACA requirements now

Publication

Nashville Business Journal

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