5 Steps To Master ACA Employer Reporting In 2016

Written by Joanna Morrow

Joanna Morrow, Principal and Founder of Employer Benefits & Advice, is an employer consultant and advocate who has worked in the employee benefits industry for over two decades. She works diligently to help employers overcome obstacles in their business by sharing her expertise in Human Resources, Benefits & Compensation, Process Mapping, Risk Management and ERISA/DOL/IRS compliance. She is a licensed life and health insurance professional in the State of Arizona and is an active member of the National Association of Health Underwriters (NAHU).

5 Steps To Master ACA Employer Reporting In 2016

1.  You Are Clear as to Which Reporting Requirements Apply To You

The Affordable Care Act (ACA) passed two very significant laws.

  1. Individuals are required to carry health coverage (Individual Mandate) and
  2. Large employers are required to offer it (Employer Mandate).

The Internal Revenue Service (IRS) is the agency charged with policing these laws beginning in 2016.

  • Section 6055 was added to the Internal Revenue Code (IRC) to police the Individual Mandate, and
  • Section 6056 was added to police the Employer Mandate.

There are reporting requirements for insurers and employers under each of these new sections, depending on certain criteria. In some cases, business owners may not be required to do anything, so it’s important you do your homework. For guidance, speak with your insurance professional and learn in simple terms your obligations under 6055/6056.

2.  You Have Designated a Reporting “Expert” in Your Company

The forms require that you list a company contact capable of responding to questions received from both the IRS as well as employees. If you have outsourced the preparation and filing of the reports the vendor will still be relying on information provided by your company. It will be easier for companies to respond if they have properly prepared. Determine ahead of time the individual(s) best qualified to oversee this new area of compliance.

3.  You’re Prepared for Questions

Regardless of how you choose to prepare and file the tax forms you are going to need to have a basic understanding as to the set up of your medical plan and the various codes that apply in order to properly respond to questions from the IRS and your employees. A few basics you will need to know before you start:

  • Is the company medical plan fully insured or self-insured?
  • Does the company offer medical coverage to spouses and dependents?
  • Does the medical plan meet safe harbor requirements that protect the employer from the shared responsibility penalties? If so, you will need to know which type of safe harbor rules apply.

In completing the 1095C form the coding appears complex, but the truth is that most employers are likely going to be using the same codes over and over. Employers will be well-served to identify ahead of time their most common employee scenarios. I recommend going one step further to create a few examples you can use as templates that address these scenarios.

Creating templates to address your most common scenarios such as:

  1. Full time employee eligible all year & covered all year
  2. Full time employee eligible all year & waived all year
  3. Full time employee who didn’t work for the company the entire year, but enrolled in coverage when eligible
  4. Full time employee who didn’t work for the company the entire year, but waived coverage when eligible
  5. Full time employee who completed measurement period within the year and then enrolled in coverage
  6. Full time employee who completed measurement period within the year and then waived coverage
  7. Full time employee only eligible for part of the year due to management carve-out (transitional relief) for non-calendar year plan and enrolled in coverage when eligible

4.  You’ve Selected a Reporting Vendor

Just like a standard tax return, if you are an employer filing either the “B” forms or the “C” forms, you will have the option to file your reports manually or electronically. For employers filing more than 250 forms, you have no choice but to file electronically. There are deadlines for submission to the IRS and submission to employees depending on your filing method.   In most cases it is going to make sense for employers to out-source filing to a third party. Costs for filing can range anywhere from $5.00 – $15.00 per form. Your insurance professional or payroll provider may offer preferred pricing for clients so explore your vendor options now, well in advance of the deadline.

5.  You Have Recorded & Documented Appropriately

How are you determining full time employees? Are you using a measurement period and if so, where are you documenting the details? Are you communicating who is eligible for benefits in your employee handbook? Now that the IRS is involved in your company health insurance you need to be documenting all the reasons you do the things you do in the event you get asked. Talk to your insurance professional and ensure that your company is properly protected in the face of an audit.