Q&A on ACA (Affordable Care Act)
The information contained in this article is not intended as legal advice and may no longer be accurate due to changes in the law. Consult NHMA's legal services or your municipal attorney.
EDITOR'S NOTE: This column is not intended as and does not constitute legal or tax advice. Questions regarding your specific circumstances should be addressed to your legal, tax or other professional advisors.
Q: What are the new IRS Reporting Requirements for Employers under the Patient Protection and Affordable Care Act (ACA) and why are they necessary?
A: The ACA includes new annual IRS reporting requirements relating to health plan coverage for employees that apply to all size employers with initial reporting due in early 2016 for Calendar Year 2015, regardless of plan year. All employers participating in an RSA 5-B risk pool, such as HealthTrust, will need to report to the IRS and each employee enrolled in the employer’s group medical plan (“Minimum Essential Coverage” or “MEC”) about their coverage. Applicable Large Employers (ALEs), those with 50 or more Full-Time Employees and/or Full-Time Equivalent employees (FTEs), must also report additional information about offers and cost of coverage for Full-Time Employees (30 or more hours per week).
The new reporting requirements are intended to help the IRS administer and enforce the following ACA provisions (for other terms used in this article, see ACA Glossary).
The Individual Mandate, which requires all Americans to maintain Minimum Essential Coverage or be subject to a tax penalty.
The Employer Shared Responsibility (ESR) requirements, which obligate ALEs to offer their Full-Time Employees affordable minimum value health plan coverage or be subject to potential ESR penalties.
Marketplace premium tax credits and cost sharing subsidies, which are available to certain low and moderate income individuals with respect to coverage purchased from an ACA Marketplace/Exchange, provided the individuals are not eligible for affordable employer provided group health plan coverage.
Once the new reporting requirements begin, the IRS will be able to compare what your employees said they had for coverage in 2015, and what you said they had for coverage in 2015 and make sure the two sides match up.
Q: I’m not sure I’m prepared for the 2015 IRS reporting requirements. What should I be doing now to be ready by the end of the year?
A: Here is a brief checklist to assist you with planning for the IRS reporting under the ACA, which will be due in early 2016 for Calendar Year 2015.
Action Steps for 2015 IRS Reporting
Determine whether your group is an Applicable Large Employer (50 or more Full-Time Equivalent employees – or FTEs) or a Small Employer (fewer than 50 FTEs) for 2015 reporting purposes.
Review the IRS Guidance, Forms and Instructions (see links below) - Carefully review the final forms and instructions for 2015.
Contact your HR or Payroll software vendor to determine if it can store the necessary data and print the 1094 and 1095 Forms.
Use the Correct Forms - Final 2015 Forms and Instructions were issued by the IRS on September 17, 2015 and are available at the links below. Be sure to review the Final Instructions and use only the Final Forms for filing.
If You Are A Small Employer (fewer than 50 FTEs) – you will report Minimum Essential Coverage (MEC) for all individuals enrolled in your group medical plan coverage on Form 1094-B (transmittal to the IRS) and Form 1095-B (to enrollees, with copies to the IRS) for CY 2015.
Form 1094-B: https://www.irs.gov/pub/irs-pdf/f1094b.pdf.
Form 1094-B Transmittal (with copies of Form 1095-Bs) to the IRS by February 28, 2016 (by U.S. mail) or March 31, 2016 (if filing electronically).
Name, Employer Identification Number (EIN), and contact information for the employer, as well as the total number of 1095-B forms that you will be filing for your enrolled employees.
Copies of the 1095-B forms provided to your employees.
Form 1095-B: https://www.irs.gov/pub/irs-pdf/f1095b.pdf.
Form 1095-B to each enrolled employee or other “responsible individual” (under-65 retiree, COBRA beneficiary or public official) by January 31, 2016.
Name, address and Social Security Number (SSN) of the employee, as well as their covered dependents’ names and SSNs (date of birth-DOBis provided only if an SSN is not available), and the months that each covered individual was enrolled in coverage during 2015.
Instructions to Forms 1094-B and 1095-B: https://www.irs.gov/pub/irs-pdf/i109495b.pdff.
If You Are An Applicable Large Employer – or ALE (50 or more Full-Time Employees and/or FTEs) – you will report Minimum Essential Coverage (MEC) for all individuals enrolled in your group medical plan coverage and additional information about offers and cost of coverage for Full-Time employees on Form 1094-C (transmittal to the IRS) and Form 1095-C (to each Full-Time employee and other enrollees, with copies to the IRS) for CY 2015, even if you are eligible for 2015 Transition Relief from ESR penalties. These forms and instructions are available at the links below.
Form 1094-C: https://www.irs.gov/pub/irs-pdf/f1094c.pdf.
Form 1094-C Transmittal (with copies of Form 1095-Cs) to the IRS by February 28, 2016 (by U.S. mail) or by March 31, 2016 (if filing electronically, which is required if you are submitting more than 250 1095-C forms).
Employer Name, EIN, and contact information.
Total number of 1095-C forms submitted with Transmittal
Designated government entity contact information (if applicable)
Aggregated ALE (Controlled) Group information (if applicable)
Eligibility certifications (if applicable) relating to certain special offer methods and/or forms of ESR Transition Relief for which the employer may qualify.
By month: Employers must report additional information regarding MEC Offers, Full-Time Employee and Total Employee counts, and applicable indicators for Aggregated Groups and 4980H (ESR) Transition Relief.
Copies of the 1095-C forms provided to employees or other enrolled individuals
Form 1095-C: https://www.irs.gov/pub/irs-pdf/f1095c.pdf.
Form 1095-C to all Full-Time Employees and any other enrolled individuals (under-65 retiree, COBRA beneficiary or public official) by January 31, 2016.
Name, address, EIN, and contact information for employer.
By month: For each Full-Time Employee, whether MEC was offered, the Full-Time Employee’s share of the single premium for the lowest cost plan option offered (even if the employee was not enrolled in that option), and certain additional information through IRS indicator codes.
Name, address and SSNs of the employee and each covered dependent (DOB only if an SSN is not available) and the months that each covered individual was enrolled in coverage during 2015.
Instructions to Forms 1094-C and 1095-C: https://www.irs.gov/pub/irs-pdf/i109495c.pdf.
Collect, Document and Track Data for IRS Reporting
Document procedures on how you collect, store and report the required IRS reporting information.
Collect missing Social Security number (SSN) data for enrolled dependents based on the IRS rules. Document collection requests and save response for reporting purposes. Employers are required to make 3 separate requests (an initial request and two annual requests) in order to avoid IRS penalties.
If you are an Applicable Large Employer, develop and maintain procedures for determining, tracking and documenting each employee’s Full-Time (>30 hours/week) or non-Full-Time status, and offers of coverage, the employee’s cost of the lowest cost plan option available, and enrollment by month.
Talk to your HR or payroll software vendors to determine software module capabilities for data collection and printing of the IRS reporting forms.
Electronic filing is required for employers filing 250 or more returns; and permitted for employers filing less than 250 returns. If filing electronically with IRS, review “AIR” (Affordable Care Act Information Return System). Information about the AIR Program page can be found at http://www.irs.gov/for-Tax-Pros/Software-Developers/Information-Returns/Affordable-Care-Act-Information-Return-AIR-Program.
Q: When does the Cadillac Tax go into effect and how should we prepare for it?
A: The Excise Tax on High-Cost Employer-Sponsored Health Coverage (the “Cadillac Tax”), a provision of the ACA, becomes effective January 1, 2018. In essence, the Cadillac Tax says that if you, as a small or large employer, are offering healthcare plans that the ACA deems excessively costly, those plans will incur a tax on the excessive costs. The Cadillac Tax is intended to encourage employers, health coverage providers and consumers to control health costs. To begin planning for the Cadillac Tax, review the checklist below.
Steps to Strategize and Plan for the Excise Tax (Cadillac Tax) for 2018
Estimate the potential cost of the Cadillac Tax to your group based on your current plans. Include the total cost of applicable coverage for each covered employee/retiree. This will include not only the total premium cost (both employer and employee share) for your primary major medical plan coverage, but also contributions to Healthcare Flexible Spending Accounts (Health FSAs) and Health Savings Accounts (HSAs), as well as employer funding of Health Reimbursement Arrangements (HRAs). Consider the impact of any such funding arrangements that you offer.
Review your current benefit offerings and explore more cost effective alternative plan options.
Understand medical cost drivers and take steps to contain them. Consider updating your plan design and adding worksite wellness activities to mitigate future rate increases.
Educate your staff through benefit education workshops and promote health management programs.
Create a health committee at your workplace to build awareness and collaboration among employees to promote healthy lifestyles and mitigate rising healthcare costs.
David Law is HealthTrust Benefits and Coverage Counsel and Darlene Simmons is HealthTrust Member Relations Advisor. They may be reached at 603.226.2861 or at email@example.com.