As the provisions of the Affordable Care Act (ACA) continue to phase in, many employers will need to create or modify systems and processes to collect the information that they must report to the federal government. A new rule that went into effect on January 1, 2015, requires many organizations to gather information about the group health coverage that they offer their employees and report that information to their employees and to the IRS. The year-end reports (new IRS Forms 1095-B and 1094-C) will include specific information about employees covered in each month of the year, so employers need to begin collecting the data as soon as possible.
Who must file?
The new reporting rules apply to:- Organizations that employed an average of at least 50 full-time employees during the preceding calendar year. These organizations are known as “applicable large employers” (ALEs).
- Groups of smaller organizations that are treated as a single employer under the controlled group rules because their combined average number of full-time employees is 50 or greater. These are called “large employer groups” (LEGs).
Organizations with fewer than 50 full-time employees are exempt for the most part, although there’s a slightly different reporting requirement for any of those organizations that self-insure.
What information is reported?
Employers that must file are required to report the following information about each employee to the IRS:- Type of coverage offered. This information must be provided for each month. If it’s the same for all 12 months, the employer can report the information once in an “All 12 Months” box.
- Lowest-cost monthly premium. In some cases, employers may be required to report how much an employee contributed to the cost of the lowest-cost monthly premium in each month.
- Eligibility for safe harbor rules. The form includes a line to report any applicable safe harbor that would help the employer’s plan to qualify as an “affordable” plan.
- I.D. information for covered individuals. ALEs or LEGs that self-insure must also provide the following information for every individual (including dependents) covered under each employee’s policy:
What are key dates for the first year of the new rules?
Affected organizations should be aware of the following key dates:- January 1, 2015. The employer’s obligation to gather data begins.
- January 31, 2016. Group health coverage information must be reported to employees.
- February 28, 2016. Group health coverage information must be reported to the IRS.
Remember that employers must issue these forms annually starting in 2016, but the information that will be reported must be tracked starting January 1, 2015. Employers will have to certify coverage availability and employee elections for each month, not just one end-of-year total like a W-2 or 1099. Finally, the filing deadlines for these forms are hard deadlines. Extensions are not available.
What steps should you take now?
Every employer subject to these requirements should have a plan in place to gather and report the required information in a timely fashion. For employers trying to comply with the new rules, here are a few steps to get started:- Identify what information your organization will be required to report and determine who holds that information.
- Contact the holders of the information (these could be insurance providers, payroll services, or employees, among others) to ensure that the data will be available and shared effectively with your organization.
- Identify the person, team, or organization responsible for collecting the relevant information and preparing the returns for your organization.
We hope that this information provides a useful guide to verify that your organization has the necessary processes in place to comply with the new rules. If you have any questions, contact your tax advisor soon. Employers are already required to be collecting this information, and any delays could make it harder to comply with the rules.
