Understanding and Preparing Affordable Care Act (ACA) Informational Returns is Challenging (article)

Understanding and Preparing Affordable Care Act (ACA) Informational Returns is Challenging (article)

Employers must prepare now for new reporting requirements.

While the Affordable Care Act (ACA) has imposed a number of changes for employers since its inception in 2010, one of the upcoming reporting requirements may be the most challenging yet. The ACA added Sections 6055 and 6056 to the Internal Revenue Code, which requires insurers and applicable large employers to file information returns with the IRS and to provide statements to their full-time employees, similar to Form W-2, about the health insurance coverage offered by the employer.

Health insurers of fully insured health plans, as well as self-insured employers, are required to meet the requirements outlined in IRC Section 6055. This means that every provider of minimum essential coverage (MEC) must report coverage information by filing an information return with the IRS and furnishing a statement to individuals.

IRC Section 6056 requires applicable large employers, those with at least 50 full-time equivalent employees (FTEs), to file information returns with the IRS and provide statements to all eligible employees about the health insurance coverage that the employer offered.

The reporting is completed using form 1094-C, often referred to as an employer transmittal, as well as form 1095-C, known as the benefits statement. The 1094-C is a relatively easy form to complete. It contains basic employer-level data, including the number of FTEs for each month in calendar year 2015.

Form 1095-C must be completed for each benefit-eligible employee. These benefit statements must be distributed no later than February 1, 2016. Employers must report on all individuals “offered” coverage, not just those who had elected coverage. For 2016, copies of employee Form 1095-C must be sent to the IRS in aggregate with your 1094-C no later than February 29 if submitting via paper, or March 31 if filed electronically.

What makes completing these forms so challenging? For starters, most payroll and HRIS systems don’t talk to each other very well and are not configured to print the forms in a signature-ready fashion. Then there is the additional issue with being able to report on offers of coverage, something that is typically tracked in HRIS systems.

Adding to the complexity of information gathering tasks is accounting for employees with fluctuating schedules, referred to as variable-hour employees. Actual hours worked must be tracked for these employees in order to determine full-time status for purposes of ACA. Add to the equation the employee in a measurement period and the fact that a measurement period may need to be adjusted for qualified and unqualified leaves and the reporting complexity grows. Further, there are a host of unique situations, including seasonal, on-call, per diem and employees receiving stipends that also must be accurately accounted for. Clearly, effective practices must be in place to address each of these reporting concerns.

A few caveats. Due to the nature of the information gathering process, there may be a lengthy lead time to get up and running and properly compile the necessary data. It is not unheard of for the implementation process to take up to six months. And thanks to the intricacies of these reporting requirements many vendors and payroll companies charge considerable monthly fees to prepare the reporting in a signature-ready fashion.

Employers required to comply with the ACA reporting should review their employee population as soon as possible by looking for those unique employment situations, evaluating their current ability to integrate the necessary data and by testing their solutions well before the end of 2015.

For more information, please contact us.


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Understanding and Preparing Affordable Care Act (ACA) Informational Returns is Challenging (article)While the Affordable Care Act (ACA) has imposed a number of changes for employers since its inception in 2010, one of the upcoming reporting requirements may be the most challenging yet. ...2015-06-22T13:38:00-05:00While the Affordable Care Act (ACA) has imposed a number of changes for employers since its inception in 2010, one of the upcoming reporting requirements may be the most challenging yet.