Earlier this month, the IRS released final versions of the forms 1094-B, 1095-B, 1094 – C and 1095 – C, that employers subject to the Affordable Care Act (ACA) “shared responsibility” mandate will be required to file (in 2016 for 2015) in order to show that the health coverage they offer to their employees is compliant with ACA requirements. Even though the forms are not required to be filed for tax year 2014, it is important for employers to understand these reports and to ensure they are tracking the data necessary to accurately file these forms in 2016 to avoid significant penalties of non-compliance.
What are forms 1094 and 1095?
Insurers and self-insured health plans must provide a Form 1095-B: Health Coverage to each of their enrollees and members and file these forms together with a transmittal Form 1094-B: Transmittal of Health Coverage Information Returns. The purpose is to provide the IRS and to taxpayers about individuals who receive minimum essential coverage through their employer-provided health plans, showing that employers are not liable for the individual shared responsibility payment.
Large employers must provide a Form 1095-C: Employer-Provided Health Insurance Offer and Coverage to each employee, and transmit these, together with a transmittal Form 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns to the IRS. These forms are used to report the information required under tax code sections 6055 and 6056 about health coverage offers and enrollment, which will be used to determine whether an employer is liable for penalties under the employer shared responsibility requirements of the ACA.
Helpful (kinda) resources
The IRS published a brochure Affordable Care Act: Reporting Requirements for Applicable Large Employers, which discusses getting ready for monthly tracking and preparing to fill out new IRS forms in 2016. It also issued instructions for the forms (1094-B and 1095-B) and (1094-C and 1095-C) although ACA experts warn the instructions are long and complex.
Are you tracking the data you need?
Even though the reporting requirements do not kick in until January 2016 (for companies with 100 or more full-time equivalent employees), the data being reported is happening this year – right now. If you don’t have the right infrastructure in place to gather that information, it will be much harder to fulfill the reporting requirements.
Here are just a few of the pieces of information you will need to collect and disclose:
- SSNs of employees, spouses and dependents
- # of full-time employees for each month
- Total # of FTEs (full-time equivalents) for each month
- Employees’ share of the lowest-cost monthly premium for self-only and the minimum value coverage for each month
- Names and employer ID numbers (EINs) of other employers within the reporting employer’s controlled group of corporations for each month of the calendar year
Chances are you have several systems that are capturing the right data – think HR, time and attendance payroll, finance – but these systems may not easily communicate with one another, which will cause a significant drain on resources and time to generate the necessary reports and comply with “Pay or Play.” Disparate systems complicate ACA compliance, making it more difficult and time-consuming than it has to be—and potentially costly if reported incorrectly.
Mitigating the risk of noncompliance now and moving forward
If you are faced with the disparate systems dilemma, and even if you aren’t, what may help ease the ACA compliance burden is having a cross-functional team develop, execute and manage a strategic plan that lays out the specific responsibilities of each department, including HR, payroll and other departments.
Another consideration – and it’s not too late even for this year – is to investigate how an integrated human capital management (HCM) platform can streamline and simplify the process of compiling information about your workforce. Having a single system of record for all employee data helps ensure accurate calculations and facilitates timely filings to maintain ACA compliance and avoid penalties.