Taxes

The Affordable Care Act Requirements

November 10, 2015

The Affordable Care Act can be pretty confusing. Hopefully this blog can shed some light on the requirements and penalties this year.

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You’ve read over 50 articles about ACA. We hope this is your last one.

The IRS has issued the 2015 forms and instructions that will be used to comply with the Affordable Care Act (ACA) reporting requirements. There are significant responsibilities and penalties and therefore TLC Employer Services (TLC) urges you to be fully prepared. If you own a business, please read this article in its entirety and follow-up with us on any questions you may have.

Our goal is to work with your insurance broker to remove the stress from you, while giving you the tools and the options to homerun the curveballs ACA throws at you. Payroll and Health Insurance are closely tied together and all businesses need to make sure they have the right technology tracking their health plans, tracking their payroll data and having the right payroll and insurance providers giving you accurate and speedy information. Please contact TLC for any questions; we don’t want you to lose any sleep over the curveballs thrown your way. Let TLC help!

Confused with ACA?

Don’t worry, you’re not alone. Many owners we speak with on ACA are confused. Our biggest concern is for a business to think they are doing everything correctly, but then find out down the road that they are not and a big penalty from the IRS is levied.

Below we are going to outline key items that you need to be aware of and understand. When you read this, please know TLC, along with your broker (we can refer you to a top notch broker if you would like), will be here to educate and to provide the technology and information making this road as smooth as possible.

What are the penalties for messing up or ignoring these requirements?

If an employer fails to file the return or furnish statements to employees by the deadline, the penalty is up to $500 PER return. Just like your payroll taxes, TLC takes away the burden from you.

Why does the IRS need all of these extra forms?

The IRS needs to determine whether employees are subject to the new shared responsibility penalty for not having health coverage or are eligible for premium tax credits on insurance purchased through the health insurance marketplace. The reporting that the business is responsible for will also allow the IRS to determine if an employer is liable for a shared responsibility penalty.

A small employer is one with less than 50 full-time employees (including equivalents) and a large employer is one with at least 50 full-time employees (including equivalents) during the preceding calendar year. The calculations to find out if you fall under the small or large employer rules and regulations becomes complicated as part time, seasonal, and terminated employees get thrown into the mix. TLC takes the lead in helping guide you through this with TLC’s ACA Tracker. Please ask Ashlee Faulkner at TLC for details on how our ACA Tracker can help you calmly navigate through ACA’s twists and turns.

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For large groups, the employer shared responsibility penalty can be imposed on any applicable member that does not offer affordable minimum value health coverage to all of its full-time employees.

Health coverage is affordable if the amount that the employer charges an employee for self-only coverage does not exceed 9.5 percent of the employee’s Form W-2 wages, rate of pay, or the federal poverty level for the year under their household. This causes a problem that TLC and most health brokers are well aware of. How do employers know what their employee household income is? The IRS has their response here. To break this down in a more understandable language TLC would like to invite you to talk with one of our recommended outside Health Insurance Brokers.

A health plan provides minimum value if the plan is designed to pay at least 60 percent of the total cost of medical services for a standard population. In the case of a controlled or affiliated service group, the penalties apply to each member of the group individually.

What is form 1095-C and Form 1094-C?

Large employer group members must prepare a Form 1095-C for each employee classified as full-time. This form must be filed regardless of whether the employee is participating in an employer-sponsored group health plan. In addition, the employer will complete a Form 1095-C for each non-full-time employee who is enrolled in the employer’s self-insured health plan. The employer will not prepare Form 1095-C for non-full-time employees who are not enrolled in the plan.

An applicable large employer group member will file Form 1094-C to transmit its Forms 1095-C to the IRS.

Members of an applicable large employer group that has fewer than 100 full-time employees (including equivalents) are generally eligible for transition relief from the employer shared responsibility penalty for their 2015 plan year. Nonetheless, these employers are required to file Forms 1095-C and 1094-C for the 2015 calendar year.

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What are the requirements for what you need to report on Form W-2?

Employers need to report the cost of coverage paid under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD.

Employees do not have to report the cost of coverage under an employer-sponsored group health plan that may be shown on their Form W-2, Wage and Tax Statement, in Box 12, using Code DD.

The amount reported does not affect tax liability, as the value of the employer contribution continues to be excludible from an employee’s income and is not taxable. This reporting is for informational purposes only, to show employees the value of their health care benefits.

What do businesses really need to do?

  • Review ownership structures of related companies and perform a controlled/affiliated service group analysis to determine applicable large employer group member status. Having a terrific health broker during this process is key.
  • In person, go through these reporting requirements with TLC and your health broker.
  • If you’re not on TLC’s ACA Tracker, develop procedures for determining and documenting each employee’s full-time or non-full-time status on a month-to-month basis. Develop procedures to collect information about health coverage offered and health plan enrollment by month. Ensure that systems are in place during 2015 to collect the needed data for the forms.

Can we please see a simple chart?

The following chart summarizes the filing requirements based on the size of the employer and its member status in an applicable large employer group (ALEG). The column titled “ALEG Member” denotes whether the employer was in a controlled or affiliated service group that collectively had at least 50 full-time employees (including equivalents) during the preceding calendar year.

Employers with non-employees enrolled in their self-insured health plans, such as directors, retirees and individuals on COBRA, can elect to report these non-employees on Forms 1095-B and 1094-B instead of Forms 1095-C and 1094-C.

Disclaimer: This document contains general information, may be based on authorities that are subject to change, and is not a substitute for professional advice or services. This document does not constitute assurance, tax, consulting, business, financial, investment, legal or other professional advice, and you should consult a qualified professional advisor before taking any action based on the information herein.

TLC Employer Services, Inc and its affiliates and related entities are not responsible for any loss resulting from or relating to reliance on this document by any person.


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