ACA reporting rules: A plain-English breakdown
If you think the Obamacare reporting requirements issued by the IRS are confusing, you’re not alone. But we’ve cut through the clutter to get to the point of what’s required.
Who has to report
First of all, let’s make it clear who has to abide by these reporting rules. Who knows maybe you’re small enough to recuse yourself from all this mess.
The reporting requirements apply to “applicable large employers” (ALE) — those who employ 50 or more full-time or full-time equivalent employees. They also apply to anyone who provides minimum essential health coverage under the law to an individual — this would apply to a very small self-insured employer, for example.
Who’s a full-time equivalent employee? That’s an issue we tackle here.
The IRS then says: “If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year.”
Reporting requirements
Now it’s time to get down to brass tacks.
There are four forms ALEs need to familiarize themselves with:
- Form 1094-B — Transmittal of Health Coverage Information Returns.
- Form 1094-C — Transmittal of Employer Health Insurance Offer and Health Coverage Returns.
- Form 1095-B — Health Coverage.
- Form 1095-C — Employer Provided Health Insurance Offer and Coverage Insurance.
Who files what?
The reporting system mirrors the current W-2 reporting system in that a 1095-B or 1095-C will be prepared for each applicable employee, and those forms will be filed with the IRS using a transmittal form — 1094-B or 1094-C.
Form 1095-C and Form 1094-C will be filed by ALEs. These forms will be required if the employer offers an insured or self-insured group health plan, or does not offer any group health plan.
ALEs must prepare a Form 1095-C for each full-time employee regardless of whether the employee is participating in an employer-sponsored group health plan. In addition, ALEs with self-insured plans will complete a Form 1095-C for each non-full-time employee who’s enrolled in the self-insured health plan. The employer will not prepare a Form 1095-C for non-full-time employees who are not enrolled in a plan.
Form 1094-C must be used to transmit Forms 1095-C to the IRS.
Form 1095-B and Form 1094-B must be filed by insurance companies to report individuals covered by insured employer-sponsored group health plans.
In addition, small, self-insured employers will also use Form 1095-B and Form 1094-B to report employees and their family members who have coverage under the self-insured plan. Employees who are offered but decline coverage are not reported.
Form 1094-B must be used to transmit Forms 1095-B to the IRS.
What do employees get?
A copy of the applicable Form 1095, or a substitute statement, must be given to each employee by January 31 every year and can be provided electronically with the employee’s consent. But since January 31 falls on a Sunday in 2016. The 2016 deadline has been moved to February 1.
When are the forms due to the IRS?
Employers must file these returns for the 2015 year by Feb. 29, 2016 (March 31 if filed electronically). Any employer filing at least 250 returns must file electronically. The deadline for future year’s returns will be Feb. 28.
It’s important to note that employers with between 50 and 99 full-time and full-time equivalent employees were granted transition relief from having to comply with the ACA’s employer mandate to provide insurance to employees. But even those granted transition relief must files these forms in 2016.
Penalties apply
Warning: Failing to provide these forms in a timely manner to the IRS or employees can result in fines — $250 per return.
But like with many ACA penalties, the IRS said that it won’t impose penalties if firms can prove they made a good faith effort to comply with the 2015 reporting regs. But an “untimely” filed form won’t meet the good-faith requirement, the IRS said.
Filing electronically?
Electronic filing takes place in four stages:
- Naming your responsible official(s) and IRS contacts
- Obtaining a Transmitter Control Code (TCC)
- Test filing, and
- Actual filing.
Responsible officials
You must file an application with the IRS to obtain a TCC needed to e-file. But before the application process can begin, you must register responsible officials and contacts with the IRS (here’s the link to register).
The responsible official(s) you name will have authority over the e-filing process and are the contact persons for communications with the IRS. All companies that plan to e-file must put at least one responsible official and two contacts on their applications.
Applying for a TCC
Once that registration process is complete, you can apply for a TCC. Anyone transmitting info to the IRS is required to complete an ACA Information Return Transmitter Control Code Application through the IRS e-services portal.
The TCC will then be mailed to you.
Test filing
After receiving your TCC, transmitters are encouraged to complete a communication test using the IRS’ Affordable Care Act Assurance Testing System.
Actual filing
Once you’ve test filed, you’re ready to file for real. To do this, you must use the IRS’ Affordable Care Act Information Returns Program — aka AIR.
But the program won’t be ready until Oct. 22, 2015.
Extension available in some cases
If you don’t think you’ll be able to hit the aforementioned reporting deadlines, don’t panic just yet.
There’s a 30-day reprieve available from the reporting requirements.
In order to take advantage of the extension, employers must use Form 8809 (Application for Extension of Time to File Information Returns) and submit it by the reporting deadline. If that form seems familiar, that’s because it’s the same form used to request an extension for filing W-2s and 1099s.
But that’s not all.
The 30-day extension can be extended even further in certain situations. According to the instructions on Form 8809, an additional 30-day extension may be provided if the request for an additional extension is filed before the expiration of the original extension.
Employers shouldn’t bank on getting the additional extension, however. The IRS makes it clear that “requests for additional time are granted only where it is shown that extenuating circumstances prevented filing by the date granted by the first request.”
