by Renee Mielnicki, Esq.
By now, most of you should have heard of the Patient Protection and Affordable Care Act, often referred to as the Affordable Care Act or the “ACA.” Much confusion surrounds this law and it’s no wonder since the law itself is more than 2,400 pages. As you can imagine, a law as lengthy as this has so many parts and components it is nearly impossible to understand or comply.
One of its many compliance provisions is now looming over our heads. In case you aren’t aware, the ACA’s reporting requirements must be met in early 2016. These reporting requirements are required by Sections 6055 and 6066 of the Internal Revenue Code, which, as most of you know, is enforced by the Internal Revenue Service (“IRS”).
While Section 6055 and 6056 apply to different types of employers (Section 6055 applies to self-insured employers and 6056 to fully-insured employers), their requirements are very similar. Both apply to applicable large employers (i.e. those with 50 or more employees as defined by the ACA) and contain two reporting requirements. First, applicable large employers must provide all impacted employees with Form 1095-C. This Form will reflect the months that an individual was or was not covered by minimum essential coverage. Second, applicable large employers must then submit Form 1094-C to the IRS. This form summarizes all of the information provided to affected employees on Form 1095-C. Copies of the 1095-C Forms given to employees must also be given to the IRS with Form 1094-C.
What is the purpose of these forms? Well, they are going to allow the IRS to determine if employees are liable for the individual mandate penalty (i.e. a tax on individuals without health coverage), whether an employee is eligible for the premium tax credit and/or whether an employer should be assessed a penalty for not providing minimum essential coverage. Remember, IRS penalties are exactly how the ACA will be enforced. Although people have been buzzing about this stuff for years, the time has finally come to comply with this law or face the music from the IRS.
If you are a large employer (remember I said you needed to have at least 50 employees as defined by the ACA to be a “large employer”), the deadline to comply with these new reporting requirements is quickly approaching. All affected employees must be provided with Form 1095-C by January 31, 2016. The information contained therein will cover the 2015 year. Large employers will then be responsible for sending this same form to all affected employees by January 31 of each year thereafter. If you think about it, Form 1095-C is somewhat similar to your W-2 reporting obligations. The other deadline swiftly approaching is February 29, 2016. That is the deadline that large employers have to file the transmittal form, Form 1094-C, with the IRS. However, if you will be filing electronically, the deadline is March 31, 2016. And don’t forget. You must adhere to these same deadlines for every year after 2016.
Notice from what I explained above that the burden of complying with these two reporting requirements is on large employers. You might be jealous to know that if you are an employer with less than 50 employees, those employers escaped this burden. Under the ACA, this same information has to be given to the employees and then transmitted to the IRS. However, for smaller employers, the burden to send the information to the employee is on the health insurance companies, not the employer. The health insurance companies will also be responsible for filing the transmittal forms for the small employers with the IRS. Lucky them, I know. Very similar forms, Forms 1094-B and 1095-C, will be used to comply with reporting requirements for small employers.
While the penalty for failure to comply with these reporting requirements is something like $100 per return, the IRS has stated that, at least for the 2015 reporting year, there may be relief from the penalty for incorrect or incomplete information on a return if the entity can show a good faith effort to comply with the reporting requirements. At least there is good news somewhere in here, right?
So now that I have simplified the two reporting requirements and given you the deadlines, ready…set…wait….are you ready? For any of you that have not done so already, take the time to look over Form 1094-C and Form 1095-C for 2014 (I don’t think the IRS has released the form for 2015 yet). At first glance, you may not think the forms themselves look so scary but wait until you read the 14 pages of instructions.
Confusing is putting it mildly. Since the first deadline is January 31, waiting until November or December to try to figure all of this out could result in penalties for noncompliance. The same is true of the transmittal forms due in February (or March if you’re filing electronically). This law and these reporting obligations are complex to say the least. Do yourself a favor and plan this one ahead. Take a look at this stuff far in advance to make sure you don’t get slapped by good old Uncle Sam (because aren’t the penalties how the government planned to pay for the tax credits in the first place???).
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