How to Be a Guardian Angel As Employers Deal with the ACA
by Michael Gomes
Following a number of delays, the time is finally approaching for the implementation of the reporting requirements of the Affordable Care Act (ACA) on January 1. Beginning in 2015, the ACA will require any employer with 50 or more employees to report the cost of health care coverage under an employer-sponsored group health plan. In addition, this past summer the federal government released instructions and revised forms for these requirements in Internal Revenue Code (IRC) Sections 6055 (i.e., Forms 1094-B and 1095-B) and 6056 (i.e., Forms 1094-C and 1095-C).
This section of the ACA is designed to regulate the reporting of the health care coverage offered to full-time employees and their dependents. IRC 6055 will enforce minimum essential coverage for the individual mandate. IRC 6056 will enforce employer shared responsibility requirements around the employer mandate. Both of these filings will be due in the first part of 2016 for the plan year of 2015. Starting in 2015, brokers need to be prepared to help their clients with 50 or more full time employees in understanding their responsibilities under the new rules and are encouraged to share these five tips with their clients as they prepare them for the new regulations:
1. Understand the Differences in What’s Required
Employers with 50 or more full time employees are required to report the cost of health care coverage on employees’ W-2 forms. In the context of the reporting requirement, make sure your clients document the value of the health care coverage and report that information in Box 12 of the W-2 with Code DD to identify the amount. The value should include the portions paid by the employer and the portion paid by the employee. Section 6055 requires that health insurance issuers, certain employers and others that provide minimum essential coverage to individuals report to the IRS information about the type and period of coverage and furnish the information in statements to covered individuals.
Section 6056 addresses the reporting requirements for employers who provide coverage through large group health insurance and requires those employers to report to the IRS information about the health care coverage. In order to administer the employer shared responsibility provisions of section 4980H of the Code, section 6056 also requires those employers to furnish related statements to employees that employees may use to determine whether, for each month of the calendar year, they may claim on their individual tax returns a premium tax credit under section 36B (premium tax credit). The regulations provide for a general reporting method and alternative reporting methods designed to simplify and reduce the cost of reporting for employers subject to the information reporting requirements under Section 6056.
2. Know the Details
Under the final regulations of Section 6055 and 6056, make sure you advise your clients to document only the pertinent details since not everything is required to be reported. While the list of required information is significant, not all data is required. Here is a summary of some of the most critical data required under the new rules:
The following are reporting requirements under Section 6055:
• The name, address and employer identification number of the employer and whether the coverage was enrolled through the Small Business Health Options Program.
• The name, address and taxpayer identification number (or date of birth if a taxpayer identification number is not available) of the responsible individual (reporting of taxpayer identification numbers for responsible individuals who are not enrolled in the coverage is not required).
• The name and taxpayer identification number (or date of birth if a taxpayer identification number is not available) of each covered individual (regardless of whether covered individuals are employees).
• For each covered individual, the months for which the individual was enrolled in coverage.
Large employers must report the following under Section 6056:
• The employer’s name, address and employer identification number.
• The name and phone number of the employer’s contact person, which can be a third party.
• The calendar year for which the information is reported.
• A certification as to whether the employer offered its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an employer-sponsored plan, by calendar month.
• The months in which -minimum essential coverage under the plan was available.
• Each full-time employee’s share of the lowest-cost monthly premium (self-only) for coverage providing minimum value by calendar month.
• The number of full-time -employees by calendar month.
• The name, address, taxpayer identification number of each full-time employee (but not dependents or others covered through employee) and the months, if any, during which the employee was covered under the plan.
3. Use the Simplified Reporting Option, If Possible
For employers that provide a “qualifying offer” to any full-time employee, the final rules provide a simplified alternative to reporting monthly, employee–specific information for those employees. In this context, a “qualifying offer” is an offer of minimum value coverage that provides employee-only coverage at a cost to the employee of no more than about $1,100 in 2015 (9.5% of the Federal Poverty Level), combined with an offer of coverage for the employee’s family.
Under the simplified option, employers will need to report only the name, address and taxpayer identification numbers of those employees and the fact that they received a full-year qualifying offer for employees who receive such offer for fewer than all 12 months of the year. This information may be submitted to the IRS for each of those months by entering a code indicating that the quality offer was made. To provide for a phase-in of the simplified option, employers certifying that they have made a qualifying offer to 95% of their full-time employees (plus an offer to their families) will be able to use an even simpler alternative method in 2015. These employers may use the simplified, streamlined reporting method for their entire workforce, including any employees who do not receive a qualifying offer for the full year. Additionally, employers can avoid identifying in the report which employees are full-time.
4. Waiting to Comply Could Be Costly
Timely reporting and attention to detail is a must. Incorrect or incomplete information on filings and statements will subject reporting entities to penalties up to $100 per incorrect return to the IRS or statement furnished to an individual. However, penalties may be reduced if the entity files a corrected return within 30 days after the required filing date. Penalties also may be reduced by a smaller amount if the return is corrected by August 1 following the reporting date. Penalties may be waived if the failure is due to reasonable cause and not willful neglect. The IRS has indicated it will not impose penalties for incorrect or incomplete information on returns and statements filed in 2016 to report 2015.
The regulations place some significant burdens on employers, such as requiring them to provide annual statements to various individuals as well as report specific information that may be administratively burdensome to obtain. Therefore, encourage your clients to start preparing for the reporting requirements as soon as possible to avoid future penalties and other consequences.
5. Don’t Navigate the ACA Alone
Since 2010, we have constantly provided this simple advice – don’t navigate the ACA alone. The regulations for health care reform are far too -numerous and change regularly so employers should seek professional advice to ensure they are fully compliant. As a broker, you are not in this alone. Research and leverage the numerous reliable, educational ACA resources available to you and your clients.
Michael Gomes leads all Government and Carrier Relations for BenefitMall, the largest national general agency and second largest privately held payroll company. A veteran of the insurance industry, Gomes has over 35 years of experience in planning, developing and executing national sales initiatives, including expertise in the area of Government and Regulatory Affairs. Gomes joined BenefitMall at their inception more than 15 years ago and served in a variety of leadership capacities, most recently as BenefitMall’s Executive Vice President of Sales and Market Operations. Since 2014, Gomes has been focused on health care reform and compliance for both BenefitMall’s payroll and employee benefit customers. He can be reached at email@example.com.