For many organizations, the employer mandate and the reporting requirements of the Affordable Care Act (ACA) loom. Employers want to ensure they will be in compliance come January 2016, when the required forms are due to their full-time employees and the Internal Revenue Service.
Yet many organizations remain confused by the law’s many complexities, especially those related to the reporting provisions. In fact, two-thirds of business executives who have attended Paycom’s ACA webinars in the past four months reported they are not ready to comply with the 2015 reporting requirements!
As staggering as that statistic is, it is important that organizations understand options exist for ACA reporting. You might be surprised to learn which method is best suited for your organization.
Who’s Set to Report?
Starting this year, Applicable Large Employers (ALEs) – organizations with 50 or more full-time or full-time-equivalent employees – will be held to the mandatory filing, which reports the details of health coverage offered to those employees.
The ACA’s “general reporting” method is completing, in its entirety, IRS Form 1095-C, Employer-Provided Health Insurance Offer and Coverage Insurance. This form must be filed with the IRS for every employee determined to be full-time for at least one month during the calendar year. Additionally, employers must provide either a copy of Form 1095-C or an alternate statement to affected employees by Jan. 31 of the year following the year the insurance was offered.
In an effort to simplify reporting requirements in certain situations, the IRS now allows three optional alternative methods:
1. The Certification of Qualifying Offer
2. The Simplified Statements for 95 Percent Offer
3. The 98 Percent Offer
The Certification of Qualifying Offer
This states that in lieu of Form 1095-C, eligible employers are allowed to certify that they extended a “qualifying offer” of health care coverage to employees, as long as the offer provided minimum essential coverage to them, their spouses and dependents, and that the cost of the coverage did not exceed 9.5 percent of the federal poverty level for employee-only coverage.
This report will include the name, address and Social Security number of each full-time employee, along with the indicator code of “1A” from line 14 of Form 1095-C. This code signifies that the employee received a qualifying offer for all 12 months; no other details are required.
The information provided to employees through either a copy of the Form 1095-C or a general statement in a format “prescribed by the IRS” must state that:
2. and therefore, they generally are ineligible for a premium tax credit for all of those 12 months.
Most employers wishing to use this alternative method will have to furnish a mixture of simplified and general reports to their workers and the IRS, as not all employees will have been with the company for the full, 12-month span.
However, it is important to note that organizations will not know until the end of the year whether simplified reporting can be used for any individual employee; therefore, it is important to maintain records of ACA-required data – affordability, minimum coverage offered and employee full-time status – in order to ensure compliance.
The Simplified Statements for 95 Percent Offer
Available for 2015 only, this alternative allows certain employers to provide a “general statement” in lieu of filing Form 1095-C. They must certify on Form 1094-C that they have made qualifying offers to at least 95 percent of their full-time employees, their spouses and dependent(s).
The information provided to employees through a “general statement” must be in a format “prescribed by the IRS” and must state that:
2. and therefore, they generally are ineligible for a premium tax credit for any of those 12 months.
These statements may vary, depending on whether the employee received a qualifying offer for all, some or none of the months. Thus, if the qualifying offer did not apply to an employee for the entire 12 months, the statement likely will inform them that any of the aforementioned entities may be eligible to claim a premium tax credit for any month in which a qualifying offer was not made.
Additionally, the statements must supply a contact name — which can be a member of the ALE or a third-party administrator — and telephone number, should an employee wish to call for additional information.
The 98 Percent Offer
For employers who offer qualifying coverage to at least 98 percent of their full-time employees, this third reporting alternative is available. It does not excuse them from submitting Form 1095-C, but does allow them to bypass two data points on Forms 1094-C and 1095-C:
- the month-to-month full-time status of employees
- and the monthly total of full-time employees.
Employers who offer coverage to “substantially all” of their full-time employees may lessen the burden on themselves to track and record hours of service in order to identify the number of full-time employees for each month. Because Form 1094-C appears to require reporting of members ranked by full-time employees, it isn’t clear whether or not this option is possible for aggregated groups.
Are the General Statements Useful?
For many, the general statement may cause more confusion than it’s worth; it may be simpler for employers to distribute a copy of Form 1095-C.
Also, it is possible that taxpayers may need to enter information from Form 1095-C on their year-end personal income tax returns, so those receiving the general statement may have to contact their HR department to obtain that information. While the IRS has not yet given guidance on the format of these statements, the bureau does require both an employer contact name and phone number for verification purposes.
The Simplified Ending
In closing, the simplified reporting alternatives may prove useful for a number of organizations, but a lot remains up to the interpretation of the law and each business’ ability to anticipate if it will be eligible to use these alternatives. If you are among the two-thirds of businesses not ready to comply with the 2015 reporting requirements, it is in your best interest to talk to a Paycom representative today.
The content of this blog is intended to keep interested parties informed of legal and industry developments for educational purposes only. It is not intended as legal opinion or tax advice and should not be regarded as a substitute for legal or tax advice.