Shortly after the Affordable Care Act’s (ACA) subsidies were upheld by the U.S. Supreme Court, President Barack Obama signed into law a trade bill that, in some cases, more than doubled the fines associated with the Affordable Care Act’s (ACA) employer mandate reporting requirements. With nearly two-thirds of businesses not ready to comply with the 2015 reporting requirements, the drastic increase for non-compliance makes the mandatory stipulation even more critical for businesses that face their first year of required reporting under the health care directive.
The IRS released two rules for employer reporting requirements which are seen in Sections 6055 and 6056 and will be reported via forms 1094/95-B or -C. ACA penalties for incomplete or incorrect returns filed or statements furnished for these aforesaid forms are imposed under IRS Sections 6721 and 6722. Section 806 of the bill – The Trade Preferences Extension Act of 2015, passed on June 31 – reads that Section 6721 of the IRS code is amended as follows:
- In general, the penalty for failure to file an information return on or before the required filing date or for filing forms with incomplete or inaccurate information will increase from $100 to $250;
- the maximum total amount of penalties allowed in a calendar year for an employer increased from $1.5 million to $3 million; and
- if there is intentional disregard to file the required forms, the aforementioned $250 fine will double to $500 and the $3 million maximum amount will cease to exist, meaning no cap will remain for that calendar year.
Additionally, the penalty for failure to file and properly furnish Form 1095-C to both the IRS and individual employees also will double from $250 to $500.
Good Faith Effort
Despite the harsh penalties, companies that demonstrate a “good faith effort to comply with the [ACA] reporting requirements” will not be penalized, according to the IRS. This language remains in effect and states, “relief is provided from penalties under Sections 6721 and 6722 for returns and statements filed and furnished in 2016 to report coverage in 2015 for incorrect or incomplete information reported on the return or statement.”
However, no relief will be granted for those companies that cannot show a good faith effort to comply with the reporting requirements by:
- timely filing an information return with the IRS and
- furnishing an information statement to individuals.
In a recent report by PricewaterhouseCoopers, 46 percent of employers stated they are unsure how they are going to deliver the required ACA forms to the IRS and their employees. It is vital that employers develop a process for compiling the necessary data to complete and distribute these complex IRS forms accordingly.
For compliance free of pain, stress and costly fines, Paycom’s Enhanced ACA solution offers the convenience of having all your ACA data in a real-time dashboard. Plus, Forms 1094/95-B or -C can be filed and furnished on your behalf timely and accurately.
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.