The Internal Revenue Service on February 9 published the final forms and instructions employers must use to comply with the Affordable Care Act section 4980H requirement to report employee health coverage information to employees and the IRS.  

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ACA Reporting Update: 4 Key Realities

Wed Feb 18, 2015

The Internal Revenue Service on February 9 published the final forms and instructions employers must use to comply with the Affordable Care Act section 4980H requirement to report employee health coverage information to employees and the IRS.

Publication of Forms 1094-B, 1095-B, 1094-C and 1095-C and instructions reminds employers of 4 key realities about the Affordable Care Act reporting mandate:

  1. Employer reporting under Code sections 6055 (insurance issuers and sponsors of self-insured group health plans) and 6056 (sponsors of self-insured and fully-insured group health plans subject to the employer “play or pay” mandate) will be incredibly complex—W-2 reporting on steroids.

    Completing Form 1095-C, for example, particularly Lines 14, 15 and 16 (see instructions pages 6-8), will require extensive health coverage data and information, including use of applicable Indicator Codes. Line 15 requires employers to enter each full-time employee’s dollar share of the lowest cost monthly premium for self-only minimum value coverage. And, of course, a separate return is required to be filed for each full-time employee.

  2. Compliance with the ACA reporting mandate will necessitate having a robust system in place for tracking health benefits eligibility and offers of coverage as well as amounts enrolled employees have paid for coverage. It’s safe to say that most employers do not yet have systems that will seamlessly populate the required data fields.

    Reporting will involve inputs from across the organization, including information on qualifications from Time & Attendance, eligibility and enrollment from Benefits and affordability (see the W-2 safe harbor) from Payroll. Ideally, employers will introduce a single HCM application with purpose-built reporting functionality to support an automated and streamlined process.

  3. The “File” and “Furnish” reporting clock is ticking right now. Employers must file the first 1095-C reports on behalf of each full-time employee with IRS by March 31, 2016, for electronic filers. They must also furnish a 1095-C to employees by January 31, 2016, less than one year from now. Employers must begin collecting coverage data in 2015 to effectively prepare for next year’s reporting mandate.

  4. While there may be some first-year penalty flexibility for “good faith” efforts, IRS has no intention of backtracking on ACA reporting. The requirement is essential because employer reporting is the sun around which much of the Affordable Care Act solar system revolves. Employer “play or pay” non-compliance penalties, Individual Mandate non-compliance fines and premium tax credit eligibility all depend on employer annual reporting. Rolling back employer reporting would mean rolling back the Affordable Care Act.
Affordable Care Act health coverage information reporting is complex, challenging, imminent and here to stay. Successful employers will focus not only on understanding the section 6055 and 6056 processes but on making ACA reporting compliance streamlined and cost-effective. Employers need to be prepared to take their compliance strategy and HCM technology to the next level—and be ready to go in 2016.