Since the Affordable Care Act (ACA) was written into law, there have been several confusing delays with its implementation. As these delays were worked through, a number of changes to how health plans are offered resulted. The latest implementation phase of the ACA is the Employer Shared Responsibility, which included new requirements for counting, tracking and reporting of employees and their insurance coverage, as well IRS penalties when health plans are not setup or managed correctly.
This month tracking and reporting for many employers begins, underlined by two main responsibilities:
- For 2015 and after, employers with the equivalent of at least 100 full-time employees (FTE) are subject to offering “affordable” coverage to at least 70 percent of their eligible workforce. In 2016, employers with 50 FTE’s will be subject to this responsibility, and coverage must then be offered to 95 percent of the workforce.
- Employers with over the equivalent of 50 full-time employees must track hours worked and the affordability of the health plan, even for employees that waive coverage. They must then submit form (1095C) to employees with their W2 in 2016.
Much has been done to clarify the counting of employees, so an employer knows if they meet the 50 or 100 FTE thresholds. It remains important, however, to yearly re-evaluate the full-time employee count, which threshold is met, and if the employer is considered to be an applicable large employer (ALE).
Under the ACA, if an ALE does not offer affordable health coverage to a significant number of their full-time employees (and their dependents) the employer may be subject to an Employer Shared Responsibility penalty payment.
The following scenarios illustrate when an ALE employer would be assessed a penalty and owe the IRS an Employer Shared Responsibility payment:
- If the employer does not offer health coverage or offers coverage to fewer than 70 percent of its full-time employees (95 percent in 2016 and beyond) and the dependents of those employees, and at least one of the full-time employees receives a premium tax credit to help pay for coverage on an Exchange.
- The employer offers health coverage to all or at least 70 percent of its full-time employees, but at least one full-time employee receives a premium tax credit to help pay for coverage on an Exchange, which may occur because the employer did not offer coverage to that employee or because the coverage the employer offered that employee was either “unaffordable” to the employee or did not provide “minimum value.”
New tracking and reporting is the newest challenge with the ACA
Many traditional services used to track employee ACA eligibility do not include the necessary information for 1095C reporting, without receiving additional information about the benefits and enrollment (example; dependent SSN or DOB). Individuals who work for an ALE require this form to file their taxes, so this information will need to be collected, recorded and managed going forward.
How will an employer know it owes a payment to the IRS?
The IRS will submit notice to employers for them to certify that one or more employees have received a premium tax credit. The notice will inform the employer of their potential liability and provide them an opportunity to respond before any liability is assessed or notice and demand for payment is made. If it is determined that an employer is liable for payment, the IRS will send a notice and demand for payment.
Tyson Fuehrer serves as compliance manager at Vancouver-based Biggs Insurance Services. He can be reached at 360.828.3705.