ACA Affordability Safe Harbors must work for Everyone in a Class …

The IRS regulations for ACA reporting require an employer to show that they offered the ‘right type of plan’ at the ‘right type of cost’ or else face penalties.  This means that an employer must have offered minimum essential coverage and minimum value coverage at a cost no greater than 9.5% of the employees household income.

Problem!  When you hired an employee you didn’t hire their whole household, so how are you to know what that number actually is?  To deal with this issue the IRS allows for employers to make assumptions on what the household income is for an employee.  It is important to note however, the Affordability Safe Harbor MUST work for everyone within a class of employees in order to use it.  Lets take an example …

Example:  The employer has a class of hourly employees that they are applying the rate of pay safe harbor for affordability purposes.  There are 100 employees in this class.  The safe harbor works for 99 of the employees but does NOT work for 1 person.  This safe harbor cannot be used for ANY employees in this class.  Instead, line 16 of their form 1095-C would simply be left blank and the IRS would use the final, actual household income of the employee to determine if a penalty could apply.

Of course for our clients, we perform all of this analysis on their behalf.  If by chance you used a different vendor for reporting and need assistance, we can assist you through our consulting services.  Find out more by clicking here …


To see specifically where this information and guidance comes from, you can visit this link here to see the Federal Register Vol.79, No.29.  On page 57 of this document you will find the following language:

(i) Conditions of using an affordability safe harbor. An applicable large employer member may use one or more of the affordability safe harbors described in this paragraph (e)(2) only if the employer offers its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan that provides minimum value with respect to the selfonly coverage offered to the employee.  Use of any of the safe harbors is optional for an applicable large employer member, and an applicable large employer member may choose to apply the safe harbors for any reasonable category of employees, provided it does so on a uniform and consistent basis for all employees in a category. Reasonable categories generally include specified job categories, nature of compensation (hourly or salary), geographic location, and similar bona fide business criteria.  An enumeration of employees by name or other specific criteria having substantially the same effect as an enumeration by name is not considered a reasonable category.

ACA Reporting Delay: Impact On Individual Tax Filings

One of the most common questions we are receiving is regarding the impact to employees filing their own personal taxes now that there has been an extension of time allowing employers and organizations until the end of March 2016 to supply forms 1095-B and 1095-C to their employees.  The concern rises when employers consider how employees can complete their normal tax filings without being provided the forms showing their health coverage for the year.

The IRS recently released some guidance to assist us with understanding this topic.  In their guidance they have said, “Due to these [ACA reporting] extensions, some individual taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2015 tax return. While the information on these forms may assist in preparing a return, they are not required. Like last year, taxpayers can prepare and file their returns using other information about their health insurance. Individuals do not have to wait for their Form 1095-B or 1095-C in order to file.

The IRS has not extended the due dates for Health Insurance Marketplaces to issue Form 1095-A. Individuals who enrolled for coverage through the Marketplace should receive Form 1095-A by February 1, 2016 and should wait to file their returns until the receive their Form 1095-A.”

The IRS has also said that individuals can rely on information from their employer or provider without having to amend their return later.  https://www.irs.gov/Tax-Professionals/ACA-Information-Center-for-Tax-Professionals


So what is the overall actual impact?  

Since the forms 1095-B and 1095-C are informational returns, much like 1099’s and W-2’s, the extended filing deadline for employers will not affect companies income tax returns.  Also, it would seem to reason that individuals will not have to file amended returns if they have wrong (or no) information from their employers due to the extensions.  Likely, the IRS will punt on the individual mandate penalties for this year in some cases.

Specifically, on the form 1040 of individuals, there is a line 61 & 62 (shown below) and they will need to complete as part of filing their taxes.

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IRS Changes ACA Reporting Deadlines …

Today the IRS and Treasury Department released guidance extending some of the Affordable Care Act reporting guidelines.  Simply put, the extensions will allow for the following:

  • Employers will have an additional two months (until the end of March 2016) to provide employees with the forms 1095-B and 1095-C, and
  • Employers will have an additional three months to file with the IRS.  
    • New paper form filing deadline:  May 31st, 2016
    • New e-filing form filing deadline:  June 30th, 2016

To learn more you can see the actual guidance by clicking here.

ACA Reporting That ‘Creates The Codes’…

Due to the number of questions we still receive on this issue, we thought it would be helpful to post so that everyone knows our process for creating ACA reporting fully completes all of the codes necessary on form 1095-C lines 14 and 16 on behalf of our clients.  This is by far the most complex portion of the ACA reporting and yet many reporting vendors in the marketplace require the employer to create these codes.  If you have read through the IRS guidance on reporting, you understand that this is a problem due to the complexity and is the main reason ACA reporting vendors in the marketplace even exist.

Our approach to ACA reporting was born out of an intensive understanding on how employee benefits work.  We are not a payroll or other type vendor trying to ‘get up to speed’ on employee benefits.  Rather, we understand that the ACA reporting on forms 1094 and 1095 is mainly employee benefit reporting.  We built a process designed to collect the minimum necessary amount of information from employers, and then we take it from there!

Need help?  Feel free to contact us via customer support at the top of the page.

Designated Governmental Entity (DGE) Did Not Fully Report on ACA To IRS …

Many municipal and other governmental entity types have been surprised by the fact that their Designated Governmental Entity has not reported all of the necessary information to the IRS as they assumed would happen.  Under the Affordable Care Act (ACA), Applicable Large Employer (ALEs) must report to the IRS on the type of plans that were offered to their employees, the costs of these plans, and who was covered under the plan.  For some governmental groups (we will call these ‘primary’) they might have a separate governmental entity that has some of their employees covered and who have agreed to perform the ACA reporting on behalf of the ‘primary’ group.

Example:  A school district has all of their teachers covered under the State medical plan, but all other staff covered under a separate plan.  The State has told the school district that ‘we will perform the reporting for you’. This is normally very misleading to the school district because the State health plan normally only intends to report to the IRS who was covered under the medical plan, and NOT the offer of coverage.

For those of you familiar with ACA reporting, the State health plan in this instance normally will report medical plan enrollment but NOT report the other necessary Offer of Coverage that shows up in lines 14, 15 and 16 of form 1095-C.  The end result is that the school district has not reported fully to the IRS and are now subject to penalties.


So what can you do ….

#1.  If you have a Designated Governmental Entity that is performing some of your reporting, you need to ask them if they are reporting for the Enrollment on the plan, OR ALSO the offer of coverage.  Understand it is unlikely they will report the Offer of Coverage.

#2.  If the DGE is only reporting enrollment, they will complete that on form 1095-B.

#3.  The underlying school district in our example still must complete forms 1095-C on these teacher employees, sections 1 and 2.


Need assistance?  Reach out to our customer service department by clicking contact us at the top of the page.

ACA Reporting Software Provider [15 Question Quiz]

Let’s face it, the marketplace is confused when it comes to ACA Reporting.  Since this is the first year of mandatory reporting, how can you know if your vendor ‘knows their stuff’ when it comes to ACA Reporting?  To help employers, we have created a quiz to assist you in researching ACA Reporting Software providers.  These questions are specifically designed to help an employer determine if their vendor has the necessary knowledge to support them through the ACA reporting process.

  1. Do fully insured employers need to report?  If so, what type of reporting do they need to do [what forms, etc]?
  2. Who ultimately gets a reporting form from us as an employer?  How does that change based upon if we are fully insured or self insured?
  3. If we have multiple plan designs, how does the reporting work?
  4. Does ACA reporting involve protected health information (PHI)?  If so, does your company enter into a Business Associate Agreement with its clients?
  5. When was your last HITECH audit?
  6. Is your ACA reporting solution even built yet?
  7. Does your ACA reporting software generate the codes for form 1095C?  Does the software create the correct codes, or do we input these manually for each person?
  8. How long will the data be stored?
  9. Could you explain the ACA reporting safe harbors?
  10. If a group offers a Health Reimbursement Account (which is considered a self-funded plan), in coordination with a traditional fully insured plan, how will this work in terms of ACA reporting?
  11. Can an employer qualify for multiple forms of transitional relief?
  12. Is it necessary for an employer to track enrollment declination?
  13. Does each employer need to request a transmitter control code (TCC) from the IRS?  If so, how?
  14. If we have an opt out bonus, how is that calculated and accommodated for in the ACA reporting?
  15. How does non-calendar year transitional relief work?

We hope you find this quiz beneficial.  For answers to these questions and more, simply contact us from the support tab.

 

Evaluating ACA 6056 Employer Reporting Software?

Evaluating ACA 6056 Employer Reporting Software?

Employers & Benefit Brokers Evaluating ACA 6056 Reporting Software

If you are a large employer or employee benefit broker, chances are you have spent a lot of time trying to determine the best ACA 6056 reporting and compliance solution for your clients.  At ACA Reporting Service, we do not sell software – but rather full service reporting.  However, we have researched almost a dozen different ACA employer reporting and compliance vendors and we thought we would pass along what we learned.

Beginning Questions To Ask Yourself

As an employer or benefit broker, this is how the ACA reporting question breaks down for you.

1).  Some employers will have their online enrollment (benefits administration) and payroll with the same vendor.  In those cases, as long as the client is willing to pay for it, it will likely make sense to just perform the required ACA reporting of IRS forms 1094 and 1095 with that vendor.

2).  Some employers will not have an outside benefits administration or payroll vendor.  They do everything in-house.  For these employers, there is going to be a lot of ACA work to be done and obviously you will need a stand alone solution.

3).  Finally, you have some employers who have payroll and benefits administration with different vendors.  This would include the scenario where one of these functions is performed in house.  In these cases you will either need to consolidate both payroll and benefit plan elections with one vendor, or you will need a stand alone solution.

Basic Conclusion:  If you are an employee benefit broker with various types of employer clients, we don’t see a scenario where you can get away with not having a stand alone ACA reporting solution to help your clients meet their ACA Reporting Requirements.


What do you need to know in evaluating ACA stand alone software vendors?  Things to keep in mind as an employee benefit broker if you want to do this on your own.

Employee Benefit Brokers, Ask Yourself These ACA Reporting and Compliance Questions

1).  Security?  What if all of the social security numbers of your client’s employees was stolen?  Can you imagine the fall out?  Many of the systems we reviewed were severely lacking in terms of security.  What level of encryption is being used for the data?

2).  Branded to your company?  Many different ACA reporting vendors offer the ability to brand a portal to your company that your employer clients will be able to login from.

3).  Is the system mainly a benefits administration system?  The differences in these systems can be extreme – from very low level to incredibly high level.  Will this add additional costs for the ACA reporting module?  Also with many benefits administration systems, there are additional charges for EDI (electronic data interface – where election data is sent to insurance carriers).  Will additional fees apply with this new ACA reporting?

4).  Is the ACA reporting solution even built yet?  Many of the ACA reporting module demo’s we sat in on were from vendors who do not even have the software built yet.

5).  How long will your data be stored?  The IRS has said that audits will begin starting in about 18 from months from the filing date, and that can last for 7 years total.  If you do not have a methodology to get back to your data at the time of inquiry, you are stuck.

6).  Is your vendor set up to file with the IRS?  Did they just lie to you and say yes to that question?  As of the writing of this blog, no one is set up to file with the IRS electronically (efile) for forms 1094 and 1095.  The IRS has literally just issued the guidelines to begin getting started with this.

7).  Variable hour tracking?  Do you need variable hour tracking to determine eligibility?  For many employers a simple spreadsheet will do the trick.  Many vendors have quite robust capabilities in this area, and for some employers this will definitely make sense.

8).   The ‘Gotcha Moment’.  This comes at the end of a great presentation where they tell you there is an additional $3 to $5 per employee to file the forms with the IRS.  Generally this will make the costs of this solution not competitive.

9).  ROBUST ACA LOGIC.  We cannot tell you how important this is!  If you have spent as much time looking at these forms as we have (especially in terms of form 1095c lines 14, 15 and 16) you will know that performing this reporting is MUCH MORE than just uploading a spreadsheet.  The codes for these lines are based upon logic.  Most systems do not have this logic built into their system, but rather it will be up to you as an employer or benefit broker to figure this out.  For most employee benefit agencies, you can count on this little ‘bug’ shutting down your operations in January.

What if you decide to just file them incorrectly?  When your largest client has 100 employees bring them letters from the IRS, you will then realized this was a very bad idea.

Also, without robust logic built into the system there will be no accommodation for situations such as someone terminating in November/December and then electing COBRA in January.  The codes for these situations are different.

10).  Are forms stored for future access and corrections?  Bottom line – there is going to be issues with the reporting from time to time.  Do you have the ability to go back into the system and create a new/corrected 1094 or 1095 form on behalf of the employee?  Many systems that rely solely on a census upload would require you to basically start over in order to make this one fix.  OR, your staff can just manually create one in .pdf which will take a lot of time.

11).  Do you have to pay for the whole system up front, or are there monthly options?  Do you need to commit to multiple years with the software vendor?  Do you have to pay onging for the solution or only once?  Are there implementation costs?  Are there separate fees for the IRS form file reporting and all other functions in the system?

12).  Can the employee elections be uploaded via census, or do you need to type it all in?

13).  Will they have adequate customer support between January 1st and January 31st so that you can KNOW you will be able to get this all done?

14).  Do you want to just let the payroll vendor do this for your client?  Do you really want to recommend your client that they should have another function performed by someone who wants nothing more than to take your business away from you?

. . . OK, that is enough!  We hope you find this helpful.  In the case that you would like someone to be fully hands on and provide great service to get all of this reporting done, we will be here to help!

 

 

Municipalities, School Districts, Governmental Entities – ACA Reporting

Municipalities, School Districts, Governmental Entities – ACA Reporting

Across the country municipal government, cities, towns and school districts are beginning to learn their responsibilities for Affordable Care Act (ACA) reporting to the IRS under Internal Revenue Code 6055 and 6056.  We speak to these municipal groups every day, and this often is a complete shock to them.  What do you mean I have a self funded plan?

For municipal groups and school districts under the state health plan in their given state, they are being notified that they are actually on a self funded plan.  The reason for this is the manner in which the states generally arrange these plans and file with their department of insurance.  Since these plans are self funded, they have very specific reporting requirements under the ACA.  The largest shock for these groups is that the states are not performing the reporting on their behalf, but rather it is the responsibility of each individual municipality, school district and other governmental entity.

Due to these facts, it is imperative that these organizations understand what their requirements are, preferably in a simple and easy manner.  To assist with the learning curve, we have recorded a free webinar that can be accessed on demand.  The goal of this webinar is to tell you only what you need to know, and to do this in less than 45 minutes.  The feedback for this session has been excellent, so we hope you find it helpful.  Simply press play below to get started.


Session Overview Notes:

  • Overall Presentation 40 minutes (the last 10 minutes covered most frequently asked questions)
  • Session was a quick (non-attorney) overview of ACA Reporting
  • What did the Affordable Care Act Accomplish?
    • Individual mandate to have health insurance  (IRS 6055)
    • Employer pay or play rules (IRS 6056)
  • How will the IRS ensure individual and employer compliance?
  • What are employers options when it comes to ACA Reporting

All Large Employers MUST Complete ACA Reporting (Even Fully Insured Groups)

All Large Employers MUST Complete ACA Reporting (Even Fully Insured Groups)

This comes as a surprise to many, but YES – if you are an employer with 50+ employees (or full time equivalent employees), you must complete ACA Reporting to the IRS (forms 1094 and 1095).

But I’m Fully Insured . . . My insurance carrier will take care of this right?   No!

You might have thought that your insurance carrier was going to take care of this, but they only report the portion that they are required to report as an insurance carrier.  Employers still have additional responsibilities.  


The easiest way to think about this is by considering what the Affordable Care Act accomplished:

  • Individual Mandate – all US citizens must now have health insurance or pay a penalty
  • Employer Mandate – all large employers (50+ employees) must offer coverage and that coverage must be affordable
  • The IRS is in charge of making sure these things happen.

So how does the IRS make sure that an individual did have health insurance and doesn’t owe an individual tax penalty?

This is accomplished through the IRS receiving specific forms from the various places that an individual could have coverage:

  • The exchanges send the IRS the ‘A’ Forms (1095A)
  • The insurance carriers send the ‘B’ Forms (1095B)
  • And self insured employers must report everyone covered under their plan for the year using the ‘C’ Forms (part 3 of 1095C)

How does the IRS make sure each large employer (a) offered coverage and (b) that the coverage was affordable?

This is accomplished through the IRS receiving a completed form 1095 by ALL LARGE EMPLOYERS.  Specifically, part 2 of form 1095C is used to accomplish this task.

So as you can see this is not something that will be fulfilled by insurance carriers, and the penalties for not filing are substantial.  (IRS Fines)

Have questions?  Contact us from the support tab.  Thanks!