It is important that employers of all sizes are aware that merely offering ACA-compliant health insurance to full-time employees may soon no longer be enough to avoid ACA penalties. In January 2016, in addition to issuing the annual Form-W-2, certain employers must, for the first time, issue the appropriate ACA employer information forms to the IRS and to employees. These forms will describe group health insurance offered (or not offered) during calendar year 2015. The calendar-year reporting requirement applies equally to calendar-year and non-calendar-year plans. While employees must receive any required ACA reporting statements by January 31, 2016, the deadline for employers to submit the forms to the IRS is February 28, 2016 (or March 31, 2016, if filed electronically).
Which forms should be completed by an employer varies according to:
- employer’s size,
- insured or self-insured health plan status,
- whether the employer has any full-time employees, and
- whether the employer is part of a controlled group or affiliated service group with related employers.
IRS Publication 5196 provides a brief summary of the reporting rules.
Many Employers Subject to the Reporting Requirements
Employers who are not aware that these rules apply to them will inadvertently expose themselves to significant penalties if they fail to prepare and submit the required forms. It is important, therefore, to note that the rules may apply to an employer of any size:
- Large employers with at least 50 full-time (including full-time equivalent) employees are subject to the reporting rules. A full-time employee, for this purpose, is an employee who works on average, at least 30 hours per week (or 130 hours per month). Forms may be required to be prepared even if a single part-time employee happens to work at least 130 or more hours in one or more months.
- So-called medium-size employers with between 50 and 99 employees are subject to these reporting requirements. Note that although some medium-size employers were exempt for 2015 from the employer shared responsibility rules, no such transition relief applies for 2015 to the reporting rules.
- Small employers with fewer than 50 full-time employees (and equivalents) are also required to file Forms 1095-C and 1094-C if they have any full-time employees (even if only in a single month) and if they are also members of a controlled or affiliated service group that has an at least 50 full-time employees (and equivalents) in the aggregate. Additionally, an employer with fewer than 50 employees that sponsors a self-insured plan will be required to prepare IRS Forms 1095-B.
The forms are designed to provide the IRS with information regarding which employers offered what types of coverage. This information will be used to enforce the employer shared responsibility rules. The reporting will also provide the IRS with information needed to confirm individual eligibility for premium tax credits on insurance purchased through the health insurance marketplace, as well as to determine whether individuals are liable for individual shared responsibility (or individual mandate) payments.
An employer who is required to, but who fails to prepare and submit the proper forms will incur penalties for: (1) failure to file correct information returns; and (2) failure to furnish correct payee statements.
The penalty for each type of failure is $250 per late or incorrect return or payee statement. This means that ignoring the reporting requirements with respect to each single employee could result in a $500 penalty per employee ($250 for the missed return and $250 for the missed payee statement).
The total penalty imposed for all failures during a calendar year after December 15, 2015 is capped at $3,000,000 for all information return failures and $3,000,000 for all payee statement failures. Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to furnish a payee statement.
Employers should take the following steps as the reporting compliance deadline nears:
- Continue to review the information reporting requirements as applied to your workforce. Final IRS Forms 1094-C, 1095-C, 1094-B, and 1095-B (and related instructions) were issued by the IRS in mid-September 2015. The rules are succinctly summarized in IRS Publication 5196 and in Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C, which is available on the IRS website.
- Review whether common ownership or affiliated service group arrangements cause your otherwise small entity to be aggregated as part of a larger employer group, and therefore subject to the rules.
- Coordinate with your group health plan’s third-party administrator or payroll vendor, if any, to identify the parties responsible for data collection and IRS form preparation.
- For current and future-year compliance purposes, continue to refine procedures to record information about the type of health coverage offered, and accepted, by employee, by month.
- Continue to refine procedures for determining and documenting each employee’s full-time or part-time status for each month.
The ACA employer information reporting rules are complex. If you have questions regarding how any aspect of the ACA reporting rules apply to your specific facts and circumstances, please contact your Davis & Kuelthau attorney.