This marks the second year of mandatory ACA reporting, as well as the phasing-in of the Employer Shared Responsibility mandate. This means some big changes when it comes time to file in 2017.
Which Employers Are Required to Report in 2017?
ACA reporting requirements are enforced by Sections 6055 and 6056 of the Internal Revenue Code. Together, they ensure that employers (and health insurance providers) report health coverage information to the IRS and provide statements to employees.
Under the Code, employers must report if they are:
- A self-insured employer, regardless of size. For clarification, a self-insured employer is one that pays employees’ medical claims directly, rather than paying premiums to an insurance provider.
- An employer with 50 or more full-time or full-time equivalent employees (FTEs) in the prior calendar year. Employers who fit this classification are known as Applicable Large Employers (ALEs), and are also subject to the Employer Shared Responsibility mandate.
Under the ACA, full-time employees are generally defined as those who average at least 30 hours of service per week (or 130 total hours) in a calendar month. An FTE is actually a combination of part-time employees who, combined, count as a full-time employee in terms of hours.
For example, an employer that has 40 full-time employees (30 or more hours per week on average) and 20 employees employed 15 hours per week on average has the equivalent of 50 full-time employees and would be classified as an ALE.
ALE classification is determined each calendar year and depends on the average size of the workforce in the prior year. This means that calculating employee hours and keeping track of the number of full-time employees and FTEs throughout the year is critical.
Forms Used for ACA Reporting in 2017
There are two main types of ACA reporting: “C” and “B”. In general, C pertains to employers, while B pertains to providers (insurance carriers and self-insuring companies).
C Reporting (Forms 1095-C and 1094-C)
The purpose of C reporting is to provide information about employees and details of their health coverage with the employer, to show that the requirements of the Employer Shared Responsibility provision have been met. C reporting must be completed by all ALEs, whether or not coverage was offered or whether or not employees enrolled in the coverage.
Form 1095-C must be filed with the IRS for each full-time employee, and a copy must be provided to the employee. Employees can use this information to determine if they qualify for a premium tax credit. Form 1094-C is an accompanying transmittal form that is sent to the IRS.
C reporting requires extensive information, including:
- Who is a full-time employee for each month
- Information about the health coverage offered
- Months each employee was enrolled in the health coverage offered
- The employee’s share of the monthly premium for lowest-cost self-only minimum essential coverage
- Months the employer met an affordability safe harbor in regards to an employee and whether other relief applies
B Reporting (Forms 1095-B and 1094-B)
The main purpose of B reporting is to show that an individual had minimum essential coverage and so is not liable for the Individual Shared Responsibility penalty. Whoever provides that coverage, whether an insurance carrier or self-insured employer*, must issue Form 1095-B to both the individual and the IRS. Form 1094-B is the accompanying transmittal form that is sent to the IRS.
Form 1095-B provides details about the coverage, including the months of coverage and who in the individual’s household was covered.
*In the case of self-insured employers who are also ALEs, the law allows the employer to combine the information onto a single 1095-C form rather than filing both B and C.
2017 ACA Reporting Deadlines (for the 2016 Tax Year)
Note: Filing deadlines are approximately three months earlier than in 2016.
Due Date Requirement
January 31, 2017: Forms 1095-B and 1095-C due to employees
February 28, 2017: Forms 1094-B, 1095-B, 1094-C and 1095-C due to IRS, if filing on paper*
March 31, 2017: Forms 1094-B, 1095-B, 1094-C and 1095-C due to IRS, if filing electronically*
*Any employer filing more than 250 information returns in a calendar year must file electronically. If under 250, paper or e-file may be used.
Managing the ACA Reporting Process
Capturing all of the data required for ACA reporting involves coordination between HR, payroll, benefits and time-tracking systems. It requires proactive monitoring and recordkeeping throughout the year—not just near tax time—in order to avoid penalties for non-compliance, incomplete reporting, or late filing. Resources must be dedicated in order for employers to keep educated about and on track with ever-shifting compliance guidelines and regulations.
Further upping the stakes, this year employers were not penalized for incorrect or missing data, provided they attempted in good faith to file correctly. This “good faith effort” grace period has not been extended for 2017, meaning that mistakes could lead to significant penalties.
For these reasons, many employers choose to invest in ACA compliance management software, or relieve the burden entirely by outsourcing the ACA reporting process.