Affordable Care Act: Overview of New Requirements for 2015

Affordable Care ActOverview of New Requirements

2015

Employers need to take action now

to prepare

TABLE OF CONTENTS

Overview of ACA ....................................................................................................................... 3

Who needs to comply? ............................................................................................................. 4

What Forms must be filed? .................................................................................................... 5

What information is required on the Forms? ..................................................................... 5

When do Forms need to be filed? ....................................................................................... 6

What are potential penalties? .............................................................................................. 6

What should employers be doing in 2015? ...................................................................... 7

How can Sikich assist? ........................................................................................................... 8

This content was updated through April 2015. The IRS continues to issue additional guidance on these rules which may be in contrast to those in effect when this publication was prepared. You should work with your Sikich tax consultant to ensure you are complying with the most recent guidance.

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OVERVIEW of New Requirements for 2015

� 2015 is the first year the employer mandate penalty will become effective for some employers. Failure to comply with the reporting requirements could result in significant penalties.

� The employer mandate will help the IRS determine if all individuals received health coverage as required, as well as if the employer provided sufficient health coverage or if penalties will be assessed.

� 2015 is the first year for employer reporting under the ACA. Forms1094/1095 may need to be filed in early 2016. These forms require significant amounts of data summarized by month for 2015.

� It is also time to review payment practices and overall compliance with welfare plan reporting requirements. Both the Internal Revenue Service and the Department of Labor have hired more agents and are increasing audits on welfare plans.

� The following pages provide a brief summary of very complex regulations. You should discuss your specific situation with your Sikich tax consultant.

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WHO needs to comply?

� The IRS uses the term “Applicable Large Employer” (ALE) to define those subject to the employer mandate and filing requirements:

• An ALE is an organization (including related entities) that employed an average of at least 50 FTEs.

• A special rule applies for 2015 for this determination. You may use any consecutive six-month period during 2014, rather than being required to use all 12 months of 2014.

- ALE determination:

1 Calculate the number of FTEs per month as follows: Total number of full-time employees (30+ hours/week) + Total hours of service by all part time employees / 120

= Number of FTEs for Month

2 Average monthly FTEs for 12 months of prior calendar year

3 Employers with an average of 50 or more FTEs per month during 2014 must file.

- A calculator is available to assist with this determination on this website: https://www.healthcare.gov/shop-calculators-fte

- Your Sikich tax consultant can also assist you with this determination

upon request.

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WHAT INFORMATION is Required in the Forms?

� Form 1094-C

Employer information, including identification of members of the aggregated group for the following per 2015 calendar month:

• Full-time employees• Total headcount• Whether Minimum Essential Coverage

was offered

• Whether an applicable 4980H “Safe Harbor” was used

• Number of Form 1095-C forms filed

� Form 1095-C

Employee statement that accounts for the following per 2015 calendar month:

• Employer’s name, address and contact information

• Employee information• Proof of offer of coverage

(with applicable code) • Employee’s share of lowest-cost

monthly premium

• Whether an applicable 4980H “Safe Harbor” was used

• For self-insured coverage, you’ll need to provide the name of each individual covered (including spouse and dependents), SSN and coverage by month.

WHAT FORMS must be filed?

If you have more than 50 FTE in 2014 you have a filing requirement for 2015 as summarized below:

Employer Size Insured Health Plan Self-Insured Health Plan

Small employer(Fewer than 50 full-time equivalent employees [FTEs])

Small employer does not file. Insurer files Form 1095-B.

File Form 1095-B.

Large employer(50 to 99 FTEs)

ALE control group member files Form 1095-C Parts I and II (not Part III), even though may not be subject to employer mandate in 2015. Insurer files Form 1095-B.

File Form 1095-C Parts I, II and III, even though may not be subject to employer mandate in 2015.

Large employer(100 or more FTEs)

ALE control member files Form 1095-C Parts I and II (not part III). Insurer files Form 1095-B.

ALE member files Form 1095-C Parts I, II and III.

WHEN Do Forms Need to Be Filed?

� Same timing as W-2 reporting for 2015:

- Employer reporting • Must be filed no later than February 29, 2016 (or March 1, 2016 because

the 29th falls on Sunday) • No later than March 31, 2016 if filing electronically• Electronic filing is required for all large employers filing at least 250 returns

(each employee is a separate return)• All are encouraged to file electronically (those filing fewer than 250 returns

may elect to file in paper form)

- Employee reporting

• Due by January 31, 2016 (or February 1, 2016 because the 31st falls on a Sunday)

WHAT are Potential Penalties?

1 Employer Mandate Penalties:

- For 2015, if an employer has 100 or more FTEs then penalties may exist if the following conditions are not met:

1 Must offer minimum essential coverage insurance to at least 70% of full time employees (95% in 2016)AND

2 Insurance must be considered affordable AND meet the minimum coverage requirements. Different excise taxes exist if both parts are not satisfied as described below:

- Employer Mandate Penalty #1: • If employer fails to offer minimum essential coverage to 70% of full time employees

(95% for 2016) AND • One employee receives a subsidy (either a tax credit or cost-sharing reduction through

an exchange) THEN • The employer may be liable for penalty of $2,000 per year for the number of full-time

employees (less the first 80 for 2015 and 30 for 2016)

- Employer Mandate Penalty #2: • If employer fails to offer affordable minimum value health coverage to at least 70% (95%

after 2015) of its full-time employees

THEN

• The employer will be liable for a penalty of $3,000 per year for each full-time employee who obtained insurance through an exchange AND received a subsidy

NOTE: The employer is only liable for the greater of the Penalty #1 or #2 discussed above imposed on a monthly basis.

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WHAT are Potential Penalties? continued

2 Reporting Failures:

• Failure to file 1094-C and 1095-C: $100 for each delinquent or incorrect return

• Failure to provide informational statement to employee: $100 for each missing statement

• Maximum penalty is $1,500,000 for each of the above failures per year

3 Other:

Providing health coverage through an arrangement that does not meet the definition of a group health plan including reimbursements for individual policies and other reimbursements arrangements outside a group health plan:

• Excise tax penalty of $100/day per affected individual until corrected. Even if payments are included in taxable income the penalty may be assessed.

• Notice 2015-17 provides transition relief for some employers through June 30, 2015.

WHAT SHOULD EMPLOYERS BE DOING in 2015?

� Prepare for 2015 reporting:• Determine who will be handling the 1094/5 filings.

• Determine which forms must be filed for 2015 (based on average number of employees in 2014)

• If more than 50 FTEs are employed per month, gather data to prepare the filings:

- Inquire of each vendor what data will be provided

- Evaluate options to aggregate data

- Secure software filing solution to submit forms to IRS and employees

• Review employer mandate rules to determine if subject to any penalties

• Retain documentation for all aspects of compliance with ACA. IRS will assess penalties and employers only have a brief time frame to respond.

• Review payment practice for any types of health payments to ensure none are paid outside of a qualifying plan to avoid penalties

� Review welfare plan compliance:• Ensure 5500 filed if there are more than 100 participants.

• Ensure 5500 filing includes appropriate policies. Plan document specifies what is covered in each Form 5500.

• Ensure plan document in place. Plan document is first request during DOL audits which are increasing in frequency.

• DOL assesses penalties for failure to have proper plan document and Summary Plan Descriptions. Insurance policy documents are often not sufficient.

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WHAT SHOULD EMPLOYERS BE DOING in 2015? continued

� Plan for 2016 issues prior to open enrollment:• Manage workforce size eligible for coverage.

• Expand utilization of employees working fewer than 30 hours.

• Utilize contractors.

• Hire more seasonal employees.

• Evaluate coverage options.

• Utilize exchanges versus providing own policy.

• Review the ‘pay or play’ decision-compare the cost of making coverage affordable and providing minimum value to the risk of paying excise tax.

How can SIKICH ASSIST?

� Determination of filing requirement for 2015

� Determination of potential penalties

� Design and testing of internal systems to collect and monitor payroll data that will

be needed for IRS compliance, including working with payroll vendors

� Assistance with building compliance file to respond to IRS notices and audits

� Preparation of IRS filings and employee notices

� Responses to IRS excise tax assessments

� Planning for 2016 to evaluate most advantageous method of providing health

coverage (e.g. exchanges versus continued sponsorship of employer sponsored coverage)

The monthly reporting requirements begin with January 2015. Employers should not

postpone addressing these new requirements.

For additional assistance contact your Sikich tax

consultant or Karen S. Sanchez, CPA, QPA at

[email protected] or 630-566-8519.

This document is not written tax advice directed at the particular facts and circumstances of any person. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein. To the extent this document may be considered to contain written tax advice, any written advice contained in, forwarded with, or attached to this document is not intended to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

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