After a year delay, the Affordable Care Act’s employer shared responsibility provisions, commonly referred to as the employer mandate, went into effect on Jan. 1 for all employers with 100 or more full-time and full-time equivalent employees.
Any large employer that has not offered qualifying health insurance to at least 70 percent of its full-time employees and their dependents during each month of 2015 may already be subject to substantial penalties. For example, an employer with 200 full-time employees that failed to offer coverage to at least 70 percent of those full-time employees and their dependents during each month of 2015 would be subject to a penalty of $240,000. Employers may also be subject to penalties if the coverage offered does not meet the ACA’s affordability standards.
Avoiding penalties under the ACA will become even more difficult for employers in 2016, when any employer with 50 or more full-time/full-time equivalent employees will be exposed to potential employer mandate penalties for failing to offer qualifying health insurance to at least 95 percent of its full-time employees and their dependents. In addition to the higher standard, the penalty amount itself will increase—an employer with 200 full-time employees that failed to offer coverage to at least 95 percent of those full-time employees and their dependents during each month of 2016 would be subject to a total annual penalty of $340,000.
As we move toward 2016, all “large employers”—those with 50 or more full-time/full-time equivalent employees—must also be prepared to comply with the ACA’s reporting requirements. Specifically, the ACA requires all large employers to prepare annual reports regarding the health insurance coverage offered to each of their full-time employees during the 2015 calendar year. Employers must accomplish this required reporting by using Form 1094-C and Form 1095-C. Form 1094-C is a transmittal form employers must submit to the IRS, together with copies of all Form 1095-Cs, which contains:
- basic identifying information regarding the employer;
- the total number of Form 1095-Cs being submitted by the employer;
- certification of eligibility for any transition relief or simplified reporting method; and
- general information about the employer’s demographics.
Form 1095-C requires detailed information concerning the health insurance that an employer offered to its full-time employees. Parts I and II of Form 1095-C must be completed for each employee who was ACA full-time for at least one month of the 2015 calendar year. Accordingly, an employer that had 200 full-time employees would be required to complete one Form 1094-C and 200 Form 1095-Cs. Employers with self-insured plans will have additional obligations under the ACA’s information reporting requirements.
Employers must file all required forms for the 2015 calendar year with the IRS by Feb. 28, 2016 (or March 31, if filing electronically). Additionally, employers must provide all of their full-time employees with a copy of their particular Form 1095-C by Jan. 31. Employers that fail to file correct forms with the IRS or furnish them to full-time employees will be subject to a basic penalty of $250 per failure, meaning an employer with 200 full-time employees would be subject to a penalty of up to $50,000.
Finally, large employers that file 250 or more information returns during the calendar year must file the returns with the IRS electronically. In order to file electronically, employers must follow the IRS’s Affordable Care Act Information Returns procedures and transmission formats, which include an onerous registration and testing process that must be completed prior to filing.
Karlee S. Bolaños is a lead consultant with HB Solutions LLC, Affordable Care Act Consulting Team.
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