New employer responsibilities under the Affordable Care Act in 2015
Posted On: 2-6-2015 | Posted By: Debra Mathes, CPA
One of the most complex, if not the most complex, provisions of the Patient Protection and Affordable Care Act (ACA) is the employer shared responsibility requirement, the so-called “employer mandate,” and the related reporting for health insurance coverage.
UPDATED: On February 9, 2015, the Internal Revenue Service released the final Forms 1094-C and 1095-C that are required to comply with the new reporting requirements under the Affordable Care Act (ACA). Employers will use the forms to report information about offers of health coverage and enrollment in health coverage for their employees. The IRS will use the form to determine whether the individual and employer mandates were met and enforce penalties accordingly.
Since the passage of the ACA in 2010, the employer mandate and its provisions have twice been delayed. However, 2015 is the year employers must begin complying with, or preparing for, several ACA requirements.
If you are an employer, the number of employees in your business will affect what you need to know about the Affordable Care Act. Your employee counts are determined each calendar year based on employment and hours of service data from the prior calendar year.
The ACA defines a full-time employee as anyone who works on average at least 30 hours per week. Since the law was passed, the Internal Revenue Service and other federal agencies have issued much guidance on how to calculate business’s full-time employee counts. The computation is far from simple and there are many exceptions but the IRS has basically designed two methods for determining full-time employee status: the monthly measurement method and the look-back measurement method. Special rules apply to seasonal workers, student employees, volunteers, individuals that work on-call, and many more.
Large employers, 100+
For large employers (100 or more full-time and full-time equivalent employees), the employer mandate is here. Large employers face penalties if they do not offer affordable health coverage that provides at least minimum value to their full-time employees and their dependents. This penalty would apply only if at least one of the full-time employees receives a premium tax credit through enrollment in a state-based Marketplace or a federally facilitated Marketplace.
For 2015, special ACA transition relief allows large employers to avoid one of the ACA penalties (one that could cost employers $2,000 per full-time employee, per year) as long as the employer offers coverage to at least 70 percent of its full-time employees. When the transition relief expires in 2016, this percentage will increase to 95 percent.
While large employers covering at least 70 percent of full-time employees in 2015 would not be subject to the penalty of $2,000 per year for every full-time employee, they could be subject to the $3,000 per year penalty for each full-time employee who was not offered affordable minimum value coverage and who received coverage on a state or public exchange, subsidized by a premium tax credit or cost-sharing reduction. The $3,000 is prorated by month, so if any employee receives subsidized coverage for only one month, the employer’s penalty would be $250 ($3,000/12 months).
Also, there are four new reporting requirements that have due dates in 2016 but require the collection of information in 2015. Draft forms have been released, and final forms and instructions are expected to be released by the government soon. The forms include:
- Form 1094-B Transmittal of Health Coverage Information Returns
- Form 1095-B Health Coverage 2015
- Form 1094-C Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Return
- Form 1095-C Employer Provided Health Insurance Offer and Coverage
Mid-size Employers, 50-99
Mid-size employers, those with 50 to 99 full-time employees that meet certain conditions regarding maintenance of workforce size and coverage, compliance with the employer mandate starts in 2016, except for the information reporting requirements. In other words, no employer shared responsibility payment will apply for any calendar month during 2015 (including, for an employer with a non-calendar year plan, the months in 2016 that are part of the 2015 plan year).
However, these mid-sized employers will be required to meet the information reporting requirements for 2015, reporting to the IRS information about the health care coverage, if any, they offered to their full-time employees for calendar year 2015, and furnish related statements regarding the coverage provided to their full-time employees by the applicable due dates in early 2016.
Employers with fewer than 50 full-time employees are exempt from the employer mandate and the new reporting requirements. The exception is employers that sponsor a self-insured health plan, which requires them to comply regardless of the number of employees they have.
We Can Help
With each new year, we will meet new ACA rules. Williams-Keepers LLC will be here to help you stay on top of the changing requirements each step of the way, so if you have any questions, please contact your WK advisor.