Whatever your thoughts are about the Affordable Care Act, you can’t deny its tremendous impact on the health care industry and Americans in general. Since its implementation in 2010, 16.9 million people have gained coverage. Despite the 191 amendments presented this year to change the law, the employer mandate is still in place, and it’s important to ensure that HR teams are prepared for the 2017 tax year filing.
5 ACA Compliance Issues to Watch Out For
1. Meet the Deadline
Be ready to meet the January 31, 2018 deadline. For the 2016 tax forms due in early 2017, employers received an extra two months to distribute necessary forms to employees and three months to file with the IRS, but 2018 will not have the same extensions. Forms need to be postmarked to employees by January 31, 2018 and transmitted to the IRS no later than April 2, 2018.
2. Measure Constantly
Perform measurement consistently throughout the year to avoid penalties and save money. Keeping track of full-time and part-time status is key to making accurate offers of coverage. Failing to offer coverage on time to a full-time employee can put an employer in a penalty situation. In addition, coverage may not be terminated on time, costing the employer thousands in premium payments. Know exactly who you have working for you by reviewing employment classification and eligibility policies, and ensuring hiring managers understand these policies when classifying new hires. It’s important to be able to clearly identify who is part time and full time based on their expected hours and other factors related to the position.
3. Don’t Overlook “Affordability” Change
There’s an annual inflation-adjusted shift in what constitutes “affordable” health care. Some employers may need to reduce their employee’s share of premium contributions to maintain affordable coverage.
- Employers with 50 or more employees must offer a plan that is affordable or they may have a tax penalty. This affordability is determined by the employee’s share of the medical plan offered being less than 9.69% of their household income for the 2017 plan year. There are 3 different safe harbors an employer can apply to an employee to determine if the plan they offered was affordable, which can be used in lieu of household income:
- The employee’s W-2 wages
- The employee’s rate of pay – hourly wage rate x 130 hours as of the first day of the plan year
- The individual Federal Poverty Level – since the FPL isn’t officially published until January, employers can use the FPL in effect six months prior to the beginning of the plan year.
- Once the safe harbor is selected for the year it should not be changed, therefore it is critical to carefully consider your demographic and make sure you have done your due diligence to ensure the option being used doesn’t create a penalty situation for a large number of employees.
- You can use the same safe harbor for all employees or you can use multiple safe harbor methods, as long as the same method is applied consistently across all employees in a reasonable category.
4. Commons Pitfalls on 1095 – C Forms
- Forms should only have the “Corrected” box checked if they have been transmitted to the IRS prior to the correction. If the correction is made to the form prior to transmission to the IRS a watermark should be used to indicate the form is corrected when providing the form to an employee.
- Only self-insured groups need to create forms for part-time employees who are enrolled in the plan. The carrier is responsible for providing a 1095-B form to all individuals covered under a fully-insured plan, leaving the employer with no obligation to provide a 1095-C form to a part time employee covered under the fully insured plan.
- Code 1G can only be used if it applies for all 12 months of the reporting tax year.
- Line 15 is only required if code 1B, 1C, 1D, 1E, 1J or 1K is in Line 14.
- Line 15 is the amount the employee is responsible for paying for the lowest cost employee-only plan – not the amount the employee is actually responsible for if they were to elect coverage for themselves and their spouse and dependents, for example.
- If no cost is required for the lowest cost employee-only plan offered then Line 15 should be 0.00, not blank, for any month Line 15 is required.
- See more information about 1095-C forms here.
5. What “Repeal” Means
Even if the law of ACA is changed, there will likely still be a need for reporting. Government agencies are still interested in receiving coverage and offer of coverage data to manage and monitor going forward, so stay alert if there is a repeal to changes and new reporting requirements for employers.
The Affordable Care Act is still vulnerable to change, with a strong possibility of being dismantled in pieces. Even if a change is made, the need to track this data and stay compliant will exist for at least another two years. We will continue to monitor changes and update the information that we have available.