ACA Employer Reporting Compliance — Part 2
Tuesday August 18th, 2015
The Affordable Care Act (ACA) requires employers to report information about the offer of health insurance coverage to their employees. Some Applicable Large Employers (ALEs) — defined as those with more than 50 full-time equivalent employees — may opt to self-insure instead of offering coverage through a health insurance company. These self-insuring employers must comply with the reporting requirements applicable to both employers and insurers contained in Internal Revenue Code (IRC) sections 6055 and 6056, respectively. Sections 6055 and 6056 require detailed information and have specific rules regarding how the information must be transmitted to the IRS and to individual employees.
How employers report
The IRS has provided regulations governing methods for reporting information required by Sections 6055 and 6056. Form 1095–C contains multiple sections: one for the information required for Section 6055 reporting and the others for information required for Section 6056 reporting. Employers with self-funded health plans will complete all sections of the form, while employers with fully insured plans through third-party providers will only complete the 6056 section. The insurance carrier will use a separate form (1095-B) to provide the Section 6055 information.
The size of the employer has a lot to do with what must be reported and how.
- An employer with fewer than 50 full-time equivalent employees who sponsors a fully insured group health plan will not be required to do any reporting. The insurer will provide the necessary reports to show who is covered.
- Non-ALEs who self-insure will complete the Section 6055 portion, which utilizes Forms 1094-B and 1095-B.
- ALEs that self-insure will complete Forms 1094-C and 1095-C, associated with Section 6056. These employers will also have to include who’s covered, including employee, spouse and any dependents.
- ALEs who are fully insured will complete Forms 1094-C and 1095-C and will not have to complete the Section III, the portion about who is covered.
The reporting to the individual employee in Form 1095-C coincides with W-2 reporting. This form is due to employees no later than January 31 following the calendar year that is being reported, and to the IRS no later than February 28 (or March 31, if filed electronically). Part 1 noted that since January 31 falls on Sunday in 2016, the deadline will actually be February 1 and that the February 28 deadline will be extended in 2016 to February 29 due to leap year. Employers issuing 250 or more 1095 forms must file electronically.
Those who choose to file electronically or who must do so due to their size can find the applicable forms online. Smaller self-insured companies must file Forms 1094-B and 1095-B. Applicable Large Employers (ALEs) must file Forms 1094-C and 1095-C.
To facilitate submission of these documents, the IRS has developed the AIR (ACA Information Reporting) system to process employer submissions and provide status updates and acknowledgments of filing. Since the system limits the file size for a single transmittal, the transmitter or issuer may need to submit multiple transmittals. Only one of the transmittals will be permitted to have an authoritative Form 1094-B or 1094-C. The system does not provide mail merge capabilities, so employee forms will have to be prepared separately.
At its inception, the AIR system will only accept returns prepared in XML (spreadsheet) format. However, the IRS has indicated that it does not intend to develop its own spreadsheet software or offer it on its websites, so employers will be responsible for creating or purchasing their own software or working with a third party such as a payroll or benefits administration vendor.
For employers already accustomed to filing electronically, it is important to note that the IRS Filing Information Returns Electronically (FIRE) system does not support the filing of ACA Information Returns. As a result, employers will be required to apply for new credentials specific to the AIR system, even if required to make electronic filings.
Apply for access as early as possible
Because this system is so new, experts suggest those who wish to or must use it apply for credentials as early as possible. Significant delays are expected close to filing deadlines early next year. The application process requires an authorized user to provide personal contact information and fill out a company application to use the system. Upon approval, the IRS will issue login credentials that will allow the user to file electronically.
For customers using iSolved Human Capital Management, Infinisource offers two levels of ACA reporting services. iSolved ACA Reporting provides a print and file solution where Infinisource produces and files forms on the customer’s behalf, requiring some data entry by the customer. iSolved ACA Pro provides a print and file solution with additional management that will automatically and fully populate the required forms.