Under the Affordable Care Act (ACA), people who can afford health insurance but choose not to enroll in coverage may be required to pay a fee (penalty) when filing on their 2015 Federal Tax Return. The fine is set to jump in 2016 to $695/adult, $347.50/child or 2.5% of adjusted gross family income (whichever is greater).
The Federal Government has announced there will be no “Special Enrollment Period” (SEP) after the 1-13-16 enrollment period has expired.
Applicable Large Employers (ALEs) in 2016 must ensure that Minimum Essential Coverage (MEC) is offered to at least 95% of ACA full-time employees for each month during 2016. The potential “A” penalty for being under the 95th percentile is projected to be $2,160/year per ACA FTE, less the first 30 employees in 2016.
All ALEs must distribute completed 1095 C Forms to applicable employees by Monday 2-1-16 for every employee they have employed for at least one month in 2015. Employers must also disclose whether each full-time employee and his or her spouse and/or dependents were “offered” health coverage for each calendar month in 2015, also providing social security numbers on all covered employees and dependents.
What It Means
If you are a self-funded employer (offering TRS ActiveCare 1-HD, 2, and Select) you will be required to identify each employee and/or spouse or dependent that was covered during each month of 2015, regardless of whether the employer is considered an ALE.
Employers filing 250 or more ACA forms will be required to do so electronically, using the new ACA Information Return (AIR) system. Before an employer can use the AIR System to electronically file their ACA 1095 C Form, they must first register under the IRS’s registration services. This process will take place in two stages: Test Filing and Actual Filing. Prior to each stage, one or more “responsible officials” and at least two “contacts” must be designated (who must then register for electronic services and apply for a “Transmitter Control Code” (TCC), which will serve as a unique identifier for the organization).
- Test Filing: Takes place through the ACA Assurance Testing System (AATS). Taxpayer data must be transmitted without error to the IRS. Detailed information about these testing procedures can be obtained in IRS publication 5164.
- Actual Filing: Takes place through the ACA Information Returns (AIR) program, using your TCC. The required data exchange between the IRS and the employer involves numerous technical protocols concerning: transmission methodology, composition, data structure, validation, correction and replacement processes. Detailed information can be obtained in IRS publication 5165.
Given the complexity of the registration and testing processes, employers that are required to file electronically (those over 250 FTEs) through the AIR system should begin this process as early as possible to gain approval of the IRS by the 3-31-16 filing deadline. Information found in the IRS publications will include: sample XML format, transmitting forms through AIR, and electronic composition of forms 94/95-B15 and forms 94/95-C15.
Remember that an employer still needs to report on employees who are offered and declined COBRA (Consolidated Omnibus Budget Reconciliation Act).
The recently passed Senate Reconciliation Package could signal potential action on the tax-extenders, thereby delaying the implementation of both the Cadillac Tax and Medical Device Tax (of 2.3%) for an addition two years (2020).
Employers need to complete and distribute Form W-2, ensuring it correctly reflects the appropriate cost of group health coverage for ACA purposes in Box 12 using Code DD. Also ensure the W-2 Form correctly reflects HSA contributions in Box 12 using Code W, if any.