There has been no shortage of chatter in the benefits world regarding the latest requirement known as Information Reporting in the never ending saga of the Affordable Care Act. You’ve probably been mind-boggled with the less-than-intuitive descriptions of Information Reporting requirements, including terms like 1094-C, 1095-C, 6056, 6055, ALE and the like. To further muddy the waters, a group of very different entities, including benefits consulting firms, insurance brokers, insurance carriers, benefits technology firms and payroll vendors are offering employers different reporting solutions.
Let’s take a step back and define Information Reporting with the goal of asking the right questions of your vendors now to make sure that January 2016 doesn’t turn into a data-gathering nightmare in order to meet the initial filing deadline.
- What is Information Reporting?
Information Reporting is a requirement under the ACA that obligates employers to provide employee-specific information to the IRS about the health coverage that is offered to plan participants.
- Why should I care about Information Reporting?
There are penalties for late, incomplete, or incorrect filing of the informational returns. That penalty of $100 for each return with respect to which such a failure occurs can reach a cap of $1,500,000.
- What is the purpose?
It’s essentially the government’s method of policing the requirements associated with the ACA’s Employer Mandate and Individual Mandate. Without information reporting, the IRS would have no efficient way of understanding which employers and employees are playing by the rules.
- Who needs to comply?
Businesses that employed, on average, 50 or more full-time and full-time equivalent employees in the preceding calendar year (i.e., 2014). Applicable Large Employers, also known as ALE’s, are required to complete information reports beginning in 2016 for the 2015 calendar year. This includes employer sponsors of both self-insured and fully-insured health plans.
- When do employers need to comply?
Under the requirements of Code § 6056, an ALE must provide Form 1095-C to each full-time employee on or before January 31, 2016. Under Code § 6055, self-insured employers must report on behalf of all employees enrolled in coverage. An ALE must file Form 1094-C, referred to as the transmittal form, and Forms 1095-C, which are submitted on behalf of each employee. These forms must be filed with the IRS on or before February 28 (March 31 if filed electronically) of the year following the calendar year for which reporting is required. For 2015, the filing deadline is February 29, 2016. (Editor’s Note: On December 28, 2015, the IRS delayed filing deadlines by two months. The deadline for furnishing Forms 1095-C and 1095-B to employees and participants has been extended from February 1, 2016, to March 31, 2016. The deadline for filing all forms with the IRS (i.e., 1094-C, 1095-C, 1094-B and 1095-B) has been extended from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016, if filing electronically.)
Thus, for the 2015 calendar year, the filing deadline is approaching quickly. We released this eAlert about the forms to our clients here.
The regulations require electronic filing except for an ALE who files fewer than 250 Form 1095-Cs during the calendar year.
- What general information is being required?
- Total employee headcount per month
- Certification of Minimum Essential Coverage
- Other employers within the ALE’s control group
- An indication of coverage for all full-time employees
- Employees/dependent indicative data (name, SSN, DOB, address)
- Employees share of the lowest monthly premium by month
- Covered dependents
- Affordability (§ 4980H) Safe Harbor indication by employee
- What should I be asking my payroll vendor?
Most payroll vendors house the indicative data (date of birth, gender, address, etc.) and deduction data for all employees. The disconnect for some payroll vendors comes into play when they are asked to provide the coverage and premium data required to populate the Forms 1094-C and 1095-C. It’s important to ask your payroll vendor how they anticipate marrying employee data with benefits data. And ask the question now as opposed to later.
- What should I be asking my benefits technology provider?
Benefits administration technology platforms should house most of the data required for the IRS forms. Having said that, not all benefits technology platforms house the indicative data and covered dependent data required on the forms. It’s important to also ensure the data can be extracted on a month-by-month basis. Reporting capability may also be a constraint depending on your technology solution. Keep in mind you’re going to need to populate forms for all of your employees, so it’s important to verify that your platform’s reporting capabilities will support extracting the data that can easily be transferred onto the required Form 1094-C and 1095-C formats.
- What should I expect from my insurance carrier?
Insurance carriers house coverage data for members and dependents, but most are not prepared to support reporting in the format that complies with employer reporting requirements. For example, insurance carriers do not house employee contribution data to determine affordability compliance required on the employer forms.
- Where does this leave HR Departments?
Between a rock and a hard place, to coin a cliché. HR could be stuck in the middle of an arduous game of finger pointing between payroll, the carrier and benefits technology providers. It’s important that HR ask the right questions now to make sure the data is being tracked in 2015, and will be easily reproduced in an aggregated report to populate the forms in January 2016. Retroactive data collection will be a challenging task in and of itself, but it’s also important for employers to track benefits eligibility for full-time employees in the 2015 plan year.
- What should I be doing now?
Thoroughly review the IRS forms and consider how you are housing and/or tracking that data today. We are aware that some HR staffs are handling hours tracking manually. Your broker or employee benefits consultant should help quarterback data collection between all of the various data inputs to ensure your output will be gathered and transferred to the forms. If you wait until January to figure this out, you’re guaranteed a series of sleepless nights preparing your forms for submission.
©2015 Corporate Synergies Group, LLC. No part of this material may be republished or distributed without prior written consent.