“You may delay, but time will not,” Ben Franklin once said. For some employers who have procrastinated, ignored, or somehow believed the Affordable Care Act (ACA) shared responsibility and reporting provisions don’t apply to them, time is up. I would like to say this is a final wake-up call but, unfortunately, the snooze button has been disabled. For some companies, a rude awakening is merely two months away.
I feel confident the “I wasn’t aware” or “the dog ate my homework” excuses aren’t going to fly next year when the IRS finds out you 1) are a large employer subject to “pay or play,” 2) haven’t been classifying full-time employees using one of the approved measurement methods or 3) haven’t been, or are unable to complete the required IRS reporting. You might try the “insanity” defense as this law has arguably driven a number of internal accounting and HR professionals crazy.
If you think you might fall in the category described above, here are a few things to consider:
First and foremost, what is your Applicable Large Employer (ALE) status? Knowing how many full-time employees and equivalents you have is the most important part of the equation. Fifty is the magic number. Getting to that number is more complicated than it seems, and this is where many companies will stumble. As an example, you may believe your company is exempt from “pay or play” because you estimated in 2014 that you had 48 full-time employees. But do you have part-time employees, and have you included those equivalents into your full-time numbers? A miscalculation here can be very expensive and will cause tremendous heartache for many businesses next year.
If you have a benefits advisor, you’ve hopefully had a conversation with them by now about your status. You’ll also want to charge your accountant with running these calculations to ensure everyone is on the same page. It could make a significant difference in your obligations under “pay or play” and ACA reporting.
Most companies with 100 or more employees know where they stand and have taken the appropriate steps to count employee hours and manage IRS reporting requirements. While businesses with 50-99 employees were given a one-year reprieve from penalties associated with shared responsibility, the reporting requirements are still in play. So let’s say you find out that you are, in fact, one of these border groups and have, indeed, averaged 50 or more employees using approved math. What now?
You’ll first want to take a look at the 1094-C and 1095-C forms and understand the information that is required. This may seem a little simplistic, but you would be surprised how many people haven’t taken the time to review the forms or read the instructions. You’ll be able to quickly ascertain the steps that need to be taken to comply with the reporting requirements.
Next, you’ll need to confirm which employees were full-time during 2015 based on the ACA’s definition. If you have not been calculating employee hours since the first of the year, the only option you have now is to go back month by month and do so.
Then, assuming you are offering group health coverage to your full-time employees, you’ll need to know whether the coverage you’re offering is considered affordable according to the ACA. While coverage is considered affordable and will not result in a penalty under the ACA if the employee’s contribution for single coverage doesn’t exceed 9.56 percent of employee’s household income, the IRS will want to know whether you used one of the three safe harbors — federal poverty level, rate of pay or W-2 — for any employees who declined your coverage.
Finally, you’ll need to prepare, distribute and file your ACA reports. Individual statements are due on or before Jan. 31 of next year. IRS returns are due on or before Feb. 29 (March 31 if filed electronically).
Compliance starts with counting employees — correctly. For those who have delayed, little time remains to do the math.
Tom Hayes is the national practice leader for employee benefits at Regions Insurance, a top-30 national insurance brokerage with 23 offices in eight states in the Southeast and Indiana. He can be reached at [email protected]