Last year, we sent out information regarding the employer health insurance reporting requirements that came about as a part of the Affordable Care Act (ACA). Because the effective date is quickly approaching for some employers, we are revisiting these requirements. We recommend that employers familiarize themselves with the requirements based on their size classification so that those required to file for 2015 can make sure they have collected the necessary data for year-end reporting.
Under the ACA, employers are divided into two groups: small employers and large employers. Small employers are those who employ less than 50 full-time or full-time equivalent (FTE) employees (either individually or collectively if part of a controlled or affiliated service group). Large employers are those who employ 50 or more full-time or FTE employees. An employee is considered full-time if they work 30 or more hours per week on average. For the purpose of this provision, employers must aggregate the average hours of employees who do not meet the full-time criteria in order to calculate FTE employees. For example, if an employer has two employees who each work 15 hours per week on average, then those two employees are counted as one FTE employee. This is because between both employees, 30 hours of work per week is being performed.
Under the ACA, there is an "employer mandate," which requires employers to offer health insurance to their full-time employees that meet certain requirements, or face penalties. If you are classified as a small employer, this requirement does not currently apply to you. For large employers with 50 to 99 full-time or FTE employees, these requirements begin in 2016. For large employers with 100 or greater full-time employees or FTE employees, these requirements began in 2015.
In order for health insurance offered to comply with the requirements of the ACA, it must have several features. For 50 to 99 FTE employees, the plan must be offered to 95% of full-time employees and their dependents up to age 26 beginning in 2016 (70% of full-time employees for large employers who must offer coverage in 2015, increasing to 95% in 2016). The plan must provide "minimum value," which is designated as paying at least 60% of the cost covered services, for which the IRS is offering a "minimum value" calculator on their website. Finally, the coverage provided must be affordable. Affordable is defined as not exceeding 9.5% of an employee's household income. Because an employer may not know an employee's household income, there are three safe harbor methods with can be used to compute affordability. These safe harbors are: 9.5% or less of an employee's W-2 wages, 9.5% or less of an employee's monthly wages, or 9.5% or less of the federal poverty level for a single individual.
In addition to requiring many employers to offer health insurance, the ACA contains several new health insurance reporting requirements. Similar to W-2 reporting, certain employers offering health insurance will be required to file individual information returns (either 1095-B or 1095-C) that must be distributed to their employees by January 31st of each year following the year in which the employer offered health insurance. These forms are also required to be filed with the IRS by February 28th if filing by paper, or March 31st if filing electronically. When being filed with the IRS, the forms must be accompanied by a single transmittal form (either 1094-B or 1094-C).
Small employers who either do not offer health insurance or who offer health insurance through an insurance company will not have any reporting requirements. For small employers that offer health insurance through an insurance company, the insurance company will prepare forms 1095-B and 1094-B, send employee copies directly to your employees, and file with the IRS. If a small employer is self-insured (i.e. provides health insurance themselves), the employer will be responsible for preparing and filing forms 1095-C and 1094-C if no insurance is offered, if insurance is offered through an insurance company, or if the employer is self-insured.
Large employers are responsible for preparing the filing forms 1095-C and 1094-C whether they offer no insurance, offer insurance through an insurance company, or are self-insured.
Compliance with the ACA is a very complex issue. To help avoid penalties, feel free to call or e-mail your ECS contact to discuss these topics in greater detail and determine how they affect you and your business.
2015 Tax Due Dates:
4th estimated tax payment for 2015 due for Corporations.
Monthly Illinois wage report for November due (employers with 25 or more employees).
About The Author - Greg Nicoll joined ECS Financial Services in 2011 after receiving his Bachelor of Science in Accountancy in 2009 and his Master of Accounting Science degree in 2010 from the University of Illinois at Urbana Champaign. He was promoted to Senior Accountant in March 2015 and passed the CPA exam in May 2015. Mr. Nicoll's areas of expertise include audit, review, and compilation engagements, and related financing statement preparation, as well as multi-state sales tax compliance services. He also offers experience in business and personal income tax preparation.