Since March 2010 when the Affordable Care Act was passed, there have been many Affordable Care Act legislative amendments and the IRS has provided exhaustive guidance on the implementation of the ACA. Most notably, Vol 79 No. 29 of the Federal Register is an authoritative reference on the shared responsibility requirements for employers. This, in context with the Section 6055/6056 of the Internal Revenue Code and the instructions for Forms 1094-C and 1095-C, provide the basis for ACA employer compliance.
The complexities of the law and its political ramifications have led to multiple delays in the implementation of the ACA. A lack of understanding of what has been delayed has provided an atmosphere of uncertainty for employers. The repeal efforts under newly elected President Trump, have further convoluted this understanding. Additionally, on January 20th President Trump signed an executive order to “minimize the burden” of the ACA that many employers mistakenly interpreted as their justification for noncompliance. Unfortunately, this executive order notably omitted any references to “employers” and “businesses,” and the Internal Revenue Service (IRS) has not changed any regulations related to employer compliance as a result.
The introduction of the American Healthcare Act (AHCA) shed light on the challenges of finding consensus in a repeal and replace bill. While this bill may yet repeal the penalties for not offering coverage to employees should it pass in the Senate in its current form, it does not remove the need to report to the IRS any coverage actually offered to employees. Any changes that do come are likely to include an employer IRS reporting element.
Knowing that the ACA is still the law of the land, it’s important for employers with 50 or more full-time employees (or equivalents) to have a strategy for penalty mitigation, including a plan for compliance with the employer mandate to offer affordable coverage to employees who work 30 hours/week or more. While this seems simple on the surface, the method by which employers determine eligibility can be very complex, requiring them to consider unpaid leave, breaks in service and other factors. For employers with more than 250 eligible employees, this must also include the ability to file electronically.
We have found that many employers are challenged with determining:
- Whether they are subject to the ACA
- Which employees are eligible for coverage
- Whether coverage is affordable to their employees
- What their potential exposure is for penalties
In addition, employers struggle to complete the necessary electronic filing of ACA forms with the IRS and accessing the expertise needed to ensure their compliance strategy is manageable and comprehensive.
The IRS is cross-referencing employers with at least 50 W-2’s, which did not file 1095-C’s, and is sending letters to ascertain the reason for non-filing. While the IRS scrapped their previous system for evaluating ACA filings due to system and budget issues, the new system, called the ACA Compliance Verification system, is set to come online this month. This new system will open the door for the shared responsibility payment (a/k/a penalty) notifications.
When researching systems for ACA compliance, the following are key factors for employers:
- Integration into payroll systems
- Automated ACA form generation
- Easy implementation and upgrades
- No long-term contract commitment
- Ability to easily e-file ACA forms without obtaining a TCC ID and performing the IRS testing
- Access to health insurance reform expertise
Even if coverage was not offered, employers should be actively engaged in ensuring their organization is complying with the ACA, filing the required forms at a minimum. Otherwise, they should be prepared for a shared responsibility payment letter from the IRS in the coming days.
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Article courtesy of Tom Franz, CPP, CHRS with Integrity Data.
Image courtesy of Areeya at FreeDigitalPhotos.net