Articles

ACA Reporting – Heartache, Heart Attack or Smooth Sailing?

3/8/2016

By: Justin Bodien – Director of Sales

March 8, 2016

As we enter the final month of first quarter 2016, the extended Affordable Care Act (ACA) reporting deadlines loom. It’s hard to believe we have finally reached the initial deadlines for printed 1095 statements and will soon be transmitting 1094 and 1095 data to the IRS. Let’s take a look back at the progression of ACA reporting over the past couple years.

In March 2014, the IRS issued final regulations for information reporting related to the ACA under Sections 6055 and 6056 of the Internal Revenue Code. Effectively, Applicable Large Employers (ALE’s) and those providing Minimum Essential Coverage (MEC) were required to report to the IRS in one or both of 2 major capacities: Offers of Coverage (as an ALE), and Coverage Provided (as a provider of MEC).

The ultimate goal of the reporting was simple, or was it? The IRS was looking to ensure ALE’s were fulfilling their obligations under Section 4980H of the Internal Revenue Code to offer affordable insurance coverage to all its FTEs (6056 reporting).

Meanwhile, insurance providers were mandated to provide information on insurance coverage elections in order for the IRS to ensure individuals were upholding their obligations under the Affordable Care Act to obtain and maintain minimum essential coverage throughout the calendar year (6055 reporting).

Furthermore, in June 2014, new draft forms 1094 transmittals and 1095 employee statements were released, which would be the mechanism by which these new reporting obligations were to be fulfilled.

What did all this mean to us as employers and/or insurance providers? We had a brand new reporting obligation based on subsets of data that had never yet been required to be compiled!

Reporting on dependent information required us to ensure we had accurate dependent data, which was a first in the information reporting space. And further, the lines were far from clear-cut when it came to which employers fell into which categories.

Questions arose such as, “What is an ALE, and ALE member, an ALE group?” “How should we calculate FTEs to determine if we are even a large employer or fall into the 50-99 or 100+ employer space?” “Are we self-funded or fully insured?” “Do we have obligations to report on dependents?” “How do I determine my lookback period?”, and my personal favorite, “How on earth am I going to compile all this data?!”

Any of these questions sound familiar? If so, you’re definitely not alone! Thousands, if not hundreds of thousands of organizations were asking the same questions. General panic initially set in as to how these new requirements were to be met in early 2015.

Enter Notice 2013-45 - Transition Relief. Fortunately, back in July 2013, the IRS had released a Transition Relief notice, which stated that for the 2014 tax year, employers and insurance providers were not obligated to report under Sections 6055/6056 and employers would not be obligated to comply under the Employer Shared Responsibility 4980H in 2014. So we now had a year to figure it all out!

Fast forward to 2015. The final regulations had been established for a year, but it wasn’t until September 2015 until the final 1095-B and 1095-C employee statement forms were released. Although some transition relief measures were still in place for 2015 reporting, the obligations now became real and the IRS indicated they were requiring a good faith, timely effort to file in 2016 for tax year 2015 and that penalties for filing late or not filing at all would be assessed. Our work was cut out for us. All those questions we had been ruminating over the past 12-18 months became front and center, and we needed to find real answers. Some employers hired consultants, some HR VPs became ACA experts, insurance companies sent entire departments to day or week long classes and lectures and a new market space opened up for information reporting providers. Everyone was trying to find their place in the ACA space. The most important question became, “How do I ensure my organization fulfills all our obligations in early 2016 with a timely, good faith effort?”

As organizations continued to make sense of this complex web of obligations throughout the end of 2015, the icing on the cake, as I see it, amongst all the delays, transition relief and grey lines, came on December 29, 2015, when the IRS granted one final extension to the deadlines. The print deadline for 1095-B and 1095-C employee statements was extended from January 31 (actually February 1, 2016 given January 31 was a Sunday) to March 31, 2016 and the transmittal deadline for electronic submissions to the IRS extended from March 31 to June 30, 2016.

Now, as I write this article on March 8 and we are quickly approaching March 31, I ask, how has your experience been fulfilling your obligations under 6055 and 6056? Do any of the above confusion, questions and complexities hit home? If so, you are in good company, as almost every organization with ACA obligations has faced similar challenges. Fortunately, as we near the culmination of the “good faith, timely effort” year, as I call it, most have found some kind of answer to ACA reporting for this year, whether internal, external or some combination of both (queue brief sigh of relief).

Next year, the stakes get even higher. The 2016 tax year reporting for ACA is no longer a “good faith, timely effort” and we fully anticipate the IRS will expect compliance with the regulations, accuracy and timeliness of reporting for companies to fulfill their 6055 and 6056 obligations penalty-free. With penalties starting at $100 per statement and much less flexibility on compliance going into next year, is your organization prepared? Has 2015 ACA reporting been a Heartache, Heart Attack or Smooth Sailing? (Queue slight sales pitch). If fulfilling your obligations under 6055 and 6056 has been anything less than smooth sailing this year, you can only expect it to be similar next year, even if slightly more manageable with a year under your belt. But there is assistance available! D2Xchange can and will help and we have helped many customers through the initial pains of ACA in 2015/2016. Why not have a discussion with D2Xchange about outsourcing your ACA reporting needs for the 2016 tax year? We’ll work hard with you and for you to ensure you go from Heart Attack to Smooth Sailing.

Sources:
https://www.irs.gov/irb/2013-31_IRB/ar08.html
https://www.irs.gov/

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