Preparing for 2016 Affordable Care Act Reporting
For many small businesses, new Affordable Care Act (ACA) reporting requirements are very challenging. With 2015 being the first year for mandatory 1095 filing, devising your reporting plan should be a high priority. Yet a survey of 480+ employers across 36 industries found that just 10 percent had developed strategies ranging from in-house to outsourced solutions. Some 16 percent of respondents had not considered various plans or even determined which options to compare.
Other research found that ACA’s complex reporting requirements are prompting many companies to consider outsourcing. Employer concerns range from not understanding various reporting options and poor data quality to responding to health care exchanges’ notices properly and excessive administrative burdens.
Delaying your decision increases your risk of owing sizable reporting penalties and ACA excise taxes. If this new annual obligation is more than your staff can handle, turning it over to National PEO’s experts can be a big relief. Our comprehensive benefit services include administering medical insurance plans, so our specialists know and follow the latest legal criteria.
Understanding the New System
ACA information returns: Individuals and employers’ shared responsibilities became effective on Jan. 1, 2015, so the IRS needs information returns about individual health coverage. Forms and submitting parties are:
- 1094-B and 1095-B: Minimum essential coverage (MEC) providers (including health insurers, self-insured plan sponsors, and government agencies that administer government-sponsored insurance programs)
- 1094-C and 1095-C: Applicable large employers (ALE)
Online return system: You must use the upcoming ACA Information Return (AIR) system to file ACA returns. It is the only IRS e-filing system that supports and processes the above ACA forms.
E-filing: The IRS requires all MEC providers with at least 250 information returns per calendar year to file them electronically. While e-filing is voluntary for providers with under 250 returns, the tax agency encourages everyone to file electronically.
Issuer and transmitter definitions: In the AIR program, “issuer” refers to any MEC provider. “Transmitter” signifies the third-party service that files information returns for an issuer. Any issuers that have not determined if they will use third-party transmitters or e-file their own returns directly to the IRS should make that decision now.
Reporting deadlines: For the 2015 calendar year, your company must give 1095 copies or substitute statements to all employees by Jan. 31, 2016. With staffer consent, you may provide them electronically. IRS paper returns are due by Feb. 28, 2016. The electronic return deadline extends to March 31, 2016.
Penalties: If you do not distribute employee statements or file your information returns on time, the IRS may impose fines. Penalties can reach $500 per untimely return.
Essential Pre-Filing Steps
- Responsible company official and key contact determinations: A responsible official assumes authority over information return e-filing for a business at a single location and serves as the IRS’s first contact person. Contacts’ responsibilities might include transmitting returns and/or being available for any IRS inquiries every workday. You must designate a minimum of one official plus two contacts.
- IRS e-service registration: The IRS must authenticate your officials and contacts. Online registration validates you individually, which allows you to represent your organization or yourself or so you can conduct IRS business electronically. Personal information you must enter includes your adjusted gross income. You will receive a registration confirmation code from the IRS by mail. To finalize your registration, you have 28 days to log into the e-services portal and enter that code.
- Transmitter Control Code application: Your third-party transmitter must access e-services to fill out an online Transmitter Control Code (TCC) application. The IRS issues TCCs by mail. Issuers need TCCs only if they are also acting as transmitters. The TCC application became available recently on June 29, 2015.
- Testing participation: At a later date, the IRS will require every transmitter to take a communication test and pass it without any errors. That involves preparing an XML-formatted transmission, submitting it for IRS processing, getting a receipt confirmation ID, and then receiving an acknowledgment that may include an error file attachment if applicable.
Once you have completed those four prerequisites, you are ready to file your ACA information returns electronically. According to the IRS, AIR should become operational during the fall of 2015. To enlist help from experienced benefit professionals, contact National PEO today at 888-221-0945.