In an ever evolving effort to improve the quality, cost, and availability of health insurance for the American public, the Affordable Care Act brings increased measures to employers in 2016. Most notable of these are significant changes in IRS reporting in association with ACA compliance. We explore these changes below, in addition to other additions to the Employer Mandate.
Until now, employee insurance coverage was only required of companies with 100 or more full time employees. In 2016, this threshold will be reduced, mandating small businesses of 50-99 full time employees to insure their workers with minimum value insurance coverage. In 2015, firms must have insured at least 70% of workers, but this rate jumps to 95% in 2016.
It’s important to keep in mind that this number includes full time equivalent employees. Additionally, a full time employee is one who works a minimum of 30 hours per week (down from 40 hours).
Furthermore, the cost of insurance coverage can’t exceed 9.5% of an employee’s household income in order to meet the affordability test. Plus, the offered plan must meet minimum value, which means it has a minimum cost sharing of 60% of covered services and meets Bronze marketplace plan standards.
If the Employer Mandate conditions aren’t met by an employer, the company will face per-month, per-employee penalties. Essentially, the reason these changes exist is to hold large firms accountable for providing affordable options for employee healthcare.
The increased regulations regarding reporting procedures have been introduced primarily so that the IRS can determine whether or not each individual has Minimum Essential Coverage, and whether an employer offers such coverage as is mandated by qualifying factors. It’s also a way for the IRS to police tax credits available to individuals – these tax credits are not available to anyone enrolled in or offered Minimum Essential Coverage (or is eligible as a dependent). Information that a person files on their annual tax return will be scrutinized alongside information provided by the employer and/or insurance carrier to verify compliance – or lack thereof.
These reporting procedures are specifically for employers that provided self-insured coverage for even a single day to an employee, and for employers that are subject to the employer mandate and provide coverage to full-time employees and their dependents. These employers are required to transmit a 1094-C form to the IRS and an individualized 1095-C form to each full-time employee and primary insured individual.
The individualized 1095-C statements are due to employees by March 31, 2016, and the 1094-C and employer-level 1095-C statement is due to the IRS by May 31, 2016 (or June 30, 2016, if submitted electronically).
Finally, note that if an employer provides a fully insured plan to employees, it’s the insurance carrier’s responsibility to provide statements to both the IRS and individual employee.
The changes in ACA compliance rules for 2016 are complex but necessary for the Act to reach its goals of affordable and accessible healthcare for every American. As an employer, these changes may create a lot of extra work, not to mention the added learning curve in understanding the nuances of these guidelines.
At Synergy, our goal is to take this burden off your shoulders. Our experts know the ins and outs of compliance and regulation, letting you get back to doing what you do best. Tell us more today about how we can help you with all your healthcare and HR-related tasks, and download our complimentary Ultimate HR Compliance Guide for further information.
Synergy is excited to be partnering with GMS, the largest privately held PEO in the country. Since 1989, countless organizations have trusted Synergy with their PEO and HR functions. This new partnership with GMS will enhance our ability to serve clients while providing the same high level of service our customers have come to know and expect.