Pre-Halloween Scare: Employers with 1-99 Employees Are Not Well Informed or Prepared for the Quickly Approaching ACA Tax Reporting Requirements

Keep Reading and Avoid a Horror Story…ThinkstockPhotos-156473188

Fall leaves, hay rides, apple cider, trick-or-treaters…autumn is here!  Before we know it, it will be time to ring in 2016.  In light of this, we at hr-haven are interrupting this week’s planned blog post with a reminder about the upcoming employer reporting requirements under the Affordable Care Act.  Think because you have less than 50 full time employees or because you are planning to offer health insurance in 2016 you can stop reading now?  Not so fast.

While information has been available far and wide about the requirements for employers to offer health insurance to employees and all the rules to determine “affordability”, we’d like to take a few minutes to remind you about the tax forms the vast majority of employers will have to submit just a few months from now…forms that must be populated with information from 2015.  The only employers who do NOT have to meet these new reporting requirements are employers with less than 50 “full time equivalents” (not the same as “full time employees”) who also do NOT offer health benefits to any employee.  If you do not meet the criteria detailed in the previous sentence, your business is required to file 1094 and 1095 tax forms and the deadline is February 1, 2016.  Seriously.  Yes, we’re sure.

We at hr-haven eat, sleep and breathe HR and we can admit that we think all the ACA requirements are confusing.  Assuming that our clients, and all business owners in general, are spending their time running businesses rather than scouring the web and news publications for details on the new 1094 and 1095 requirements, we thought we’d publish some basics to make it easy as possible to know what you are responsible for and when.

Who, What, Where, How and When?

Who:  All employers who offer health benefits to any employee in 2015, employers with 50+ full time equivalent employirs reportsees who do not offer health benefits to any employees in 2015.

What is an FTE (Full Time Equivalent Employee)?:  The Affordable Care Act defines a full time employee as one who works at least 30 hours per week or 130 hours in a calendar month for the purpose of defining benefits eligibility.  Part time employees must be reported also but in a prorated fashion, i.e. two employees who each work 15 hours per week equal one FTE.  Employers must capture all hours worked by all employees and report the number of full time equivalent employees per calendar month.

***Please note this is a simplified example for illustrative purposes and there are additional detailed rules on determining FTE, including what counts as hours of service, when to count paid time off such as sick or vacation pay, etc, and how commonly owned employers must combine their employees as an aggregated group.  We recommend starting at www.IRS.gov/aca for more information on to calculate FTE’s in your own business.  It’s complex enough that we simply can’t provide a one-size-fits-all example.

What are the 1094 and 1095 and do I file version B or C? The 1094 is a tax form filed with the IRS. The 1095 is filed with the IRS and a copy must also be provided to employees.  To simplify the requirements for each form and when form B vs. C applies, please review the table below.

    # FTE’s:

*defined below

Health Benefits

Offered in 2015?

Are Benefits Fully Insured Plan(s)?

Are Benefits Self-Funded Plan(s)?

Requirement:

Less than 50

No

None, you lucky ducks!

Less than 50

Yes

X

Your insurer is required to file with the IRS on your behalf and provides the appropriate copies to your employees.

Less than 50

Yes

X

You are required to complete and file the 1094-B and 1095-B with the IRS and provide copies of 1095-B to employees.

50-99

No

You are required to complete and file the 1094-C and Part I & II of 1095-C to the IRS and provide copies of 1095-C to employees.

50-99

Yes

X

You are required to complete and file the 1094-C and Part I & II of 1095-C to the IRS and provide copies of 1095-C to employees.

50-99

Yes

X

You are required to complete and file the 1094-C and Part I, II & III of 1095-C to the IRS and provide copies of 1095-C to employees.

100+

LATE

LATE

LATE

Requirements became effective January 1, 2015 for 2014 tax filings.

 

How and When: 

Both forms require some very specific data about health benefits offered, if applicable, and employee data/FTE calculations by calendar month.  If you are required to file 1094/1095forms, you can obtain a detailed list of the information you’ll need to complete each one at www.irs.gov/aca.  Check it out ASAP and get started on the employee data right away.  The calculations are complex!

Employees must be provided copies of the applicable 1095 by February 1, 2016.

Both forms must be filed with the IRS no later than February 29, 2016 if filed by mail, or by March 31, 2016 if filed electronically.

And we have only scratched the surface here.  We recommend employers seek additional information on the detailed requirements for each of the forms they are required to complete at www.irs.gov/aca

What happens if you don’t comply?  Fines at the bare minimum are estimated by the IRS at $500 for the smallest of businesses and are capped at $6 million dollars per year for the big players.  Employers with 100 employees can expect $10,000-20,000 if forms are not submitted to the IRS or employees in 2015. Submitting forms with errors are subject to fines as well, but on a smaller scale.

What are you waiting for?  Make sure your business is on track to avoid a scary tale in 2016!

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