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Understanding the Reporting Requirements of the Affordable Care Act

2016 is just a few short months away, and with it will come new responsibilities related to the Affordable Care Act (ACA). Do you have a plan for collecting the data required to complete IRS forms 1094-C and 1095-C?

aca-healthcare-reformThese Forms are to be filed by employers who are required to offer health insurance coverage to their employees under the ACA and who are recognized as an Applicable Large Employer (ALE). An ALE is an employer who has 50 or more full-time employees or 50 or more full time equivalent employees. Filing in early 2016 for the 2015 calendar year is actually based on the size of your company in 2014. Confused yet? Maybe this will help:

If your business had 100 or more full time employees in 2014: In 2015 you must comply with the ACA mandate of offering health coverage to 100% of your full time employees and their dependents (until age 26) and report this information on IRS forms 1094-C and 1095-C in 2016.

  • If your business had between 50 and 99 full time employees in 2014: In 2015 you must comply with the ACA mandate unless you qualified for transition relief. If you did qualify for transition relief, please note that the ACA mandate will apply to you for the 2016 plan year (reported in 2017).
  • If your business had less than 50 full time employees in 2014: You are not an ALE and are not required to comply with the ACA mandate.

Merely counting your full time employees will not help, however. The IRS qualifies employers as ALE’s based on full time employees and full time equivalent employees. So how many full timers do you really have? Based on the definition related to the reporting requirement, a FT employee works an average of 30+ hours per week or 130 hours per calendar month and at least 120 days per year. That’s the easy part. The next piece is a little more tricky.

The hours of part time employees are added together to equal those of a full time employee and are then used to calculate whether the mandate applies to your business. So two part time staff each working 15 hours per week can be the equivalent of one full time staff member who works 30 hours per week. The folks at Healthcare.gov know this is confusing, so they have a Full-time Equivalent (FTE) Employee Calculator available on their site to help.

So why are there two forms and what will the information be used for? The 1095-C provides information about health insurance and is sent to the IRS and to your employees. The 1094-C acts as a cover page for the 1095-C and is only sent to the IRS. The IRS will then use the data to identify employees who are eligible for subsidies to purchase coverage through the Exchange, employees who are without Minimum Essential Coverage (MEC) and who may be subject to an Individual Shared Responsibility Penalty, employers who are failing to offer Minimum Essential Coverage (MEC) to full-time employees and employers who fail to offer Minimum Value Affordable Coverage to full-time employees. Employers who are failing to offer coverage may be subject to penalties.

If you’re still unsure about what these requirements mean to your organization, we encourage you to contact our offices today.

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