Like most accounting professionals who are already heads-down into tax season, you’re likely still getting questions from clients about the Affordable Care Act (ACA) – and we can assume they need help fast. There is still time for your clients to prove that they provide their employees with the minimum health care required by the Affordable Care Act. The following is just-the-facts information required to determine which of your clients fall into categories requiring ACA compliance reporting – and guidance on how to get it done quickly, efficiently and accurately.
The Affordable Care Act (ACA) has been making headlines for years. Signed into law by President Obama in March 2010, it was immediately challenged by more than half of the states and the National Federation of Independent Business. Legal battles continued from when the first provisions took effect, until the United States Supreme Court upheld the major provisions of the ACA in June 2012. The bulk of the Affordable Care Act took effect on Jan. 1, 2014 –additional provisions will be phased in through 2020.
Most of your clients are aware that for 2015, all “applicable large employers” (ALE) with at least 50 full-time employees (or the equivalent) must provide health insurance to employees and their dependent children. As dictated by the Affordable Care Act, a full-time employee works an average of at least 30 hours per week, or at least 130 hours per calendar month.
What many businesses overlook is the ACA’s tax filing requirements. And, that can have real consequences.
Pay or Play Provisions
Under the ACA Employer Shared Responsibility provisions, failure to offer employees minimum essential coverage may lead to penalties. This is sometimes called the “pay or play provisions:” play along with the requirements or fork over an employer shared responsibility payment to the IRS.
ACA minimum essential coverage (MEC) requirements are as follows:
- Health insurance must be provided to 95 percent of full-time employees
- Self-coverage may not no more than 9.5 percent of the employee’s income
- The plan must cover at least 60 percent of plan costs
Incentives to Play
Failure to comply with ACA can lead to steep penalties – the worse the offense, the more you pay:
- Employers that do not fulfill their reporting obligations are subject to penalties of up to $500 per form.
- Employers that provide health insurance but do not satisfy the affordability or minimum value requirements set forth by the ACA are subject to an excise tax of up to $3,000 per year (a minimum penalty of $250.00 per month, per employee).
- Employers that fail to make a qualifying offer of insurance to at least 95% of its full-time employees (or equivalents) are subject to an excise tax of $2,000 per employee.
Filing the proper forms in a timely manner proves to the IRS that businesses offer the minimum health care coverage to their full-time employees.
Applicable large employers must file the following forms:
- Form 1095-C Employer-Provided Health Insurance Offer and Coverage (with the IRS)
- Form 1094-C Transmittal of Employer-Provided Health Insurance Offer and Coverage Information (with the IRS)
- A separate information return containing similar information (for each full-time employee)
Forms 1094-C and 1095-C are due no later than May 31, 2016, (paper filers) and no later than June 30, 2016 (electronic filers). Electronic filing is required for businesses with at least 250 employees.
Employers are required to issue paper statements to their full-time employees (unless the employees consent to receive the statement in electronic form) by March 31, 2016.
There is an additional filing requirement for businesses that purchased insurance through the Health Insurance Marketplace or healthcare.gov: Form 1095-A.
Tax Credit for Small Businesses
IF you have clients with fewer than 50 full-time employees (or equivalent), reach out to discuss what the future will hold for them. Those with a mix of full-time and part-time employees may already have the equivalent of 50 full-time employees under the Affordable Care Act. If they don’t now, they could soon. How many hires are they from new health insurance requirements?
Alternatively, clients who provide health insurance but have fewer than 50 full-time employees (or equivalent) may be eligible for a tax credit under the Affordable Care Act. The tax credit is 50 percent of premiums paid. Eligible businesses must do the following:
- Purchase coverage through the SHOP marketplace or healthcare.gov
- Pay at least 50 percent of the total cost of insurance premiums
- Pay employees no more than an average annualized wage of $51,000
- File for the tax credit with Form 8941
Businesses with fewer than 50 employees may be required to file Form 1095-B. This form should also be used by employees with insurance outside the Marketplace (such as Medicaid, Medicare, TriCare or private insurance).
There’s Still Time to Comply with ACA
Tax filing season is a challenging time for all businesses. Every year, there are new or different forms to file at the state or federal level. Your clients look to you to help them negotiate this period – and come out unscathed and penalty-free.
There is still time for your clients to prove that they provide their employees with the minimum health care required by the Affordable Care Act. Simplify health care insurance reporting by implementing an automated ACA compliance solution like Avalara 1099.