10 ACA employer shared-responsibility reporting tips
Last December, I confidently announced to my consulting team that after four long years, preparation for the Affordable Care Act’s employer shared responsibility was officially over! All that was left was the small matter of ensuring that our clients subject to ACA shared responsibility were prepared to file the new IRS Forms 1094-C and 1095-C (also known as ACA employer shared responsibility reporting). Of course, nothing is as easy as it seems, right? Six months later, the midpoint of the tax year is almost upon us, and many still have work to do to prepare for this new filing. For employers who are finalizing their strategy, please consider these 10 tips:
1. Transitional relief doesn’t apply. Even if your firm qualified, for example, for the 50 – 99-employee 2015 transitional relief, the 1094-C and 1095-C must be prepared for tax year 2015.
2. Employers without a health plan must file. Even if your firm doesn’t offer a health plan, if you’re subject to ACA shared responsibility, you still must prepare and file the forms.
3. Visualize the forms. During 2014, I made the mistake of trying to explain what’s on the forms without actually handing them out. That’s like trying to explain what’s on a Form 8889. Download and print the 2014 Form 1094-C (the transmittal) and 1095-C. Review these forms and the information requested, and begin to visualize the forms, just like you can visualize a W-2. Note how easy Part I of both forms will be to complete. (Filing the forms for 2014 was optional. The forms and the instructions may change for 2015.)
4. Read the instructions. It won’t be fun, but investing 15 minutes to read the 2014 instructions unlocks the riddle. And, for those of you using the federal poverty level affordability safe harbor, wait until you see the good news about Part II of the 1095-C.
5. Buy the upgrade. Don’t assume that because you’re with a major payroll or HRIS vendor that you’re all set. Most require their clients to purchase a service upgrade to receive assistance with this form preparation.
6. Minimize file uploads. Benefits professionals understand the challenges that can occur setting up the transmission of eligibility files to and from HRIS/payroll suites to benefits vendors. Ideally, your HRIS/payroll partner already has all of the information needed to complete these forms. If not, map out a strategy that minimizes the amount of files that must be uploaded and ask for the file specifications.
7. Ask your TPA for dependent SSNs. Speaking of eligibility files, if you sponsor a self-funded health plan and don’t have dependent Social Security numbers in your HRIS/payroll suite, your third-party administrator likely does and can send you a file.
8. View a demonstration, not screen shots. If your current HRIS/payroll partner cannot help you with the preparation of these forms, the good news is that numerous quality stand-alone solutions are available. However, because this requirement is brand new, no one has a track record. Be sure to vet any solution thoroughly. If a vendor presents from screen shots, that’s a red flag. Consider asking your accountant or benefits adviser for a recommendation.
9. This reporting and variable hour employee tracking are separate topics. Many HRIS, payroll and specialty vendors are bundling variable hour employee tracking services with 1094-C and 1095-C reporting. Some are presently not allowing the buyer to purchase just the reporting suite. For employers without variable hour employees, it’s like the Apple Store mandating that if you buy an iPod, you must also buy a ukulele. If you’re in this situation, negotiate to purchase just the reporting service.
10. Make sure your ducks are in order. Double-check that your leadership team, accountant, benefits adviser and attorney are in agreement on:
a) When employer shared responsibility is effective for your organization. Importantly, transitional relief comes with strings attached;
b) Which affordability safe harbor you’re using for tax year 2015: federal poverty level, rate of pay or W-2; and
c) Whether or not your organization is part of a controlled group.
The good news is that after we put this matter behind us, we can move on to more exciting ACA initiatives, like 2018 Cadillac Tax mitigation!