If you were an Applicable Large Employer (ALE) for tax year 2015, you’ve likely made it through your first year of annual health care reporting under the ACA. You’ve issued the new annual information return to each employee that was full-time for at least one month in 2015 (IRS Form 1095-C, Employer-Provided Health Insurance Offer and Coverage) and have or are in the process of filing the forms with the IRS. Now is the time to start proactively planning for next year—and equally as important, finding out what you need to be on the lookout for in the upcoming months.
We reached out to ADP’s leading ACA experts to discuss key findings from the first year of annual reporting and requirements that are changing for 2016 and 2017, which make complacency not an option.
Vic Saliterman, Senior Vice President, Health Care Reform: A key finding we’ve discovered from our first year of annual reporting is that complying is even harder than expected. What are some of the reasons for that?
Ellen Feeney, Vice President and Counsel, Health Care Reform: For annual reporting, many organizations have said that gathering the data for completing Forms 1094-C/1095-C was challenging. People underestimated the time and effort needed to obtain the correct data from the necessary systems such as Payroll, HR, Leaves and, particularly, Benefits.
We also discovered that source data was often correct for its original purpose, but sometimes inconsistent with ACA definitions. All of it needed to be analyzed and often adjusted manually, which is time consuming. And looking forward, in a newly fielded ADP market research study, employers indicated that accuracy of forms, annual reporting, and affordability measures are their anticipated top ACA challenges in 2016.
Vic Saliterman: Another key finding is that you need a plan in place for handling Marketplace Notices. It seems most employers have not seen these yet, so why is it important?
Robyn Crosson, ADP ACA Center of Excellence & Compliance Executive: Only 4 states are sending out these notices now, but the Centers for Medicare & Medicaid Services (CMS) has confirmed that employers should begin to see Federally Facilitated Marketplace (FFM) Notices, so more employers will be seeing them soon. If your employee goes to an Insurance Marketplace (or Exchange) and receives a subsidy, the Exchange begins a complex trail of communication and paperwork with the employer to validate any health coverage offering and employee earnings, starting with a Marketplace Notice.
We’ve found that among large employers, those with 1,000 or more employees, 23% indicated “responding to exchange notices” is their top ACA compliance concern for 2016, and it increases to 27% among those who are handling ACA compliance on their own. One thing to keep in mind is that the Notice will go to the address provided by your employee, which means it may not go where you expect, so it may be important to educate local work locations that may receive these inquiries.
When you receive a Marketplace Notice for an employee, it is an opportunity to look at the Marketplace Notice coverage offered, if any, and make sure you are in compliance from a penalty perspective. If appropriate coverage is not being offered, it gives you a chance to make an offer and potentially limit the amount of penalty assessed by the IRS.
Vic Saliterman: Let’s talk about penalties. Up until now, this is not something most organizations have had to worry about.
Pete Isberg, Vice President, Government Affairs: For 2015 reporting, the IRS said it will not impose penalties on a filer for reporting incorrect or incomplete information if the filer can show that it made good faith efforts to comply with the information reporting requirements for 2015. But that won’t be the case moving forward.
Additionally, while last year you only needed to offer 70% of your employees affordable coverage, this year the percentage increased to 95%—a much higher bar. Keep in mind that any Employer Shared Responsibility assessments are determined independently for each month, even though reporting and IRS notices will be annual. So you should test periodically to make sure you’re hitting the 95% mark.
At some point—likely December or early 2017 for 2015—you’re going to be getting Employer Shared Responsibility assessments. The only way you can avoid paying those penalty assessments is going to be to be able to show to the IRS that you in fact complied. You’ll need to be able to show who was a full-time employee for each month, who was offered coverage and whether it met affordability standards. Make sure that data is available because you could be looking two, three or even several years in the past when you have to respond to the IRS on these issues.
Vic Saliterman: Lastly, can you tell us about some of the changes coming?
Pete Isberg: For annual reporting and Form 1095-C, there will be some new codes, such as “Plan start month” (optional for 2015) and a possible new Line 14 code to identify conditional offers to spouses. 2015 Transition relief codes will remain for 2015 plan year months in 2016. And more changes are coming. The IRS just issued a proposed rule on expatriates and expatriate plans. We are still waiting for Multi-Employer Plan guidance, as well as revised forms and instructions for 2016.
For additional insights about how employers handled ACA compliance, be on the lookout in July for a newly fielded ADP market research study. To hear more from our ACA experts, listen to Ellen’s and Pete’s recent webinar presentation about ACA Changes in 2016 called: “ACA Best Practices: Why You Can’t Take a Vacation From Affordable Care Act Compliance.”