The Employer Shared Responsibility Provision of the Affordable Care Act (ACA) penalizes employers who either do not offer (healthcare) coverage or do not offer coverage which meets minimum value and affordability standards. These penalties apply to firms with 50 or more full-time equivalent employees. –The Kaiser Family Foundation
Many companies have put ACA compliance on the back burner, thinking the IRS may not enforce it. But, in late 2017, the IRS began assessing penalties for tax year 2015.
The financial risk for not handling obligations under the employer mandate could put your entire businesses in jeopardy. We continue to advise our clients how important it is to comply before it’s too late.
Here are two questions we’re often asked by business owners:
- What happens if we don’t comply?
- What actions are required by the IRS related to the healthcare law?
What happens if we don’t comply?
The penalties for doing nothing are significant. There are 2 potential penalties if you do not meet certain ACA criteria. In addition to these penalties, you also can be fined for not performing the required calendar year reporting to the IRS (forms 1094 and 1095).
- Penalty A goes into effect if you do not offer Minimum Essential Coverage to at least 95 percent of your eligible employees. The penalty is $2,320 per full-time employee in 2018 if one employee utilizes a subsidy in the Exchange.
- Penalty B goes into effect if you do not offer affordable coverage that provides a minimum value. This penalty is $3,480 per full-time employee in 2018 that utilizes the Exchange.
- Failure to provide employees with the 1095 form can lead to penalties of $260 per form.
These penalties are very real, and the IRS is still assessing them.
What actions are required related to the healthcare law?
If you are an Applicable Large Employer (ALE), determine which employees must be offered insurance and receive a 1095 form. There are 2 primary steps:
- Establish the measurement timeframes (periods) to determine which part-time and seasonal employees must be offered health insurance.
- File the year-end 1095 and 1094 forms.
The work involved in these 2 steps is often complex and time consuming.
Establish measurement timeframes (periods)
These three periods determine which variable-hour employees should be offered insurance and how long it is guaranteed before it is measured again:
- Ongoing Measurement Period—Timeframe designated to ascertain whether an ongoing variable or seasonable employee is full-time and eligible for healthcare coverage. For employees not included in the Ongoing Measurement Period, each month you also will need to perform an Initial Measurement period calculation. These periods can be no less than three and no more than 12 consecutive months.
- Administrative Period—Allows an employer up to 90 days to calculate the average hours worked over the Measurement Period to determine whether an employee averaged 30 or more hours per week during the measurement period. This period is normally coordinated with the open enrollment period.
- Stability Period—The period in which those employees determined to be full-time in the Measurement Period must remain eligible for health coverage.
File year-end reporting on forms 1094 and 1095
The IRS requires all employers with 50-plus full-time employees and full-time equivalents to perform year-end reporting on forms 1094 and 1095. The 1094 form, a summary of the company’s ACA compliance, is provided to each employee to be filed with their tax return. It shows whether the employee was offered insurance, etc.
The 1095 form must be provided to the employee by March 2, 2018. The 1094, along with copies of the issued 1095 forms, must be provided to the IRS by Feb. 28, 2018, if not filing electronically, or April 2, 2018 if filing electronically. Failure to properly provide the forms to the employees or file them with the IRS can lead to penalties of $260 per form.
Meet Chris Cooley at the 2018 NGA Show, where he will be a guest presenter during the FMS Financial Symposium. Chris is co-founder of MyHRConcierge and SMB Benefits Advisors. Chris can be reached at 855-538-6947, ext. 108 or at [email protected].
HR & Benefits News is a monthly column in The Shelby Report. Cooley’s companies, MyHRConcierge and SMB Benefits Advisors, offer services including employee handbooks, anonymous worker tip lines, manager HR help lines, HR compliance and administration, workforce management and benefits advisory solutions. The companies specialize in helping small to mid-sized grocers throughout the U.S.