2016 will bring increased regulations and paperwork for employers as well as employees.
New forms to be filed
Under the Affordable Care Act (ACA) regulations, Applicable Large Employers are required to file two new annual information returns: 1094-C and 1095-C forms. These forms must be filed with the IRS in compliance with Section 6056 of the Internal Revenue Code no later than February 29, 2016 (or March 31, 2016 if filed electronically). The forms must be provided to employees no later than January 31, 2016.
The kicker? The required IRS forms must contain data tracked month-to-month in 2015. It must detail employees’ hours worked as well as employees’ access to employer provided health care and employee contributions to employer-provided health care. Companies failing to provide the required reporting will face costly penalties.
What is an Applicable Large Employer?
According to the IRS:
- Two provisions of the Affordable Care Act apply only to applicable large employers (ALEs):
- The employer shared responsibility provisions; and
- The employer information reporting provisions for offers of minimum essential coverage
- Whether an employer is an ALE is determined each calendar year, and generally depends on the average size of an employer’s workforce during the prior year. If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year. Employers who are not ALEs may be eligible for the Small Business Health Care Tax Credit.
- If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is an ALE for the current calendar year, and is therefore subject to the employer shared responsibility provisions and the employer information reporting provisions.
- To determine its workforce size for a year an employer adds its total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year and divides that total number by 12.
Employers need to begin planning for 2016 and insure that they are in compliance with the new regulations. Since 2015 is the first year full-time employees will receive the 1095-C Form, employers should educate their workforce on what the Form 1095-C means and how it relates to their 2015 income tax returns.
More information about reporting on Form 1094 and 1095 can be found on the IRS FAQ here.