IRS Updates & FAQs on Certain ACA Tax Provisions

 

irs-acaThe Trump Administration and allies in Congress appear to be holding true on a highly debated campaign promise: the repeal and replacement of the Affordable Care Act (ACA).  While this act is supposed to be completely overhauled and replaced in the next few months, we want to emphasize to employers that they are still required to comply with ACA regulations already in place for 2016.  Please note that this absolutely includes shared responsibility provisions and information reporting requirements.  

Because there is a plethora of information for consumption, the IRS, in the past, issued three sets of Q&As so employers can have guidance on their responsibilities under the ACA.  Since its initial release, these three FAQs were updated by the IRS in 2016:

In the event you, as an employer are subject to the ACA and its subsequent modifications, we recommend you review our updated list of IRS FAQs.   

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Some Essential Background

As an employer, it is critical that you understand the ins and outs of the ACA.  You need to understand whether you have shared responsibility provisions under the ACA, as an employer subject to an applicable large employer (ALE).  If you do fall into this category, there are guidelines you must follow.   Hefty fines are imposed if an employer does not meet these requirements:

  • Full-time employees (FTEs) are not offered essential coverage that is affordable and provides minimum value
  • At least one FTE does not acquire coverage in the health insurance marketplace, in turn receiving a premium tax credit

In order to be considered an ALE, the company must employ 50 FTEs, on average, during the preceding calendar year.  

Offers of Health Insurance Coverage FAQs

Several employers must report health care coverage, and respective details, to the IRS….not to mention their employees.  Here are some clarifications that have been made:

Updates to Question 23

Question 23 pertains to whether or not a reporting ALE, especially one facilitated by a third party, can file more than one 1094-C.  IRS revisions explain’s that, although an ALE member may generate more that one Form 1094-C, it can only use one of these Forms for “authoritative transmittal”.  A 1094-C aggregates employer- level data.

Updates to Question 24

This question elaborates on whether or not an ALE member still satisfies regulations if it generates more than one Form 1095-C per employee.  Quite simply, the answer is no- an ALE cannot combine more than one form with another form to have a complete 1095c.  Only one form may be used.  

Information Reporting FAQs   

ACA-reportingAs an overview, the following entities- according to shared financial provisions- must file annual returns to the IRS for any individual who is covered by “minimum essential coverage”.  This is in addition to providing these respective individuals with written statements of what was provided to the IRS.

  • Health insurance issuers
  • Sponsor of a self-insured health plan
  • Government agency that administers government-sponsored health insurance programs
  • Any other entity that provides “minimum essential coverage”

Both questions in this section will pertain to Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and  Coverage Information Returns and Form and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage.

ACA-1095BUpdates to Question 9

The IRS received several inquiries about whether or not members of an ALE, which are combined to form a sole company, can file an aggregate report summing up all the information for the ALE members. The answer is no- every ALE member must report separately.

Updates to Question 26

Confusion also surrounded whether or not an ALE needs to report coverage under a Health Reimbursement Arrangement (HRA), if an individual is enrolled by an employer self-insured major medical group plan and the HRA.  In general, the answer is yes.  However, there is one caveat: if a person is covered by more than two plans which offer minimum essential coverage by the same entity, only one report is needed.  

Shared Responsibility FAQs   

shared-responsibility-rules-acaIf you’re having difficulty comprehending whether you can be considered for ALE status, and are in compliance with shared responsibility requirements, here are some more questions and answers that might help:

Updates to Question 8

Question eight surrounded the determination of ALE status eligibility if a company onboards part-time employees.  It was clarified that those employees aren’t taken into account during the calendar during which they were hired, but they must be reported the following calendar year for ALA purposes.

Updates to Question 9

Question 9 clarified that regardless of tax filing status (for-profit, non-profit, tax exempt…etc.) all entities must all file if they are an ALE member.

Updates to Question 28

Another question that came up often was how to determine, under shared responsibility provisions, an “offer of coverage”.  In this case, coverage is defined as employer sponsored minimum essential health coverage.  An “offer of coverage” means that an ALE must give its respective employees the ability to decline or enroll in coverage every calendar year.   

Updates to Question 43

Regarding dependents, clarification was requested on who an employee could have as an actual dependent under shared responsibility guidelines.  Eligible for dependent status are children under 26, including those who are adopted.  Spouses are not eligible and and neither are children, stepchildren and foster children not residing in the United States.  

Updates to Question 44

Many ALE members inquired about the payment they were responsible for as a member of an ALE.  The answer here is made simple: each member is responsible for its shared portion of payment.

Upcoming Filing Deadlines

Many ACA filing deadlines are getting very close.  The below chart illustrates this:

DUE DATE FILING FORM
February 28, 2017

(if not filing electronically)
March 31, 2017

(if filing electronically)

1094-B, Transmittal of Health Coverage Information Returns

1095-B, Health Coverage

1094-C, Transmittal of Employer-Provided Health Insurance Offer and  Coverage Information Returns

1095-C, Employer-Provided Health Insurance Offer and Coverage

March 31, 2017 Deadline for furnishing 2016 Forms 1095-B and 1095-C to individuals


Conclusion    

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The ACA and healthcare benefits are usually very complicated items for employers to grasp.  This is why the assistance of an advisor, such as a CPA or interim CFO can be so beneficial.  An CPA like Thomas Huckabee, CPA of San Diego can help a business understand the ACA in plain English, especially when there are definitely new changes on the horizon.  Contact us for more information on how our services can be of assistance to you.    

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