GPHA Clouds

Navigating the Affordable Care Act

Meet the Forms

In 2016, most employers will be required for the first time to report their employee health care participation. Regardless of whether or not you’ve opted to “pay or play” there is still work to be done within your HR department. This is the first installment in a series of articles intended to provide a simple explanation as to how these forms work, their function within the parameters of the law itself, and how they all work together to ensure you aren’t (or are, depending on your business plan) being penalized; and that your employees are either receiving the proper coverage, or are provided with the assistance they have been promised under the law.

Let’s start by addressing something I mentioned in that intro: You are required to file these forms with the IRS regardless of whether or not you choose to fulfill the requirements of the ACA. Your HR department will have an increased work load; and depending on how organized your HR team is, and how advanced and up-to-date your payroll software is, a slight increase in the overall workload for the year, a noticeable increase at the end of each month, or a log jam next January which is the proverbial 11th hour.

If your team has not already done so, they should be selecting and implementing one of the hour-counting methods the IRS has approved for determining full-time status. For a very static work environment with predictable work hours and a straight forward schedule, you may choose to use the Monthly Method. For those environments where hours can be unpredictable, variable, or cyclical; you will probably be using the Look Back Method.

If you choose the Look Back Method you will also need to determine an Initial Measurement Period, verify your Administration Period, and solidify your on-going Measurement and Stability Periods.

You should also select one of the Safe Harbors laid out in the ACA.

The W-2 safe harbor is based on box 1 wages. The cost to the employee for health insurance cannot exceed 9.56% of box 1 wages.

The Rate of Pay safe harbor is 130*the lowest hourly rate of pay for that employee for that month. Employee cost of health insurance cannot exceed 9.56% of that number.

The Federal Poverty Level safe harbor is, in part, determined by the government. For 2015 the FPL is $11,770 per year. Employee cost of health insurance cannot exceed 9.56% ($93.77/month) of the FPL in order to be considered affordable.

Proving the affordability of your plan is key to avoiding penalties under the employer mandate of the ACA. Using the FPL safe harbor in certain instances will save you some extra time by allowing you to skip certain parts of forms, but that is something we’ll address in depth in later articles.

So, assuming you have now determined a Methodology for determining full-time status, selected your safe harbor to prove affordability, and slipped something into the water cooler of your HR team so they calm down a bit and get cracking on all of this; I present to you, the forms you’ll need to know for the ACA:

1094-B

1094-C

1095-B

1095-C

There is also a 1095-A, but that is used only by the Exchanges, and it would be unlikely that you will use it.

The 1094 forms are similar to the W-3. They are a broad-view company-wide transmittal of information.

The 1095 forms are similar to the W-2. They are an employee-specific, substantive form that have a role in reporting and filing (and determining fines and tax subsidies).

If you are an Applicable Large Employer [(ALE) (50 or more Full-Time Equivalencies)], or have a self-funded insurance plan, my recommendation will usually be to ignore the B forms entirely (although please call to verify). The B forms have value if you have non-employees (Board Members, partners, COBRA users, etc) who are covered; but in most cases you will end up having to fill out a C form for them anyhow, so we’re going to focus on the C forms in our articles.

The C forms are only filed by ALEs (or non-ALEs with self-funded plans, which is unusual). They must be filed by all ALEs regardless of whether or not a health plan is offered. They must be filed by all ALEs regardless of fully-insured or self-funded status. They must be filed for 2015 regardless of an ALEs exemption from the (pay-or-play) employer mandate.

The C forms are multi-purpose. They report to the IRS on the affordability of the coverage offered to full-time employees during each month of the year, and whether or not an employer is subject to the incessantly emphasized sledgehammer or tack hammer penalties. The IRS (or the DOL, which we’ll address in a later article) will use these forms to verify which, if any, months employees had Minimum Essential Coverage (MEC) under self-funded plans. The verifying entity will also use these forms to prove existence of coverage on behalf of the employee so they can avoid penalties under the individual mandate, and determine eligibility for subsidies or tax credits towards and Exchange plan.

And so concludes Installment 1 of our ACA series. Mostly review, mostly boring, hopefully informative.

If you have questions on this info, or anything to do with the ACA, please do not hesitate to email me at the address below. I will do my best to provide you with an answer, or find a source that can.

Next week:
1094-C – The longer and yet somehow less confusing of the C forms.

 

If you missed the first two presentations our HR clown(me!) gave on this topic (in it’s entirety) he has been contracted to give it at least twice more. In Dodge City, KS on May 5th, and Manhattan, KS on May 7th. If those dates don’t work for you, contact me to set up your own personal presentation!

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Aaron Miller is the HR and Marketing guy at Great Plains Health Alliance. If you have questions about the Affordable Care Act, or any HR topic, shoot him an email at amiller@gpha.com.

Posted by Aaron Miller on April 20, 2015 in Affordable Care Act, Human Resources and Personnel Management.

 

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