By Elizabeth Collins
Navigating the complexities of the Affordable Care Act (ACA) can be a challenge for employers. During our recent ACA Palooza, we received numerous questions surrounding the ACA Employer Mandate and reporting requirements, COBRA eligibility, 1095-C forms, seasonal employee measurement, lookback method adjustments, self-insured plan reporting, state mandates, dependent SSN accuracy, and responding to Letter 226-J penalties, and more.
We selected some of the most frequently asked questions we received and helped provide responses to assist employers in better understanding some of these ACA issues and requirements.
Typically, COBRA must be offered for up to 18 months in this scenario, with an additional extension of time if the employee or their dependents become disabled or experience a second qualifying event after enrolling in COBRA. It’s important to remember that the ACA’s Employer Mandate requirements did not change any of the existing COBRA qualifying event rules.
An employee losing coverage due to a reduction in hours has always been considered a COBRA qualifying event, which entitles them to enroll in COBRA for up to 18 months (as outlined in the DOL’s Employer’s Guide to Group Health Continuation Coverage Under COBRA). Keep in mind that the requirement to offer COBRA in these scenarios holds true regardless of whether you are using the ACA’s Monthly Measurement or Look-back Measurement Methods to determine eligibility.
If those employees meet the ACA’s definition of “full-time.” Applicable Large Employers (ALEs) are generally required to provide a Form 1095-C to every employee who was full-time for at least one month of the year based on either the Monthly or Look-back Measurement Methods. This is true regardless of whether the employee was offered benefits or not, and regardless of whether any benefits offered were administered by the employer or by a union multiemployer health plan.
However, in the latter scenario, the IRS does provide a simplified reporting option. The Instructions for Forms 1094-C and 1095-C recommend reporting a code combination of 1H / 2E on Form 1095-C Lines 14 and 16 for any months in which the ALE was required to contribute to a multiemployer plan on behalf of the given employee. Additionally, these employees should be included towards calculating whether the ALE met the 95% Minimum Essential Coverage threshold each month as reported on Form 1094-C, Part III, column (a). Finally, any employees who enroll in coverage through a union administered multiemployer plan will typically also receive a separate Form 1095-B from the plan administrator.
Let’s start by recapping some key ground rules. The ACA allows employers to choose between the Monthly Measurement and Look-back Measurement Methods for determining full-time status. The final ACA Employer Shared Responsibility regulations do permit employers to apply different measurements to the following categories of employees if they wish, provided that they do so consistently:
Salaried vs. Hourly employees
Employees whose primary work locations are in different states
Union vs. non-union employees
Union employees covered under different collective bargaining agreements
Employees in different FEINs
However, the regulations are clear that employers are not allowed to use different measurement methods for any categories other than those listed above. The regulations even go so far as to state that they “do not permit an employer to adopt the look-back measurement method for variable hour and seasonal employees while using the monthly measurement method for employees with more predictable hours of service.”
With all of this background in mind, a common strategy for employers that have large volumes of temporary and seasonal employees could be to use the ACA’s Look-back Measurement Method across all of your employees. Alternatively, if all of your temp and seasonal employees are paid Hourly, then you could use the Look-back Measurement Method for just your Hourly employees and the Monthly Measurement Method for your Salaried employees.
Yes, employers can generally change their lookback measurement period, but it's important to proceed with caution. Here's what to consider:
Stability Periods: The main rule is that you must maintain the stability period for each individual employee. This is the timeframe where their full-time or part-time status is locked in based on the prior lookback results. Changing the measurement period can't disrupt this.
Avoiding Coverage Gaps: Be very careful not to create gaps in coverage when switching. For example, if moving from a 6-month to a 12-month lookback, there might be a period where some employees need continued coverage based on the old method until the new one takes full effect.
IRS Guidance: The IRS has provided some flexibility on this (IRS Notice 2014-49 outlines several helpful example scenarios), but it's crucial to understand their rules and any potential transition period requirements. Consulting with a benefits advisor or legal counsel is a good idea.
Communication is Key: If you change the lookback method, clear communication to employees is essential. They need to understand how this might affect their eligibility for benefits and when the new method takes effect.
Under the Affordable Care Act (ACA), the reporting requirements for self-insured plans depend on whether the employer is an Applicable Large Employer (ALE) or not (also, please see source information below):
1. Applicable Large Employers (ALEs):
ALEs are employers with 50 or more full-time employees (including full-time equivalent employees) in the previous calendar year.
Reporting Requirements: ALEs with self-insured health plans must file:
Form 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
Form 1095-C: Employer-Provided Health Insurance Offer and Coverage
Parts I and II: For all full-time employees, regardless of enrollment in the plan
Part III: For employees (and their dependents) who were actually enrolled in the self-insured plan during any month of the year
Keep in mind that Forms 1095-C or 1095-B must also be provided to any individuals who were not full-time employees but were enrolled in your self-insured plan during the year (for example, COBRA participants, retirees, etc.)
2. Non-ALEs:
Non-ALEs are employers with fewer than 50 full-time employees (including full-time equivalent employees) in the previous calendar year.
Reporting Requirements: Non-ALEs with self-insured plans must provide:
Form 1095-B: Health Coverage
This form is provided to all employees (and their dependents) who were enrolled in the self-insured plan during any month of the year
Additional Information:
Deadline: The deadline to furnish Forms 1095-B and 1095-C to individuals was previously January 31st of the year following the calendar year of coverage. The IRS has offered a permanent 30-day extension to this deadline, which means forms must generally be provided to employees by March 2nd, or March 1st if a leap year. The deadline to electronically file Forms 1094-B, 1094-C, 1095-B, and 1095-C with the IRS is usually March 31st (or February 28th if filed by paper) of the year following the calendar year of coverage.
Penalties: Failure to comply with ACA reporting requirements can result in penalties under Sections 6721 and 6722 of the Internal Revenue Code.
For further information and detailed instructions, you can refer to the following resources:
IRS Website: ACA Information Center for Applicable Large Employers (ALEs): https://www.irs.gov/affordable-care-act/employers/aca-information-center-for-applicable-large-employers-ales
Questions and Answers on Reporting of Offers of Health Insurance Coverage by Employers (Section 6056): https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-reporting-of-offers-of-health-insurance-coverage-by-employers-section-6056
Remember, it's crucial to stay updated on any changes to ACA reporting requirements and consult with a tax professional or legal counsel if you have specific questions about your organization's obligations.
State healthcare mandate reporting requirements apply to employers with even just one employee residing (or with the District of Columbia, working or living) in a state with a mandate.
Currently, several states have individual mandates requiring residents to have health insurance coverage or face a penalty. Each state has its own set of reporting requirements, but in general, employers must report information on their health insurance offerings to the state and provide employees with copies of the relevant forms.
For more details on the requirements in each state, refer to our What Do Individual Healthcare Mandates Look Like in Your State? article.
Under the Affordable Care Act (ACA) IRS reporting requirements, inaccurately reporting a dependent's Social Security Number (SSN) can result in the following penalties:
IRS Penalties: The IRS can impose penalties under Section 6721 and Section 6722 of the Internal Revenue Code for failing to file correct information returns or furnish correct payee statements. These penalties can range from $60 to $630 per incorrect return, with maximum penalties depending on the type of error, whether it was intentional or unintentional, and how late the employer is in correcting the data.
Employee Tax Issues: Inaccurate reporting of a dependent's SSN can affect their eligibility for the Premium Tax Credit (PTC) or cause issues when filing their tax returns. This could lead to delays in processing returns or potential audits.
Providing Date of Birth (DOB) Instead of SSN:
Yes, an employer can provide a dependent's date of birth (DOB) if the SSN cannot be obtained. However, there are specific guidelines:
Good Faith Effort: The employer must make a good faith effort to obtain the dependent's SSN. This could involve requesting the information multiple times or providing instructions on how to obtain an SSN.
Form 1095-C: If the SSN is not obtained despite a good faith effort, the employer can include the dependent's DOB instead.
Additional Documentation: The employer may need to provide additional documentation to the IRS, such as a copy of the dependent's birth certificate, to verify the DOB and relationship to the employee.
Important Considerations:
It's crucial for employers to maintain accurate records of their efforts to obtain the SSN and any communication with the employee regarding the issue.
If the dependent's SSN is obtained later, the employer should file a corrected Form 1095-C with the IRS.
Employers should complete Form 14764 (ERSP Response) by the due date indicated on Letter 226-J indicating whether or not they agree with the penalty assessment and Form 14765 (Premium Tax Credit Listing) if changes to codes are needed from the original 1095 submissions. If the employer agrees with the penalty, they can return the forms with payment.
If an employer does not offer health insurance to at least 95% of its full-time employees, and at least one employee claims the Premium Tax Credit, the ERSP is $2,000 per employee, but that is not assessed on the company’s first 30 employees. This number is indexed to inflation, and as of 2024 is $2,970 per year.
The penalty for employers that do offer health insurance to at least 95% of its full-time employees, but fails to offer coverage to some employees, or does not offer coverage that is affordable or minimum value, is $3,000, but that only applies per employee who claims the Premium Tax Credit. Indexed for inflation, the amount for tax year 2024 is $4,460 annually.
The information provided is intended as general guidance and is not intended to convey any tax, benefits, or legal advice. For information pertaining to your company and its specific facts and needs, please consult your own tax advisor or legal counsel. Equifax Workforce Solutions provides services that can help employers reduce their compliance risks. Details on our provision of these services and related support will be contained in your services agreement. Links to sources may be to third party sites. We have no control over and assume no responsibility for the content, privacy policies or practices of any third party sites or services.