New Affordable Care Act information reporting requirements
Most manufacturing companies will face additional Affordable Care Act (ACA) information reporting requirements in 2015. Currently, companies that issue 250 or more federal W-2 forms are required to include the cost of employer-provided group health plan coverage as an information item on the W-2 form. Newly issued regulations now require a company to report additional information if the company either: (1) sponsors a self-insured health plan, or (2) is an applicable large employer (one with 50 or more full-time employees or full-time equivalent employees).
New information returns
A new information return (Form 1095-B or 1095-C) must be prepared for each applicable employee for calendar year 2015 and filed with the IRS by Feb. 28, 2016 (March 31, if filed electronically). A copy of the Form 1095 or a substitute statement must be given to the employee by Jan. 31, 2016. Employers will be subject to penalties for failing to timely file the returns or provide statements to employees.
Health plan reporting requirements
Employer-sponsored health plans of all sizes will need to inform the IRS of employees and family members enrolled in the plans during 2015. Employees who are offered coverage, but decline the coverage, are not reported. Insurers will be responsible for reporting this information for insured plans, but employers will be responsible for reporting this information for self-insured plans. The IRS will use this information to determine whether the employees are exempt from the individual mandate penalty due to having health coverage for themselves and their family members.
Large employer reporting requirements
If a company is a large employer, it must report whether it offered its full-time employees affordable, minimum value health coverage for 2015. Full-time employees are those who work, on average, at least 30 hours per week. Health coverage is considered affordable if the amount that the employer charges an employee for self-only coverage does not exceed 9.5 percent of the employee’s W-2 form wages, rate of pay or the federal poverty level for the year. A health plan provides minimum value if the plan is designed to pay at least 60 percent of the total cost of medical services for a standard population. Employees who are offered this coverage, but decline it, are included in the report. The IRS will use this information to determine whether the employer is subject to the employer mandate penalties. Employers with fewer than 50 full-time or full-time equivalent employees in 2014 are exempt from this large employer reporting requirement for 2015.
Controlled group issues
Since employers that are members of a controlled group are deemed to be one employer for ACA purposes, employees of all entities in the group are counted for the 50-employee threshold. A controlled group can exist if one company owns at least 80 percent of another company, or if the same five or fewer individuals, estates or trusts have both a controlling interest (80 percent common ownership) and effective control (50 percent identical ownership) of at least two companies. For example, if a manufacturing company with 80 full-time employees is the sole owner of a distribution company with 20 full-time employees, both companies are deemed to be large employers, since together they have at least 50 full-time employees. Consequently, both companies must comply with the large employer reporting requirements. Each company must file the IRS forms using its own employer identification number to report its employees.
Filing the return
In general, a large employer must report the following information to the IRS each year, even if the employer does not sponsor a group health plan:
- A certification by month as to whether the employer offered its full-time employees (and their dependents) the opportunity to enroll in minimum essential health coverage
- The months that coverage was available
- Each full-time employee’s share of the lowest-cost monthly premium for self-only minimum value coverage
- The number of full-time employees for each month of the calendar year
- The name, address and tax identification number of each full-time employee during the calendar year and the months, if any, during which the employee had health coverage
- Any other information required by the IRS
Regarding collectively bargained employees participating in multiemployer plans, the employer is still responsible for providing the required information to the IRS and the employees, even if the multi-employer plan administrator prepares the IRS forms or provides other assistance to the employer. Consequently, the IRS will look to the employer to pay any penalties for noncompliance.
In light of the complexity of the new information reporting requirements, employers should take action now to learn about the rules and ensure that their internal systems will be able to collect the data needed to complete the returns.