The 5 W’s of ACA Tax Reporting
As anyone in HR will tell you, things have been a bit hectic since the Affordable Care Act (ACA) rollout, with new guidelines and changes going through every day. Among those changes are the final rules for ACA tax reporting which were issued on March 5, 2014. These are rules that many companies still don’t fully understand, even though any company that provides insurance to their employees or employs more than 50 full-time staff members is now going to be held accountable.
Don’t worry, you aren’t alone if you’re feeling a bit in the dark when it comes to ACA tax reporting. But this reporting is important, and employees and politicians alike will be looking for the resulting information. This means now is the time to get on the ball and figure this stuff out.
So what has to be reported and who is responsible for the reporting?
As is always advisable when solving any good mystery, let’s start with answering the 5 W’s.
There are two sections of ACA reporting that you need to understand.
The first is IRC Section 6055, which applies to all employees who have been enrolled in Minimum Essential Coverage (MEC). Only those who are enrolled need to be reported, not those who are simply eligible. In some cases, your insurance carrier will be responsible for the reporting of IRC Section 6055, but they may rely on you for some of the necessary information. For companies that provide self-funded group health plans, the onus of responsibility is all on you. This means that now is the time to designate staff members for the reporting requirements.
The second section you need to know about is IRC Section 6056, which applies to all employers who are deemed Applicable Large Employers (ALE) during the year of reporting. So basically, if you employ at least 50 full-time workers, this section applies to you.
For companies that have self-funded plans and employ over 50 workers, all the reporting requirements will be on your shoulders.
IRC Section 6055 requires you to report the months each individual employee was covered by an employee sponsored MEC health plan. You must include identifying information pertaining to the employee and any dependents who were also covered. The name, address and EIN of the reporting entity (sometimes the insurance company) and the employer sponsoring the plan must also be included. Finally, you will need to report whether the coverage was enrolled through the SHOP exchange or not.
IRC Section 6056 will require a certification about whether employees had the opportunity to enroll in MEC under an employee-sponsored plan. You will also be asked to report how many full time employees you had throughout the year and the months during which that MEC was available to those employees. Identifying information for each of those full time employees will be required, as well as the employee share of the lowest cost monthly premium plan available.
Reporting for IRC section 6055 becomes mandatory in the 2015 tax year, with due dates of January 31, 2016 and March 31, 2016 to employees and the IRS respectively.
IRC Section 6056 does not become mandatory until the 2016 tax year. Some companies with 50 to 99 full-time employees will have a transition reporting year for 2015. Reports will be due to employees by January 31st and the IRS by March 31st, in the year following the reporting year.
Didn’t catch that bit above? It’s not just the IRS you are reporting to – you also need to turn forms over to your employees, much like W-2 reporting.
Because ACA said so, and because these reports will be used to determine how successful (or unsuccessful) ACA has panned out to be in the long run. This means that for now, companies need to accept ACA tax reporting as part of their standards of operation. Until the point, when and if, those standards should once again change.