The end of the year is quickly approaching, bringing with it a multitude of annual reporting and filing requirements, including 2018 Affordable Care Act (ACA) reporting for employers. Despite numerous attempts to repeal the ACA, the law is still alive and kicking as we end 2018 (even though a new court ruling in Texas puts the law’s future in question again). However, employers need to stay the course and continue to make sure they are in compliance with the law’s provisions.
Individual Mandate Confusion
There was a lot of confusion about the ACA’s future (and even employer reporting) when President Trump signed sweeping tax legislation into law in December 2017 that repealed the ACA’s individual mandate requirement. The ACA individual mandate imposes a tax penalty (also known as an individual shared responsibility payment) on individuals who do not obtain minimum essential health care coverage for any month, unless an exemption applies.
Under the tax reform legislation, effective January 1, 2019, the tax is repealed by reducing the individual responsibility payment to zero for individuals who do not purchase health insurance that qualifies as minimum essential coverage. However, it’s important for employers to understand that there is NO CHANGE to the employer mandate. That provision is completely unaffected by the tax legislation and the repeal of the individual mandate, which means ACA reporting is still firmly on employers’ annual to-do lists.
ACA Reporting Refresher
As a quick refresher, the ACA does not require an employer to offer health coverage under the employer mandate, but applicable large employers (those with at least 50 full-time employees, including full-time equivalent employees) are subject to the employer shared responsibility provisions. This means these applicable large employers may owe a shared responsibility penalty if at least one full-time employee receives a premium tax credit, or cost-sharing assistance, to purchase individual coverage through the marketplace and the employer didn’t offer health coverage:
- At all; or
- That is considered good enough under the ACA.
To go along with the employer responsibility mandate provision, the ACA created two annual information reporting requirements under the Internal Revenue Code (IRC) for certain employers:
- IRC Section 6055 requires annual information reporting by health insurance issuers, self-insuring employers, government agencies and other health coverage providers.
- IRC Section 6056 requires annual information reporting by applicable large employers relating to the health insurance that the employer offers (or does not offer) to its full-time employees.
Both sections require employers to report information to the IRS and furnish written statements to employees or covered individuals detailing the health coverage offered to them.
ACA Reporting Extension
In late November 2018, the IRS announced that it was extending the 2019 due date for entities to provide the required individual statements to employees. Thus, employers now have until March 4, 2019, to provide Forms 1095-B or 1095-C to individuals. (The original deadline was January 31.)
Since the extension is automatic, employers don’t have to do anything to take advantage of the extra time. However, it is important to remember that there was no extension of due dates for filing the 2018 information returns with the IRS. These returns are still due to the IRS on February 28 for paper filers and April 1 (because March 31, 2019, falls on a Sunday) for electronic filers.
Potential Penalties and IRS Letters
Employers must stay on top of ACA reporting since failing to meet these deadlines can result in significant penalties. For example, failing to timely file information returns or furnish employee statements can cost an employer more than $3 million a year. These amounts can increase if an employer intentionally disregards the reporting requirements. To avoid these penalties, it is important for an employer to know how to complete and file Forms 1094-C and 1095-C and Forms 1094-B and 1095-B.
The IRS has also continued to send IRS Letter 226J tax penalty notices to propose and assess employer shared responsibility payments. Whether an employer receives a Letter 226J will be based on information reported to the IRS on Forms 1094-C and 1095-C and information the IRS has about any employees that received a premium tax credit. An employer that receives a Letter 226J from the IRS generally will have 30 days to respond, and the specific due date will be listed on the letter.