You are an
employer. You are a bit unclear on the new paperwork you need to file to comply
with the Affordable Care Act (ACA), also known as Obamacare. As we go into the fourth quarter of 2014, this
issue is taking on greater urgency.
You are
completely normal. Many companies, including their advisors, are in the same
situation. The rules are new, complicated and – and in some cases – repetitively
postponed. Are you supposed to do anything different when you send out the 2014
Forms W-2 in early 2015, for example?
The easiest
way to make sense of this is to divide employers into three categories. Why?
Because each employer category has its own rules.
The first category is an employer
with less than 50 employees (technically, “full-time equivalents”). The Government is quick to point
out that this encompasses 96% of all employers, although of course it
encompasses a much smaller percentage of employees.
If this is
you:
·
You
do not have to do anything different with your 2014 W-2s.
·
You
are not required to provide health insurance coverage to your full-time
employees.
·
You
are not required to pay an employer penalty.
·
This
is true for 2014, 2015 and all years thereafter.
So, if you
are an employer in this category you may or may not offer health insurance to
your employees, but this remains a business decision. You are not required to
do anything – including filing any new paperwork – to be in compliance with the
ACA.
Let’s make our second category
employers with 100 or more employees. Why? Technically the original ACA divided employers into two
groups: under 50 employees and 50 employees and over. There have been numerous
regulatory changes to the law, and one change divided employers further into
50-but-99-and-under employees and 100-employees-and-over.
If this is
you… you need to get ready to make changes.
·
You do not have to do anything different with
your 2014 W-2s (fortunately). However, see below for your 2015 W-2s, which you
will file in 2016.
·
You
will have to provide health insurance to your employees starting January 1,
2015.
o
The
ACA itself defines what is acceptable insurance, referred to as “minimum essential
coverage.”
§ It also has to be “affordable.”
§ These are areas you want to review
with your insurance agent or benefits consultant.
o
There
is a sub-rule in here that may or may not impact you. The ACA originally
required employers to cover 95% of their full-time employees in 2015. That rule
has been changed. You are now required to cover 70% of your full-time employees
in 2015 and then 95% for 2016 and later years.
·
You
will be required to pay an employer penalty if you don’t provide minimum
essential and affordable health insurance.
o
Interestingly
enough, this penalty will not appear on your business income tax return. The
IRS has to wait until your employees have filed their individual tax returns, then
match any information provided to the IRS by the health-care exchanges and by
you as the employer.
o
This
is expected to be in the form of an IRS notice. You will be given time to
respond, after which the IRS will issue another notice and demand for payment.
o
You
can therefore expect that this notice will not go out until the end of 2016 or
more likely in 2017. This is approximately one-year after you paid the
underlying payroll itself.
§ We should expect that this penalty will
also eventually be required to be paid via estimated tax payments.
·
You
will have new paperwork when you file your 2015 year-end payroll tax returns in
2016. These are known as the “Section 6056 rules” and are in place to provide
employees the information they need to calculate their ACA penalty, if any, on
their individual tax returns.
o
You
will file Form 1095-C Employer-Provided Health Insurance Offer and
Coverage. A copy of this goes to your employee. It will also go to the
IRS with its transmittal – Form 1094-C Transmittal of Employer-Provided Health
Insurance Offer and Coverage Information Returns.
§ It is therefore similar to sending
the W-2s with their transmittal Form W-3.
o
By
the way, filing Forms 1095-C and 1094-C are optional for 2014 (to be filed in
2015). The IRS has said it would like you to file and consider them a “trial
run,” but you do not have to.
o
But
they are mandatory for 2015 (to be filed in 2016).
Finally, our third category: employers
with 50 to 99 employees.
This
category is different because in February, 2014 the IRS segregated what it
called “midsized employers” (that is 50 to 99 employees). These employers
received a one-year delay before facing ACA penalties – until January 1, 2016.
The “large
employers” (100-or-more employees) received no such break and have to comply
starting January 1, 2015.
If this is
you… you need to get ready to make changes.
·
You
do not have to do anything different with your 2014 W-2s (fortunately).
However, see below for your 2015 W-2s, which you will file in 2016.
·
You
will have to provide health insurance to your employees starting January 1, 2016
(not 2015).
o
There
is an interesting requirement, though.
§ You will have to certify – for 2015 -
that…
·
You
have not reduced your workforce to qualify for this relief; and
·
You
have not materially reduced or eliminated any health coverage.
§ This certification is on Form 1094-C,
which you will be filing anyway.
o
Otherwise,
the requirements are the same as 100-and-more employers, as discussed above.
·
You
will have an employer penalty for not complying, but you do not have to comply
until January 1, 2016. That is, you have one additional year to comply (as
compared to 100-and-more employers).
o
Otherwise,
the requirements are the same as for 100-and-more employers, as discussed
above.
·
You
will have new paperwork when you file your 2015 year-end payroll tax returns in
2016. These are known as the “Section 6056 rules” and are in place to provide
employees the information they need to calculate their ACA penalty, if any, on
their personal tax returns.
o
You
will file Form 1095-C Employer-Provided Health Insurance Offer and
Coverage. A copy of this goes to your employee. It will go to the IRS
with its transmittal – Form 1094-C Transmittal of Employer-Provided Health
Insurance Offer and Coverage Information Returns.
§ It is therefore similar to sending
the W-2s with their transmittal Form W-3.
o
By
the way, filing Forms 1095-C and 1094-C are optional for 2014 (to be filed in
2015). The IRS has said it would like you to file and consider them a “trial
run,” but you do not have to.
o
But
they are mandatory for 2015 (to be filed in 2016).
You now have
a high-altitude view of what you, as an employer, are to do to comply with the
ACA filing requirements. Unless you are a less-than-50 employer, you will have
additional reporting requirements. Please consider that some of this
information is not presently collected as part of your routine accounting
process. Both 50-to-99 and more-than-100 employers should review that new
procedures will be in place to collect the information needed to complete these
new ACA tax forms. Whereas these forms will not be filed until early 2016, they
will contain information going back to January, 2015.
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