Every January, employers scramble to get their required Forms W-2 prepared and sent out to their employees. Well, get ready, because starting in January 2016—only 10 months from now—applicable large employers (ALEs) will be required to complete and send out the new Form 1095-C for every full-time employee. This is all thanks to the reporting required by the Affordable Care Act (ACA.) The biggest concern right now is that many, if not most, ALEs have not even thought about this looming requirement. We worry about that because the Form 1095-C and its transmittal, Form 1094-C, are quite complex and both will require 2015 data beyond the usual payroll information. Thus, we are trying to get employers to focus on this requirement now so they won’t be faced with a nasty surprise next January.
Data points that the IRS will use in assessing “pay or play” penalties
As everyone knows by now, the ACA, starting in 2015, imposes potential “pay or play” penalties on employers who do not provide affordable, minimum essential coverage to their full-time employees. One of the data points that the IRS will use in assessing such penalties will be information provided by ALEs on Forms 1094-C and 1095-C. In essence, these forms will tell the IRS which full-time employees are offered coverage and which are not. For those offered coverage but who declined, the forms will also indicate whether the coverage is affordable and, if so, under which regulatory standard it is considered to be so. Finally, the forms will indicate whether any special coverage exemptions apply.
Forms 1094-C and 1095-C will be looking for information that is outside the usual payroll function. The information includes:
- The number of full-time employees and total employees on a monthly basis
- Each employee’s cost for the lowest priced single-coverage option applicable to that employee
- Which methodology the employer is using to determine coverage affordability for each employee.
And the list goes on.
Not all payroll vendors are ready for ACA reporting
We have spoken to a number of payroll companies about the new reporting, and it is clear that some are more ready than others. The same is true of payroll software providers. At a minimum, a large employer should check with its payroll provider or software company as soon as possible about its ACA reporting readiness. Additionally, large employers should start to gather the required 2015 information. January 2016 is going to come all too soon and when it does, employers will have only 31 days to comply.
For more details about the information you need to begin tracking for Forms 1094-C and 1095-C, please read our related article, Are You Ready for the ACA Employer Reporting Requirements? Contact Roger Prince or Bill Enck with any questions.