A bill known as the Common Sense Reporting Act could fundamentally change the way employers report their ACA information to the IRS annually if it is signed into law.
First proposed in 2019, the Act currently has bipartisan support and includes significant changes to how organizations submit their annual ACA Employer Mandate reporting information to the IRS. Below we’ve highlighted the key takeaways that employers should know.
The Act would allow employers to voluntarily report their ACA information, so long as it is no later than 45 days before the first day of the annual open enrollment. In their reporting information, employers will need to indicate whether the coverage they’ve offered to their workforce:
- Was offered to full-time employees
- Was offered to part-time employees
- Meets Minimum Essential Coverage (MEC) for full-time employees, dependents, and spouses
- Meets Minimum Value (MV)
- Satisfies one of the affordability safe-harbors
- Months covered by the reporting
In addition, employers must identify any associated waiting periods and all the Employer Aggregated Group members.
The Common Sense Reporting Act would also streamline communications by allowing health exchanges the ability to report to employers each employee who enrolls in a federal or state health exchange plan. A system would be created that would also allow employers to update in a timely fashion, cancelations of coverage, and permit exchanges to follow up with employers to obtain additional information to determine the eligibility of employees to Premium Tax Credits (PTCs) the current trigger for identifying ACA Employer Mandate non-compliance and IRS penalty Letter 226J.
Some of the other provisions allow third parties to file on behalf of an employer and electronic delivery of 1095-C forms. So long as the employee opts in for receiving electronic 1095-C for records, the process could streamline employers’ furnishing requirements.
In addition, employers will have the option to provide full name and date of birth for covered dependents, if Taxpayer Identification Numbers (TINs) are unavailable. This reduction in requirements would also reduce the administrative burden on employer’s ACA reporting.
Potential compliance challenges
While the Common Sense Reporting Act of 2019 does have some value adds, namely the ability to streamline communications and the option to furnish electronically, it poses significant compliance issues and generally complicates the process for ACA reporting. Requiring employers to self attest to ACA compliance will require the development of a system for identifying compliance metrics, such as documentation supporting of waiting periods, estimation of penalty, and the potential requirement for updating changes in coverage across employees. In short, it requires more reporting parameters.
Employers also run the risk of ACA non-compliance if they don’t complete the standard 6056 reporting of ACA Forms 1094-C and 1095-C. In short, this could just add to the employer’s burden. Now that we are more than five years into ACA reporting, if the bill becomes law, it would add additional reporting requirements to the existing ACA Employer Mandate responsibilities.
Under the ACA’s Employer Mandate, employers with 50 or more full-time employees and full-time equivalent employees, known as Applicable Large Employers (ALEs) must:
- Offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees (and their dependents) whereby such coverage meets Minimum Value (MV); and
- Ensure that the coverage for the full-time employee is deemed affordable based on one of the IRS-approved methods for calculating affordability.
Failure to adhere to these two requirements could subject ALEs to Internal Revenue Code (IRC) Section 4980H penalties.
Best practices for preparing for these types of requirements include implementing a robust, comprehensive, ACA compliance solution with a dedicated specialist.
Such a program can track ACA compliance for you, as well as the necessary supporting documents to substantiate compliance. Only then would the voluntary decision to report ahead of time make sense. Contact us to learn about our full-service compliance solution, ACA Complete.
We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.