We recently held a webinar regarding changes pertinent to the 2023 ACA reporting season. After receiving numerous questions from attendees during the event, we thought it best to compile them and share them for your reference below.
Without further ado, see below the most common ACA reporting questions heading into the 2023 reporting season.
What is a PTC?
A PTC stands for (Premium Tax Credit). It is a tax credit that an individual can use to lower his/her monthly insurance payment when enrolled in coverage on either a state exchange or the Health Insurance Marketplace. It is also the trigger for the IRS to identify ACA non-compliance within an organization.
How would an employer know if an employee received a PTC?
The only way an employer will know this is if your employee volunteers this information to you or you get a penalty Letter 226J. The penalty letter details all employees who have ever received a PTC and which months associated with it resulted in a penalty.
What happens if an employee receives a PTC? Will I get a penalty?
Not necessarily. The fact that your employee received a PTC does not mean you will get a penalty for it. What it does mean is that the IRS is going to check how you code their 1095-C form. They will look at that coding and assess: Is this coding sufficient to avoid a B penalty? Were they made an offer of coverage that meets the Minimum Value (MV) and was it affordable under one of the three safe harbors? Were they a part-time employee? These are the types of things the IRS will look for when evaluating an employee’s 1095-C form.
Does the family glitch impact IRS reporting?
The “family glitch” doesn’t directly impact employer reporting – it might, however, impact the number of potential PTCs. The PTC is just a trigger at the 95% threshold. If you don’t offer that 95% coverage then you are potentially exposed to a 4980H(a) penalty.
If there is no PTC-listed individual then there will be no penalty assessed. With the 49080H(b) penalty, you could have 1,000 employees and not offer them Minimum Essential Coverage (MEC). If none of them go on the exchange and try to get a PTC, then your penalty risk is zero. They assess the penalty based on an employee receiving a PTC that triggers all of those other factors.
Why is ACA affordability so low for 2023? Does it have anything to do with the Inflation Reduction Act?
Yes. The Inflation Reduction Act capped the maximum contribution towards premiums for exchange plans at 8.5% of an employee’s income. We believe this is what is leading to the reduced affordability thresholds for 2023.
If we offer an HRA are we required to use one of the HRA offer of coverage codes?
Not necessarily. All of the new HRA offer codes identify the ZIP code safe harbor. The IRS has made it clear that as long as it meets a specific threshold, the HRA is an offer of coverage that meets MEC and MV. If you use the ZIP code safe harbors to prove affordability, then you have to use B codes.
Do all employees have to get a 1095-C or only full-time?
You do not need to send and file for all employees. You do need to send and file for any employee who was full-time for one or more months during the calendar year.
How do you code an employee who waives insurance?
You would indicate that you made an offer of coverage, and there are several codes for that. The fact that they waived the insurance is not necessarily relevant to the IRS. It must be indicated that the offer of coverage met the minimum benefit value and affordability safe harbors.
What are the filing requirements for a California ALE employer that does not offer health insurance?
Your filing requirements are triggered by your Applicable Large Employer (ALE) status, not whether you offered your employees coverage. You would have the same requirements as other ALEs that offered plans.
If a company is brand new this year and has roughly 100 employees for the majority of 2022, will it have to report?
While the ALE calculator is generally made looking at the prior year, a new employer would be considered an ALE for 2022 if it reasonably expects to employ, and actually does employ, an average of at least 50 full-time employees, including full-time equivalent employees) on business days during the current calendar year.
Are there late penalties for filing late ACA information?
There can be. We have had several new clients get late filing penalty letters that referenced the date where corrections were filed vs. the original filing date.
Who should be handling the ACA filing for the company?
Employers doing it in-house conduct it through HR. Some payroll vendors or HRIS platforms do this as an add-on. We do it on your behalf. It depends on your internal comfort level in tracking coverage offerings and being able to complete the necessary forms for filing. Organizations with high rates of turnover or seasonal employees usually find it easier to file with a third party as it gets a bit confusing.
Get help with 2023 ACA reporting
The 2023 ACA reporting season is right around the corner and the penalties for failing to complete filing and furnishing requirements as well as compliance with the Employer Mandate are higher than ever before. Furthermore, the IRS has made it clear that enforcement is a top priority going forward.
Organizations that need assistance with their ACA compliance processes, including determining employee coverage eligibility, affordability calculations, coding, filing, furnishing, and IRS audit defense, should contact Trusaic for assistance. We’ve prevented over $1 billion in penalty assessments for our clients. Plus, if you sign up before December 31, 2022, we will waive the entire setup cost.
To evaluate your current ACA efforts, take the self-assessment quiz, ACA Vitals below.
For information on ACA penalty amounts, affordability percentages, important filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA 101 Toolkit.