Updated from original blog post on November 7, 2017.
The ACA filing deadlines for the 2017 tax year are fast approaching. With the IRS sending penalty notices for ACA filings for the 2015 tax year, now is the time to make sure your reporting for your 2017 ACA filings will be 100% on time and accurate. Organizations with more than 50 full-time or full-time equivalent employees, known as Applicable Large Employers (ALEs), are required to make these filings annually. Here’s a five-point checklist to help gauge where your organization stands in preparing for this annual IRS filing of forms 1094-C and 1095-C.
1. Consolidate, Aggregate and Validate HR, Time & Attendance, Payroll. and Health Benefits data for each month of 2017. This is an important step to ensuring an accurate and timely ACA filing with the IRS. Transition relief for ALEs is not available for 2017 as it was for the 2015 and 2016 tax reporting years. The unavailability of transition good faith relief for 2017 onward makes the use of accurate data in ACA compliance filings with the IRS even more critical than ever for the 2017 tax reporting year.
2. Conduct a monthly audit of employment classifications, such as full-time, part time, variable and seasonal. The ACA employer shared responsibility mandate requires employers to accurately identify their full-time employees (and their dependents) and offer them minimum essential coverage. A 5% margin of error is allowed each month. For any month that an employer strays outside of the 5% margin of error in 2017, the employer is exposed to an annualized penalty of $2,260 multiplied by the number of full-time employees. If you have not been conducting these monthly audits, you may want to start reviewing this information to get it ready for completing your filing.
3. Determine your Workforce Composition, at both the ‘Aggregated Employer Group’ and EIN level. This includes knowing the numbers of full-time and part-time employees, including full-time employees that are not part of the limited non-assessment period. You also need to know the numbers of “pending” and “trending” employees when using the Look-Back Measurement Method. Remember to reconcile historical full-time employees, “not in Limited Non-Assessment Period,” without an offer of health coverage.
4. Calculate health coverage affordability. For 2017, in order to meet the ACA’s affordability threshold, the employee’s required contribution to the lowest cost monthly premium for Self-Only coverage providing Minimum Value should generally not exceed 9.69% of either (a) the employee’s Rate of Pay, (b) the employee’s W-2 Box 1 wages, or (c) the Federal Poverty Line threshold for a household of 1. When calculating affordability, make sure to account for flex credits through cafeteria plans as allowed under IRS Section 125, and other factors such as opt-out payments, wellness plans, HRAs and fringe benefits.
5. Check the accuracy of your data. Many of the problems encountered on the path to ACA compliance are data problems. Make sure your key data points are accurate, including Legal Name, SSN, DOB, Address, Employment Periods, Hours, Wages, Rate of Pay, Compensation Type, Title, Employee Class, Location, EIN, Health Benefits Class, Health Benefits Eligibility Periods, Health Benefits Enrollment Periods, and W-2 information.
To get the complete ACA 101 Toolkit, click here.
If you haven’t started gathering the data necessary to complete the required ACA filings with the IRS, time to get moving.
If you feel overwhelmed, you can find free resources that might prove helpful by clicking here.
You may also want to consider hiring a third-party expert to help you consolidate your data to get on track for meeting IRS deadlines. With IRS penalties increasing, it may prove to be a worthwhile investment to avoid problems posed by filing inaccurate information and the possibility of being assessed IRS penalties. The IRS has begun its efforts to enforce compliance with the ACA. IRS Letter 226J has been sent to some ALEs already for the 2015 tax filing year. More letters are sure to follow. This letter proposes ACA penalties called Employer Shared Responsibility Payment or ESRP, provides the general procedures the IRS used to proposes the penalties, and the procedures for recipients to respond.
To obtain an infographic that explains the process that triggers Letter 226J and how to respond, click here.
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