The Most Commonly Asked ACA Reporting Questions, Answered
3 minute read:
With less than 30 days left in 2020, employers should begin to prepare their ACA filings with the IRS. Despite ACA reporting having been required for the sixth consecutive year now, employers are still facing challenges in complying with the healthcare reporting requirements of the ACA’s Employer Mandate.
We have compiled some of the most frequently asked ACA reporting questions from insurance brokers and employers alike and answered them below.
Q: Which employers need to report their ACA information to the IRS?
A: Applicable Large Employers must file Forms 1095-C for their full-time employees if they do not want to be subject to potential penalties from the IRS. The tax agency is currently issuing ACA non-compliance penalties for the 2018 year via Letter 5699. Employers that fail to file Forms 1095-C could also be subject to penalties under IRC 6721 and 6722. Employers may also be subject to penalties for failing to file Forms 1095-C for prior years.
Q: Are only full-time employees required to file 1095-Cs?
A: The full-time employees do not in and of themselves file the 1095-Cs (or 1095-Bs). Rather, it is the Applicable Large Employer (ALE) that is required to file and furnish 1095-Cs for each of its full-time employees.
In addition, if the employer has self-insured coverage, the employer must also report on all the individuals who were enrolled in the self-insured health plan, including individuals who were not full-time employees, and non-employee individuals (e.g., spouses/dependents). The employer has the option to complete information about non-employee individuals using either Part III of the 1095-C or by using Form 1095-B.
Q: What is the TIN Error Reconciliation Process?
A: The Taxpayer Identification Number (TIN) error reconciliation process is a system for identifying TIN errors in ACA filings submitted to the IRS. For example, if the IRS Affordable Care Act Information Returns (AIRs) system indicates that an employer’s filing is “accepted with errors,” a list is provided containing all of the employees with respect to whom a TIN error was noted. This typically occurs when there is a mismatch between the legal name and reported social security number for said employees. This list should be cross-referenced with the employer’s HR/payroll records, which may be out of date and could be the root of the cause for the TIN mismatch.
Employers should be engaging in the TIN solicitation process to ensure names or social security numbers (SSNs) are up to date. Employers filing 1095-Cs that contain incorrect TINs will not be subject to penalties if they comply with the TIN solicitation requirements. Once the names and SSNs are corrected, the employer will want to use the corrected information for future 1095-C filings. (The IRS does not require the filing of corrections to SSN or name errors alone without any corrections to the amounts identified in the 1095-C).
Q: What documentation is necessary for substantiating ACA reporting?
Supporting documentation is essential for all employers that file with the IRS. In the event of an ACA penalty assessment from the IRS regarding your filing submissions for a particular year, your organization is going to provide documentation substantiating the coverage you provided to your workforce. Supporting documentation includes items such as Summaries of Benefits of Coverage and Enrollment Guides, Employee Handbook, Summary Plan Documents, Employee Premium Rate Sheets, and/or Acknowledgement of Offer of Coverage.
If the question is specifically focused on payroll, supporting documentation could be a spreadsheet on which relevant payroll data was downloaded for use in determining full-time employee status.
If your organization has any additional reporting questions or needs further assistance with ACA reporting, contact us to learn about ACA Complete. As you head into the new year and begin your ACA filings with the IRS, we hope you find these questions and answers to be helpful.
To learn more about ACA compliance in 2021, click here.
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