Time to Check Your Work with IRS ACA Filing Deadline Approaching
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The April 2 deadline is fast approaching for filing information related to the Affordable Care Act (ACA). Credit to your organization if it’s putting the finishing touches on its submission for the 2017 tax year. For those of you who have not yet finalized the submission for IRS filing, there are only two weeks left to do so.
No matter where you stand, here’s a checklist to help gauge where your organization stands in preparing for this year’s annual IRS filing of forms 1094-C and 1095-C.
1. Consolidated, Aggregated and Validated 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. Conducted a monthly audit of employment classifications, such as full-time, part time, variable and seasonal. The ACA employer 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 recheck your information to be sure of its accuracy before completing your filing with the IRS.
3. Determined 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. For instance, if you own or are a partner of several business organizations, each with less than 50 employees, you still may be required to file ACA information with the IRS as a Controlled Group under ACA employer aggregation rules.
4. Calculated 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. If you have not done those calculations, it might be worth a spot check to see where you stand. 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. Checked 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:
If you have not been checking this information monthly, it might be worth at least spot checking some records to ensure that they are, indeed, accurate.
The IRS has indicated during the course of this year that it intends to continue to enforce the Employer Mandate. The IRS has started sending Letter 226J notices assessing organizations with employer share responsibility payments (ESRPs) for 2015 filings. The IRS will inevitably get to the 2016 and 2017 filings to determine organizations’ compliance with the ACA. Inaccurate data and mistakes in completing forms are two of the most common errors that trigger receiving Letter 226J. Taking time to check your filing before submitting it to the IRS could save you many expensive headaches in the years ahead.
To learn more about ACA compliance in 2020, click here.
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