With 2016 quickly approaching, employers should be preparing for reporting requirements under the Affordable Care Act (ACA). From documenting the offer of health care coverage to all eligible full-time employees (FTEs)—those who work 30 or more hours a week—to reporting hours worked for all employees, businesses have a lot on their plate. And with the introduction of Forms 1094-C/1095-C by the IRS, it may get even more challenging.
Moreover, 2016 means that, under the ACA’s “Employer Shared Responsibility” mandate, all Applicable Large Employers (ALEs)—those that employ 50 or more FTEs—will need to prove they have offered “affordable” health insurance coverage to eligible employees or risk facing significant fines. While large companies may have the resources to take on this task, many small and mid-sized business owners need help navigating the complex health care landscape.
In fact, according to ADP research, more than four in 10 small business owners surveyed believe that benefits administration has become more complex. A few (one in seven) are more likely to outsource benefits administration to help protect their organization from costly penalties.
One way to help alleviate this burden is to partner with a Professional Employer Organization, or PEO. Specifically, PEOs provide businesses with a co-employment model where they retain the day-to-day managerial control of employees, but the PEO’s compliance and risk experts help by managing tasks associated with HR and employee benefits—allowing employers to focus more on growing their business.
So, what can this mean for ACA compliance efforts? A PEO can accurately track and report data for each employee to help business owners stay in compliance. Additional ACA-related responsibilities with which a PEO can help include:
- Assisting with determining ALE status and measurement period: Some employers may be unsure if they’re considered an ALE under the ACA definition, but all employers should confirm their status as soon as possible. Why? Because all ALEs are required to provide minimum essential coverage to their full-time employees or risk facing “Employer Shared Responsibility” penalties. But ALEs don’t have to figure it out alone. In fact, PEOs can assist in identifying the correct look-back period to determine if coverage was offered to all eligible employees—ensuring the information is properly tracked and recorded to meet ACA compliance requirements. In addition, because PEOs have access to payroll and benefits information, they can also help employers verify whether the coverage they offered was considered “affordable” under ACA mandates, as well as if it met the criteria for minimum essential/minimum value coverage.
- Supporting 1094-C/1095-C IRS reporting: In 2016, the IRS will require ALEs to file a Form 1094-C, which is a report demonstrating they’ve offered health care coverage to 70 percent of eligible employees in 2015 (95 percent in 2016). In addition, the Form 1095-C must be furnished to employees at the same time as the Form W-2, and employers must file the Forms 1095-C with the IRS. By working with a PEO, ALEs can get help with completing, printing and distributing the 1095-C forms to employees, as well as filing both forms with the IRS.
- Reviewing and managing Exchange notices: In the event an employee seeks subsidized medical coverage from a state or federal health insurance marketplace and their employer receives a notice from that marketplace, a PEO can review and research the situation to recommend and assist in developing the best response for the employer. Specifically, if an employer does not offer minimum value, affordable coverage to 70 percent of its full-time employees in 2015 (or 95 percent in 2016) and one of those employees seeks an advanced premium tax credit from the marketplace, the employer could be subject to a non-tax deductible penalty of approximately $2,000 for every employee.
For small and mid-sized businesses, the health care landscape continues to evolve. PEOs can help businesses avoid common ACA pitfalls while giving them more time to focus on building their business and remaining competitive. And for those employers not considered an ALE? Partnering with a PEO can still be beneficial, providing support for Summary of Benefits and Coverage (SBC) distribution and Form W-2 reporting.