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For large employers, reports are due in 2016 with employee data for every month in 2015
Affordable Care Act (ACA) reporting requirements are presenting challenges to employers, leading many to consider an outsourced solution, according to survey findings reported in April 2015 by consultancy PricewaterhouseCoopers (PwC) in An HR Perspective: Affordable Care Act Reporting Survey Results.
PwC and Equifax Workforce Solutions conducted a survey in the first quarter of 2015 to better understand how employers are planning to comply with the new ACA reporting requirements. This survey report contains information provided by 480 employers in 36 industries across the U.S.
Tracking and Reporting Employee Data
In 2015, companies with 100 or more full-time employees (or the equivalent in part-time employee hours) were required to begin complying with the ACA’s “shared responsibility” mandate to offer minimum essential health coverage that is affordable to their full-time employees and dependents, or pay certain penalties, although they will have two years to phase up to the requirement to cover 95 percent of their workers. Companies with 50 to 99 full-time or equivalent employees have another year—until 2016—to comply with the coverage requirements.
If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an “applicable large employer” (ALE) subject to the ACA’s coverage mandate or the employer information reporting provisions. Employers with 50 or more full-time employees or full-time equivalents are considered ALEs.
Providing reports to employees.
For ALEs, the first Forms 1095-C (the statements for 2015) must be provided to each full-time employee no later than Feb. 1, 2016 (Jan. 31, 2016, being a Sunday).
Filing reports with the IRS.
ALEs must file Form 1094-C and Form 1095-C for each employee with the IRS for the 2015 calendar year no later than Feb. 29, 2016 (or March 31, 2016, if filed electronically). Regulations under section 6081 address extensions of time to file information returns.
The required IRS forms must contain data tracked month-to-month in 2015, detailing employee’s hours worked as well as employee’s access to employer-provided health care and employee contributions to employer-provided health care.
For those with 100-plus full-time employees or part-time equivalents, penalties for noncompliance with the ACA’s requirements will be assessed in 2016 based on 2015 data. For those with 50 to 99 full-time employees/equivalents, penalties will be assessed in 2017 based on 2016 data.
"This reporting, on IRS Forms 1094 and 1095, is needed to demonstrate compliance with the ACA's employer mandate and individual health coverage requirements," the PwC report explains. "The effort required to implement the reporting can be significant, and if employers do not implement a solution soon for meeting these requirements, they may have significant risk for reporting penalties and underlying ACA excise taxes."
"Employers will need to make important business decisions soon regarding whether they will implement an ACA reporting solution in-house or whether they will outsource their reporting requirements," the report points out.
However, only 10 percent of survey respondents had implemented an in-house or outsourced solution as of the first quarter of 2015. In addition, 16 percent reported they had not yet considered a solution or did not know what solutions they should consider.
The participating employers that intended to or had already outsourced their ACA information reporting requirements varied with respect to the type of vendor they intended to use: 48 percent of smaller employers planned to use their payroll vendor, whereas 35 percent of large employers planned to use a dedicated ACA compliance vendor. In addition, 18 percent of mid-sized employers were still in the process of determining their outsourcer.
Of the respondents that have more than 30 percent variable hour/part-time employees, 44 percent intended to use a dedicated ACA compliance vendor for their ACA information reporting requirements.
Types of Outsourcing Vendors Selected for ACA Reporting
Among employers that intended to or had outsourced their Affordable Care Act information reporting requirements, the type of vendor selected varied according to the size of the employer's workforce.
Outsourced Vendor Type
Employers with fewer than 1,000 employees
Employers with 1,000 to 5,000 employees
Employers with more than 5,000 employees
Tax information reporting firm
HR systems provider
Dedicated ACA compliance vendor
Do not know/undecided
Source: PwC, An HR Perspective: Affordable Care Act Reporting Survey Results, April 2015.
According to the survey findings, 65 percent of respondents indicated that data quality was a concern. For many employers, multiple systems house the necessary data—payroll, HR information systems (HRIS), benefits administration, and leave of absence systems—and some of the data may be held by third parties.
"Aggregating all of this data on a month-by-month basis for purposes of reporting to the IRS and employees can be challenging, especially because of the degree of scrutiny the IRS Forms 1094 and 1095 are likely to receive," the report points out. "Employers will need to make a business decision as to how to collect the necessary data in year 1 and then create an on-going process for future years."
In a related reporting issue, 43 percent of survey participants indicated they were concerned about responding to exchange notices.
"Employers can expect to receive notices from exchanges when their employees apply for subsidized insurance, possibly triggering employer penalties," the report explains. "On receiving the notice, an employer may be able to validate or challenge an employee’s eligibility for a subsidy (for example, because a full-time employee is eligible for affordable employer-sponsored coverage) and thus mitigate the risk of penalties. Particularly for multistate employers with many worksites, responding to the exchange notices on a timely basis could be challenging since state exchanges may vary in their notices and response procedures."
Timely response to notices is critical, "but could be a problem for decentralized employers," the report notes. "There is also no way to predict the volume of these notices and a high level of notice activity in addition to other inquiries from the IRS and exchanges could create challenges for employers."
Among survey respondents, 61 percent of those with more than 20,000 employees were concerned about responding to exchange notices.
Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.
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