ACA Reporting Checkup: What Employers Need to Know

Despite multiple challenges, many portions of the Affordable Care Act (ACA) are still in effect and employers are taking steps to remain in compliance with the law. This fact sheet is intended as a quick checkup as businesses prepare for reporting on coverage offered under their employer-sponsored health care plans and develop their compliance strategies for 2020.

Safe Harbors, Forms and Transition Relief

Affordability

In 2020, if the premium for the lowest-cost, employee-only coverage option available to employees does not exceed 9.78 percent of an employee's adjusted gross household income, the coverage will be considered "affordable" for purposes of the ACA. This is lower than the 9.86 percent threshold in place last year, meaning some coverage options that were marginally "affordable" in 2019 may not remain so in 2020.

Three affordability safe harbors—Rate of Pay, Form W-2, or Federal Poverty Line—are generally available to simplify an employer's task in determining whether a plan is considered to have offered at least one "affordable" employee-only coverage option. Note that wellness incentives, incentives to waive coverage and other factors can impact the affordability determination.

Forms 1095-B and 1095-C Reporting Form Distribution to Employees

Employers had until March 2, 2020—extended from January 31, 2020—to provide employees with copies of their Forms 1095-B or 1095-C. Many employers distributed these forms in conjunction with employees' W-2 wage statements for 2019, which can streamline distribution of employee tax forms or can distribute them separately.

Stemming from the effective repeal of the ACA's individual coverage mandate effective Jan. 1, 2019, the IRS has provided additional transition relief available for 2019 reporting of "minimum essential coverage" on Form 1095-B. Rather than distributing Forms 1095-B directly, eligible employers may instead post notice on their websites that the forms are available on request, along with certain contact information.

However, a hard-copy of the Form 1095-B must be provided within 30 days of receipt of an employee's request. Similar relief from the ACA's "failure to furnish" penalties is available for eligible employers with respect to Form 1095-C reporting for employees who were not working full-time schedules during every month of 2019.

Filing Deadlines for Information Returns and Transmittals

The deadline to file Forms 1095-B or 1095-C with the IRS, along with transmittal Forms 1094-B or 1094-C, was Feb. 28, 2020 (this deadline as not extended by the IRS). The electronic filing deadline is March 31, 2020. 

Employers filing 250 or more returns (inclusive of Form W-2 submissions) must file electronically. The IRS updated instructions for 2019 Forms 1094-B and 1095-B, and also updated instructions for 2019 Forms 1094-C and 1095-C.

"Good Faith" Transition Relief

The IRS extended "good faith" transition relief to employers for ACA reporting for plan year 2019. This transition relief provides relief from penalties for employers that report inaccurate or incomplete information if they can show they made good faith efforts to comply with the reporting requirements. An important note: this relief does not apply for failing to timely provide statements to employees or failing to timely file with the IRS.

Employers may want to analyze their employee data to ensure they have accurately accounted for ACA full-time employees. Depending on the nature of a company's business and workforce, the number of ACA full-time employees may be different depending on which measurement method the company is using (e.g., monthly or look-back safe harbor).  Capturing and maintaining accurate employee service data is critical to defending against IRS penalty assessments.

No "Cadillac Tax"

In December 2019, President Donald Trump signed a spending package that eliminated the so-called Cadillac tax under the ACA, which would have imposed a 40 percent excise tax on "excess" coverage offered under employer-sponsored plans. The Cadillac tax would have been effective in 2022.

State Coverage Mandates

Although some states, such as California, have passed laws implementing their own versions of the ACA's individual mandate, the legal viability of such requirements has yet to be tested.

Shardé T. Skahan is an associate in the Los Angeles office of law firm Ogletree Deakins. Her practice is focused on employment litigation and counseling as well as Affordable Care Act compliance. © 2020 Ogletree Deakins. All rights reserved. Reposted with permission.

Related SHRM Article:

Deadlines Loom as Employers Prep for ACA Reporting in 2020, SHRM Online, January 2020

IRS Lowers Employer Health Plans' 2020 Affordability Threshold, SHRM Online, July 2019