The Affordable Care Act implements penalties on individuals for failing to obtain health insurance and on large employers for failing to offer affordable health insurance coverage to their employees.  Because these penalties are implemented through the tax code, employers and health insurance providers are required to file new information returns with the IRS.  This information is required to verify whether or not employees were offered/obtained health insurance coverage, and determine the amount of any applicable penalties.

Originally, the law specified January 1, 2014 as the “starting date” for large employers to provide coverage to their employees.  However, reporting requirements were not established early enough by the federal government.  Without any information reporting from employers, it would be impossible to implement the law as written.  In July 2013, the “employer mandate” was delayed a year to provide time to develop the reporting requirements.

In March 2014 the final regulations were published in the Federal Register detailing what information will be reported by employers and providers of health insurance.  The IRS will now implement these regulations (which includes designing the forms, writing the instructions for completing them, and writing a specification for electronic reporting).  Once this is done, we will have enough detail to write the software required for reporting this information.

For employers that have not offered health insurance benefits to their employees (or perhaps only to a limited number of employees), it is important to note that the added administrative and record keeping requirements imposed may be significant.  In other words, you may need additional personnel and new software to handle these requirements.

Human Resources Functionality

The software that implements reporting requirements for the ACA will be included in the Human Resources module.  This software will not be a part of the standard payroll package.

Employers will be required to provide employees with a new form at the end of the year, the 1095-C.  This form can be mailed along with their W-2.  Both forms may be provided to employees electronically as well, provided that an employee consents to electronic delivery of the forms.

Providers of minimum essential coverage, including employers providing coverage under a self-insurance group health plan, are subject to the “Section 6055” reporting requirements.  This includes information reporting on who is covered under a particular health insurance policy (e.g. the employee and/or spouse and/or dependents) and what months they were covered.

Employers are subject to the “Section 6056” reporting requirements.  This section details the information that must be reported on the 1095-C form, including which months the employee was offered/eligible/enrolled in the employer’s health plan.

The 1095-C form will include areas to report both section 6055 and section 6056 information.  Self-insured employers will fill out both areas.

The first 1095-C forms will be filed in 2016, for the 2015 calendar year.

A transmittal form, the 1094-C, will also be filed with the IRS.

Electronic reporting of the information to the IRS will be possible, subject to the same rules as electronic reporting of W-2 information.  Files with the 1095-C information will likely be uploaded to the IRS web site just as you currently upload the W-2 electronic files to the SSA’s web site.

Completing the 1095-C Form

Datatech’s Human Resources program will include a database to store all of the information that is required to be reported on the 1095-C, including both section 6056 (required of all employers) and section 6055.  Self-insured employers will either need to maintain the section 6055 information themselves for reporting at the end of the year, or import the section 6055 information from a file provided by the health plan administrator that contains the required information.

Electronic Delivery of W-2’s and 1095-C’s

Employers may have the opportunity to significantly reduce costs for printing, preparing and mailing employee year end statements.  Employees that consent to electronic delivery of statements would typically log into a web site and access their W-2’s and 1095-C’s as PDF documents, download them, and print them out to file with their tax returns.

There are three possibilities for accomplishing the delivery of year end statements:

  • Datatech may develop the software needed for you to operate your own web site that employees would be able to log into to retrieve their forms.  This would require a server running Internet Information Services and DataFlex WebApp.  For security purposes, this server would be linked only to a database containing the employee statement information, and not to your entire accounting/payroll database.
  • Datatech may develop a web site designed for customers to upload their employee statement information and provide a hosting service for our customers.  Costs for this service would likely be based on a per employee basis.  This would eliminate the need for you to set up and operate your own web server.
  • Datatech may develop an export function that would allow you to upload your employee statements to a third party hosting provider.

We would like to get feedback from our customers regarding the electronic delivery of W-2’s and 1095-C’s.  You may want to survey your employees to determine how many have Internet access currently, and how many may be interested in receiving their year-end statements on the Internet.  Is electronic delivery of year end employee statements feasible for farm workers?  If so, which of the above methods of delivery would you prefer?

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