If you have just now succeeded in forgetting the debacle that was 1095-C and 1094-C reporting for 2015, it’s time to reawaken all that you hoped was in the past and start preparing for 2016 reporting during January , February, and/or March 2017. According to IRS Instructions, the following are the dates to put on your calendar NOW:
“Furnishing Forms 1095-C To Employees
You will meet the requirement to furnish Form 1095-C to an employee if the form is properly addressed and mailed on or before the due date. If the regular due date falls on a Saturday, Sunday, or legal holiday, file by the next business day. A business day is any day that is not a Saturday, Sunday, or legal holiday. An ALE Member must furnish a Form 1095-C to each of its full-time employees by January 31 of the year following the year to which the Form 1095-C relates. Forms 1095-C for the 2016 calendar year must be furnished by January 31, 2017.”
“When To File
You will meet the requirement to file Forms 1094-C and 1095-C if the forms are properly addressed and mailed on or before the due date. If the regular due date falls on a Saturday, Sunday, or legal holiday, file by the next business day. A business day is any day that is not a Saturday, Sunday, or legal holiday. Generally, you must file Forms 1094-C and 1095-C by February 28 if filing on paper (or March 31 if filing electronically) of the year following the calendar year to which the return relates. For calendar year 2016, Forms 1094-C and 1095-C are required to be filed by February 28, 2017, or March 31, 2017, if filing electronically.”
“What Should I do To Prepare NOW?”
If this is your first year as an ALE and you have 250 or more employees who have worked Full Time hours of service during at least one month during 2016, then you must Electronically file your 1094-C & 1095-C Forms. That means that, if you haven’t already done so, TWO responsible employees in your company need to immediately start the process of registering as users on the IRS website. These two employees must use their personal tax information when registering. This allows the IRS to confirm your identity, after which they will mail to your personal mailing address the confirmation letter explaining how to complete your registration process. You can use this link to register.
If this is not your first year as an ALE with 250 or more 1095-C’s, but last year you did not register with the IRS, finish registering with the IRS, obtain a TCC code, or successfully utilize your TCC code, then it’s also time to start now and finish all of those processes prior to needing to use your TCC code to submit this year’s reporting. See this blog article for more information on the steps that need to be completed.
Once you have finished all of the steps necessary to get your TCC into Production status, it’s time to focus on the actual data you will be filing, and how you intend to compile it. If you are a Datatech Human Resource Management (HRM) Software user, you know that it is capable of compiling the data onto the 1095-C forms right inside the software. If you are not using the HRM Software, or if you are using an outside service to create, mail and/or file your 1095-C’s, then you might want to consider purchasing it now. Otherwise you will want to start checking that the data you have in your employee files is complete and accurate and ready to be exported to your third party processor. If you are planning to use pre-printed Portrait Mailers for the employee copies of the 1095-C, you may want to place your order soon.
[Note to those who are Paper Filing (less than 250 1095-C’s): Remember that any Paper copies mailed to the IRS need to be printed in the Landscape IRS format. You may print directly out of the HRM Software onto pre-printed landscape forms, or you may print the entire form directly onto blank paper, saving you from having to purchase two different pre-printed forms.]
Perform A Compile 1095-C Test Run
Even if you are not required to report electronically and even if you are an HRM Software user, you will want to make sure that the data and settings in your system are accurate for the 2016 calendar year. Don’t wait until January to start, since it will be too late to fix any errors before the employee copies of the 1095-C forms need to be printed and mailed along with the W-2’s by January 31, 2017. You can use the Compile 1095-C Information feature of the HRM software to do an initial check now of your existing 2016 records and try to spot errors or potential errors. You can make any needed adjustments now so that your final 1095-C’s are more likely to be accurate and not need manual edits, which will make your Review process go much faster. Then after all of your December Payroll is entered and finalized, you will need to Compile again to capture the rest of the 2016 data. But before you do either, be sure to check the following settings:
- Is there a Default Category setup that correctly indicates what Eligibility Method you are using? (ACA Menu, Setup, Categories)
- If you are using the Look Back Method, is the Ongoing Measurement Period Starting Date correct? (ACA Menu, Setup, Categories)
- If you are using a 12-month Look Back Measurement Period, do you have complete payroll records in your company file (or associated predecessor company files) going back to at least November 2014?
- Does the Category properly determine eligibility for Salaried employees (if applicable)? (ACA Menu, Setup, Categories)
- Is the correct Safe Harbor Code shown in the Category Setup? (ACA Menu, Setup, Categories)
- Is the correct Medical Plan selected (on the Offered To setup) that you are reporting? (ACA Menu, Setup, Medical Plans. Choose your Plan, Click on Offered To tab)
- If this is a Self-Insured Plan, is that box checked in the Medical Plan setup? (ACA Menu, Setup, Medical Plans. Choose your Plan)
- Is the correct Plan Start Month and End Month entered on the Medical Plan setup? (ACA Menu, Setup, Medical Plans. Choose your Plan)
- Is the correct 1095-C code for your Plan entered on the Medical Plan setup? (ACA Menu, Setup, Medical Plans. Choose your Plan) [NOTE: New 1095-C codes for Medical Plans have been added for 2016]
- Are the 2015 and/or 2016 Prior Year Costs archived in the Medical Plan setup? (ACA Menu, Setup, Medical Plan, Prior Year Costs tab)
- Are the Age Rated Costs (if utilized) archived by Plan Year Ending Date? (ACA Menu, Setup, Medical Plan, Age Rated Costs tab)
[NOTE: In addition to the 1095-C compile, you will also need the archived rates for your W-2 DD compile.]
- Are all offers of coverage recorded on the Health Benefits tab for eligible employees? (Employees Menu, Employee Entry, Health Benefits tab)
- Are all insurance coverage and Decline records accurate on the Health Benefits tab? (Employees Menu, Employee Entry, Health Benefits tab)
- Do separate Decline records exist for all Plan Years being reported? (Employees Menu, Employee Entry, Health Benefits tab)
- Are all payroll records accurate, including employee Pay Type and Pay Cycle? (Employees Menu, Employee Entry, Employee Info tab and Deductions tab)
- Are you planning to take any form of Transition Relief, and do you know the rules and Regulations concerning that Relief? (See IRS Instructions link on next point)
- Have you reviewed the Instructions for Forms 1094-C and 1095-C and do you understand the changes from last year and the meaning of all Line 14 and Line 16 codes?
“What if My Insurance Deduction Rates or Plan(s) Are Changing?”
Recently we were presented with the following scenario by one of our customers:
‘We are now in Open Enrollment for the 2016-2017 Plan Year. Our New insurance coverage is effective 11/01/2016. Do we need to add a new Health Benefit Record for every active employee for the new Open Enrollment or will it automatically change/add the Records? We don’t want the new deduction rates to affect our current Payroll deductions.’
While it may seem like one simple question, there are actually many factors that need to be considered in order to accurately determine how the question should be answered.
First of all, we need to address the question of whether or not the Plan itself is changing.
If the Plan is changing: then Yes, you do need to have the existing Health Benefit records show an Ending Coverage date of 10/31/2016 and they need to be Inactivated. Also the Default Plan checkbox in the old plan setup needs to be unchecked. Then the new Medical Plan(s) need to be setup, and the Default Plan checkbox needs to be checked for that Plan, and new Health Benefit Records need to be created that assign the employees to the New Plan with a Starting Coverage Date of 11/1/2016. Any employees who become eligible after 11/1/2016 will automatically be assigned to the New (Default) Medical Plan.
If the Plan is NOT changing: then there is no need to add a new Health Benefit Record. The Ending Coverage Date in the existing Health Benefit Record will continue to be automatically updated for as long as the employee is assigned to that same plan and continues to be measured by the Eligibility Report. (Note: The only exception to this might be if the 1095-C code changed for the existing Plan. Check with your Insurance broker to determine if the new 1095-C code needs to be reported for the entire year or only for the portion of the year after the Plan Year begins. If the latter, then you would need to follow the instructions above to inactivate existing Health Benefit Records and create a NEW Medical Plan and New Active Health Benefit Records, even though the only change would be the 1095-C code.)
Second, we need to know if the Payroll Deduction amount changes for the new Plan Year.
If the Deduction amount is NOT different: Then there is no need to do anything. Just continue running your Eligibility Reports, etc. as you normally would.
If the Deduction amount is different: Then the amounts that are currently being taken out will continue to be taken out until all of the Health Benefit records assigned to this Plan are Updated. The Software allows you to enter the NEW deduction amounts without changing the amounts currently being deducted.
But: You will need to FIRST archive the current amounts. This allows the W-2 DD Compile and the 1095-C Compile to populate accurately. To do this, go the ACA tab, Setup, Medical Plans. Select the Plan from the first field menu. Make sure that the Start Month is correct (In this scenario it should say 11) and the End Month is correct (It should say 10.)
If you are using Flat deduction amounts (not Age Rated) use the following instructions:
Go to the Costs tab. Record all of the current deduction amounts, including the “Annual Plan Costs” and the “Employee Share” Costs. (If these amounts are not entered here, contact your broker and obtain the rates.) Then click on the Prior Year Costs tab. Click into the first field under the “Year Ending” column and enter the date your Plan Year ends (in this scenario it would be 10/31/2016.) Then tab into the “Cost Self” column and enter the Annual Plan Cost that you recorded from the “Self Only” field on the Costs tab. Then tab to the “Self Share” column and enter the “Employee Share” amount you recorded from the “Self Only” field on the Costs tab. Then continue to tab right through the remaining columns and archive the remaining Cost and Share amounts. All fields that have the word “Cost” are the Annual Plan cost amounts, and all the fields that have the word “Share” are the Employee Share (payroll deduction) amounts. When you finish tabbing past the last field the cursor will automatically go down to the next line. This indicates that the Software has saved the amounts you entered.
If you are using Age Rated Costs use the following instructions:
Simply click on the Age Rated Costs tab, Enter a new Plan Year Ending Date (in this scenario it would be 10/31/2017,) and then enter all of the new Age Rates for the New Plan Year. Any prior Age Rated Costs are automatically Archived under the old Plan Year ending Date (In this scenario, 10/31/2016.)
Third, you need to decide upon the precise date you wish to update the Employee Benefit Records.
If the Medical Plan is NOT changing, and the Deduction Amounts ARE changing, then you will need to Update the Employees Health Benefit Records MANUALLY on or about the day the New Plan Year begins (in this case, 11/1/2016.) Doing this on 11/1/2016 allows the existing Health Benefit Records to continue to deduct the current (but old) Plan Year amounts for the remainder of current Plan Year. Then by Manually Updating (instructions below) the Health Benefit Records on 11/1/2016, the existing deduction amounts will be updated to reflect the New Plan Year deduction amounts. Note: We hope to have an automatic feature created in the future wherein this process can be done by the software.
IMPORTANT: 11/1/2016 is a nominal date. If, for example, your pay periods in this scenario end on Saturday, then the last FULL pay period in October will end on 10/29/2016. This pay period will not be paid out, though, until November 4 or 5, depending on your check dates. But depending on how your system is set up, the Software may view this as an October payroll deduction, meaning the amount should be the OLD Plan Year Amount, even though the check is dated in November. If this is the case, then you will need to wait until after the November 4 or 5 payroll checks are printed BEFORE you update the Employee Benefit Records. If this is NOT the case, and the November 4 or 5 check is considered a November deduction, then proceed with Manually updating the Employee records on 11/1/2016.
To determine how your system is set up, use the following instructions:
Go to the Tools menu, Program Setup and then select the Payroll tab. In the 3rd field from the bottom of the left side column you will see the “Week of Month Calc. Basis:” field. The default setting is Ending Pay Period Date. If your system is set this way, then you will need to wait until after the November 4 or 5 checks are printed to Update the Employee records, because the system uses the date of the last day of the Pay Period to determine if the deduction is for the old month or if it is for the new month. If your system is set to “Check Date: Friday” or “Check Date: Saturday”, then you can Update the Employee records on 11/1/2016, because the system uses whatever the Check date is to determine if the deduction is for the old month or if it is for the new month. In this case, a November 4 or 5 check date is going to use the New Plan year amount because the check date is in the new Month.
Once you have decided upon the precise date you wish to update the Employee Benefit Records, follow these Instructions to Manually Update the Records:
Go to the ACA tab, Setup, Medical Plans, and select the Plan from the first field menu. Click on the Costs tab and then click on the Update Employees button in the lower left hand corner. This will automatically update all employees who have Active Health Benefit Records (assigned to that Plan) to the NEW Plan Year deduction amounts.
We are sure this is just the first of many posts about this and other topics related to IRS reporting. Please feel free to send any questions to firstname.lastname@example.org.