The Affordable Care Act (ACA) requires applicable large employers (ALE), who are those employers having at least 50 full-time employees (including FTEs – Full-time Equivalent Employees), to file information returns regarding the health insurance coverage that they offer with the Internal Revenue Service and to provide statements about their health insurance coverage to their full-time employees. These information returns are used to monitor compliance with the ACA. Those employers who fail to comply with the Affordable Care Act reporting requirements risk substantial penalties and an increased risk of audit.
Because these reporting obligations are complex and require considerable attention, it is vital to work with a professional consulting firm, such as NPPG, to ensure your organization stays in compliance with Affordable Care Act Reporting Requirements.
Reporting Requirements Under IRS Section 6056
Internal Revenue Code Section 6056 requires ALEs (and all self-insured employers, regardless of their size), to report their healthcare coverage information to their employees and the IRS.
Full Time Employee Definition
Reporting Requirements Under IRS
A full-time employee generally includes any employee who worked an average of at least 30 hours of service per week for more than 120 days in a year. Under these provisions, a company may have less than 50 full-time employees, but must still meet the ACA reporting requirements.
For example, if you had three employees – who each worked for 120 days for at 10 hours per week, they could be considered one FTE.
Unsure of how to determine who your full-time employees are and what information needs to be provided? Northeast Professional Planning Group, Inc. (NPPG) can assist your organization in determining your filing obligations.
Reporting Requirements Under IRS Section 6055
Determine Your Exposure to Penalties
As of January 2015, IRC Section 6056 required large employers (those with 50 or more full-time employees, including FTEs) to provide Form 1095-C (employee statement) to each of their employees and send a Form 1094-C (transmittal) to the IRS. Form 1095-C and the transmittal Form 1094-C require disclosure of specific information on the employees’ insurance coverage (and their dependents’ insurance coverage, if applicable).
The forms include data such as Tax Id (TIN or EIN), address, full-time status, length of employees’ full-time status, proof of minimal essential coverage offered, coverage dates and employee’s share of coverage premium costs.
Affordable Care Act Reporting Requirements: Penalties for Noncompliance
For employers and employees who do not comply with the ACA reporting requirements, substantial penalties can be imposed. An ALE member that fails to comply with the information reporting requirements may be subject to the general reporting penalty provisions under IRC Section 6721 (failure to file correct information returns) and Section 6722 (failure to furnish correct payee statement).
- The penalty for failure to file an information return under IRC Section 6721 for the 2015 year for large employers with gross receipts over $5 million (average gross receipts for the most recent 3 taxable years) generally was $100 for each return for which such failure occurs. The total penalty imposed for all failures during a calendar year was not to exceed $1,500,000.
- For returns filed for 2016 and 2017, the penalty for failure to file an information return is generally increased from $100 to $260 for each return for which such failure occurs. The total penalty imposed for all failures for the 2016 year was not to exceed $3,178,500 and the total penalty imposed for all failures for the 2017 year cannot exceed $3,193,000.
- The penalty for failure to provide a correct payee statement under IRC Section 6722 for the 2015 year was $100 for each statement with respect to which such failure occurs, with the total penalty for a calendar year not to exceed $1,500,000 for the 2015 year.
- For returns required to be filed for 2016 and 2017, the penalty for failure to provide a correct payee statement is increased from $100 to $260 for each statement for which the failure occurs. The total penalty imposed for all failures for the 2016 year cannot exceed $3,178,500 and the total penalty imposed for all failures for the 2017 year cannot exceed $3,193,000.
- Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to furnish a payee statement.
- Reduced penalties apply to small businesses with gross receipts less than or equal to $5 million (average annual gross receipts for the three most recent taxable years).
Determine Your Exposure to Penalties
The waiver of penalty and special rules under IRC Section 6724 and the applicable regulations, including abatement of information return penalties for reasonable cause, may apply to certain failures under IRC Section 6721 or 6722. NPPG can assist in determining your company’s exposure to these penalties and whether or not penalties might be reduced or abated for reasonable cause.
Contact us at (732) 758-1577 ext. 278 and ask to speak directly with Casey Carragher.