The IRS is coming, what to do before, during and after and ACA audit

Over the last 6 years, the Affordable Care Act (ACA) has dramatically changed the employee benefits landscape across the country for employers and employees alike. As the first year of ACA reporting deadlines have just passed, they first wave of IRS audits, as specified in the ACA, will begin.

The government views the ACA as a huge revenue source and they have pushed a lot of their resources to develop an auditing system. The federal agencies are becoming quite aggressive, especially when it comes to protecting participants, as they are charged by the law to have regular enforcement efforts.

There are many triggers that could prompt a potential ACA audit, here are 5 examples:

  1. Employee complaints
  2. Reporting failures
  3. Failures of IRS control group employers
  4. Other agencies identifying issues – (Agencies like the Department of Labor (DOL) and the Internal Revenue Service (IRS) will have a cross-referral agreement where they are required to share information about businesses not in compliance, thus triggering audits from multiple agencies.)
  5. Media reports – (Media coverage on an organization’s business not in compliance, thus triggering audits from multiple agencies.)

While you may not be able to totally avoid every trigger. The best way to avoid a full-fledged audit is to keep good records. Proper documentation is key to both avoiding and surviving an audit.

Lowering your chances of an ACA audit is key, here are 6 ways to help your organization look its best:

  1. Document good faith compliance on questionable issues – (This includes reviewing and adopting corresponding wording in all internal and employee-facing materials.)
  2. Compliance review – (Focus on administrative practices and make sure they are in compliance.)
  3. Correct failures found. (Make sure administrative processes are in order but when you discover an issue, hold internal compliance discussions to correct your failures.)
  4. Designate employee status. (Create realistic benefits expectations for employees by communicating their employee status and eligibility.)
  5. Train managers well. (Beware of practices to terminate or limit hours for employees to prevent them from eligibility levels. Understand the law and work within it for hiring, firing and scheduling practices.)

If your business is subject to an audit, knowing what it will look like and how to handle it will be key to passing with flying colors. Contact FreedomCare to help maintain your compliance and minimize your risk of an ACA audit.

Employer mandate penalties are coming

It’s been two years of required reporting of the Employer Mandate under the Affordable Care Act (ACA) but the IRS has yet to impose any penalties on employers for failing to comply with the law. This delay has suggested to some employers that the IRS would not be enforcing the mandates or collecting penalties. The Treasury Inspector General for Tax Administration (TIGTA) just released a report that is a game changer.

On April 7, 2017 TIGTA issued its, “Assessment of the Efforts to Implement the Employer Mandate under the Affordable Care Act.” In this report, TIGT explained that the IRS has developed an ACA Compliance Validation (ACV) System. It will be used to identify potentially non-compliant Applicable Large Employers and calculate the “A” penalty under the Employer Mandate. The IRS has been developing the ACV system since July 2015 with a scheduled completion date of January 2017. However, “the implementation of the ACV System has been delayed to May 2017.”

The report states that once the systems are in place, the IRS will be able to mass identify noncompliant employers. This will allow the IRS to send notices to noncompliant employers for any and all reporting years.

This means that time is up for employers who were delaying. The current lack of IRS notices for noncompliance with the Employer Mandate does not imply that the IRS does not intend to enforce the Employer Mandate. The IRS will come knocking, they are just running behind schedule. FreedomCare has the solutions you need, answer our simple questionnaire to get started.

Will you have to prove your compliance?

Last November, a few weeks after the national election, the Internal Revenue Service (IRS) began to issue notices to employers who may have failed to comply with the Affordable Care Act (ACA). These notices appeared to be the start of the IRS ACA audit process.

Just a few weeks ago, Speaker Paul Ryan stated the ACA will be the law of the land for the “foreseeable future.” Companies are still liable for penalties incurred for ACA non-compliance as long as current regulations are in effect. Failure to successfully defend the IRS audit could mean significant ACA-related penalties.

These regulations are still in full effect:

  • Companies with 50 or more full-time employees, including equivalents, must offer health insurance of a certain quality to their full-time employees and their dependents – or face a penalty.
  • The threshold for classifying an employee as full-time, and thereby eligible for an offer of coverage, is an average of 30 service hours a week.
  • Employers large enough to comply with the ACA still won’t be fully ACA-compliant no matter how generous their offers of coverage are unless they also meet annual reporting requirements.
  • Employers must produce health-benefits forms (1095-Cs) for their full-time employees and copy the IRS on what’s documented on those forms.

Complying with the provisions of the ACA will be required until legislation has passed both houses of Congress and has been signed into law. But don’t worry, it’s not too late, give FreedomCare a call and we can get you or your clients compliant today.

Why self-fund?

With the health benefits market changing so much, the costs of different plans can be all over the place. How would you like better, more cost-effective solutions for your clients to choose from?

Every year, most employers dread shopping around for their plan for the next year but they go to their broker and get several quotes, most employers decide on the most inexpensive plan, then the next year the rates raise with renewals and they are back in this vicious cycle repeating it every couple of years. As the employer or broker, it’s hard to feel like you have any control.

“Insurance can cost close to $10,000 per employee per year, so employees cost as much as $1 million a year. Self-Insurance can save 12 percent, or $120,000, which can be used to hire more employees or grow the business.” – Michael Turpin, Insurance executive.

The potential to save money increases from year to year. For employers, self-funding is a no brainer.  With FreedomCare’s unique structure, our plans protect the employer by collecting a monthly rate to cover claims and build a reserve. Over the years, the employer can build up their reserve utilizing our FreedomCaptive. Learn more and increase your control, give FreedomCare a call today.

Important – ACA 1095 update

With 2017 rapidly approaching, last week we received some good news from the IRS. The IRS released, notice 1015-70 which highlights some of the changes to come with ACA’s information reporting. One of the biggest changes is a date extension.

Form 1095-B for Health Coverage and form 1095-C have been extended from January 31st, 2017 to March 2nd, 2017.

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This won’t affect the employees’ ability to file their tax returns, but it does delay their receipt of the forms for their own records.

“This deadline was especially challenging because it coincided with Form 1099 and W-2 processing schedules,” said Mike Downey, executive vice president of BenefitScape. “A 30-day extension, while short, moves the printing and distribution to a more opportune time.”

It’s important to note, the filing deadlines remain unchanged, this is just an extension to furnish the forms to employees.  It’s still just as important for employers to get the rest of their filings completed on time, and trust me, this extra month will fly by.

There are only 21 business days left in 2016 and its filled with holiday closures. Your clients need to make their ACA compliance a top priority.

6 overlooked requirements of ACA reporting

6-overlooked-requirements-of-aca-reportingWith 2017 right around the corner, it’s almost time for employers to submit their paperwork for their 2016 plans. Unfortunately, the leniency that was given last year is no longer available. In order to seek a waiver of penalties for the 2016 filings an employer will need to meet a standard of reasonable cause and that they acted “responsibly”.

Unfortunately, “responsibly” can be very subjective so employers need to be prepared to demonstrate the same level of quality assurance and audit rigor that is applied to other governmental reporting. To help your clients accomplish this, here are some very important details of ACA reporting:

  1. File on time – Failing to file the required forms to the IRS and provide them to employees can lead to significant penalties. These penalties are NOT tax deductible.
  2. Don’t underestimate the IRS digital data environment – The IRS is increasingly working in conjunction with other Federal agencies, so they have the ability to identify contradictory data submitted on both individual employee forms and across multiple employees, this can lead to audits. The government is projecting employer mandate penalties of $228 billion. There is clear anticipation that revenue will be generated and violations will be ascertained through information reporting filings.
  3. Communication with employees is critical – Employers need to ensure accurate names, social security numbers, dependents, waiver information, eligibility determinations and offers of coverage are documented and up to date. Employers need to remind their employees to report any name changes due to life events such as marriage or divorce to both the Social Security Administration and their human resources department.
  4. Use proper worker classifications – A key requirement under the ACA is properly identifying full time employees and equivalents to determine if an employer is an applicable large employer under the employer mandate. Applicable large employers must cover the requisite 95% of all full time employees or they are risking exposure to penalties. It was only 70% last year which meant employers had a lot more leeway they won’t have this year.
  5. Correct errors – Errors could be identified by an IRS error message, internal audit or by an employee. A corrected return corrects an inaccurate return, if a transmission or submission was REJECTED by the IRS then that rejection requires a replacement.
  6. Keep accurate records – It is important to document and retain proof to substantiate responses on ACA information reporting forms. Among the records employers should retain are:
    1. Records of employees who are provided with an offer of coverage and corresponding dates
    2. Eligibility methodology and determinations
    3. Signed waivers or opt out forms
    4. SSN solicitation records
    5. Controlled group determinations
    6. Participant communications
    7. Affordability calculations

This can get overwhelming very fast but I have some good news, FreedomCare is here to help. Give us a call, we can answer any questions and walk you through the steps you need to take.

How to prepare for earlier reporting in 2017

How to prepare for earlier reporting deadlinesLast December, most employers were relieved when the IRS provided extensions of employee notifications and filing deadlines for Affordable Care Act (ACA) reporting. Unfortunately, this may have set up those same employers for failure as it will seem like these deadlines are coming 2 months earlier in 2017. To prevent this from happening, here are 4 ways to prepare for earlier reporting in 2017.

1. Give yourself plenty of cushion to submit required filings on time.

This year employers must provide 1095-Cs to employees by the end of January, indicating month-by-month coverage provided through the end of the previous December.

ACA Reporting Deadlines_with citationThese forms are required of most employers;

  • Employers of any size that sponsored a self-insured health plan providing minimum essential coverage must distribute to enrolled employees and file with the IRS Form 1095-B, showing a health plan enrollment.
  • Applicable large employers with 50 or more full-time employees or equivalents must distribute to enrolled employees and file with the IRS Form 1095-C, showing compliance with employer shared responsibility/minimum essential coverage requirements.

2. It’s now 95%, not 70%.

Unfortunately, last years extended reporting deadlines may not be the only things that trips up employers this year. Starting in 2016, all organizations with 50 or more full-time employees or equivalents must insure 95 percent of their full-time employees to avoid liability under the ACA’s shared responsibility provisions, and the resulting penalties.

The thing is, some employers may not understand that it’s not a 95% average for the year, it’s 95% for each month. If an employer had a month where they fell below 95%, then the employer is exposed. The employer could be facing penalties for the months when they were below the threshold.

The IRS will ask for payroll and benefits data, this will help them determine whether the indicator codes used on Form 1095-C are accurate. With last year’s 70% threshold, employers had a lot more leeway.

3. Exchange notices have been arriving.

Employers also need to be on the lookout for exchange subsidy notices. Notices pertaining to 2015 coverage, are now being sent from the ACA’s Health Insurance Marketplace. These notices allege that a full-time employee received subsidized coverage on an exchange because the employer failed to provide qualifying coverage.

4. Determining eligibility is an on-going effort.

The coverage provided to each full-time employee needs to be tracked and recorded every month. This needs to be an ongoing process for employers to get ready for the next year’s annual reporting. Employers can find relief by working with companies who offer tracking services that work in conjunction with payroll companies as part of their coverage. FreedomCare is one of the only options that provides this integration.

Employers that were close to the 50 or more full-time employee threshold last year need to make sure they stay on top of their eligibility. They need to run the numbers each month to make sure they aren’t on the hook. It would be terrible to find out too late and be liable for penalties for the whole year.

Reach out to FreedomCare, we can help you calculate and determine whether or not an employer needs to offer coverage. Trust us, it’s much less expensive than paying the penalties.

ACA Compliance Enforcement Begins!

ACA Compliance enforcement beginsEmployers are out of excuses and delays; ACA compliance enforcement has begun and they need to be compliant now. If you or your clients are an employer that decided not to choose a compliant plan or didn’t offer anything at all, the employer may be subject to penalties under the Employer Mandate.
May has been a big month for the Department of Health and Human Services (HHS). They’ve made two major announcements regarding the process for determining if an employee is eligible for a subsidy under the Affordable Care Act (ACA). Earlier this month, HHS announced that they hired a third-party contractor to conduct an “employer verification study” where the contracted company will be calling employers and asking about the health insurance coverage they offer. The purpose of these calls is to determine whether employers have successfully offered an affordable plan that meets the minimum value requirements to their employees.
The need for these calls goes back to the ACA Exchanges, a person must state that they were not offered a plan that was affordable and meets minimum value by their employer. If they were indeed offered an eligible plan, this person would be ineligible for a subsidy.
CMS also released a sample notice that the Federal Exchange will send to employers that one of their employees has submitted an application for a subsidy and claims they haven’t been offered compliant coverage.
So why does this matter to you and your clients?
Well, some employers did everything they needed to do and chose a plan that was compliant, like the ones FreedomCare offers but the Exchange did not discover that fact during the verification process. The employer will have the opportunity to contact the Exchange and provide documentation that they offered a plan that is affordable and meets minimum value requirements. After the Exchange receives this info, they will re-determine the employee’s eligibility and discontinue any premium subsidy payments.
Let’s talk about our 100% compliant ACA solutions, give FreedomCare a call asap.

Deadlines have passed – Penalties are coming

Filing deadlines have passed, penalites are comingAs we head into August with the 4th quarter rapidly approaching, the deadlines for the IRS required ACA form filings have passed. Unfortunately, a lot of employers still have questions or haven’t even filed yet.

Well back in July, the IRS held an Affordable Care Act Information Returns Program (AIR) webinar where they shared their publication, 1586. They covered a lot of information and clarified a lot of questions employers have been asking.

Just in case you aren’t sure what the AIR policies include;

Under the Affordable Care Act (ACA), insurance companies, self-insured companies, large businesses and businesses that provide health insurance to their employees must submit information returns to the IRS reporting on individual’s health insurance coverage.

ACA information returns include:  

  • Form 1094-B, Transmittal of Health Coverage Information Returns
  • Form 1095-B, Health Coverage
  • Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
  • Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

The 1596 publication made it clear that the penalties for incorrect forms or forms that haven’t been filed could devastate an employer’s bottom line.

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With this type of reporting, it’s more than just proofing your documents and filing. Employers need to consult professionals who can help them ensure their compliance. I have some good news though, some of these penalties are still preventable.

According to the IRS, corrections or late forms need to be filed as soon as possible. It’s better to file late then to not file at all. Don’t let these fines hit your business or your clients.

Use our years of experience and expertise and contact FreedomCare today to protect yourself and your clients.

3 Tips for keeping your clients trust under the ACA

3 tips for keeping your clients trust under the ACAYou are probably getting used to the impact that health care reform (the ACA) has had on the insurance market and the laws. But have you taken the time to think strategically about your clients and their futures? Undoubtedly, your time is consumed with all the day-to-day activities required to manage your business and the relationships with your clients.

With different updates happening constantly, it can be difficult to keep up, here are 3 tips you can use to help keep the trust of your clients when dealing with the ACA.

  1. Stay up to date on the laws and communicate updates asap.

    • Research and educate yourself on the ever changing laws and regulations by following reputable news sites and our blog. Forward articles to your clients, share the information you’ve learned. This will allow your clients to rely on and trust you, in turn they will be more likely to come to you when issues arise.
  2. Use the ACA as an opportunity.

    • Try not to think of the ACA as a bad thing or a burden, use the ACA as an opportunity to help your clients help their employees. Sponsoring a benefits program not only satisfies the ACA employer mandate but can greatly improve employee retention among other things.
  3. Present alternative options to traditional plans.

    • Expand your options to include things like self-insurance, ACA tracking, voluntary benefits, telehealth and other offerings your clients might not even know about. If you can devise a complete coverage package for your clients saving them time and money, you have the best chance of keeping their trust and their business.

Let’s face it, your role as a broker is changing. As healthcare reform keeps presenting more pressing dilemmas for small-business owners, employers are looking towards you and other agents not just as salespeople but expert consultants. Your clients need your expertise, advice and counsel. In these constantly changing times there isn’t a client organization out there that’s not willing to talk to an adviser who seems to have some information or a seamless process for coping with all of the change. This includes every one of your clients as well, even the ones that haven’t been interested in the past.

Look through our previous articles on the sidebar and share with your clients, remember FreedomCare is here for whatever you need.