With 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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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:
- Records of employees who are provided with an offer of coverage and corresponding dates
- Eligibility methodology and determinations
- Signed waivers or opt out forms
- SSN solicitation records
- Controlled group determinations
- Participant communications
- 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.