Leo Ortega Paylocity Senior District Sales Manager lortega@paylocity.com Driving Better Outcomes 512.667.4843
Disclaimer • The information in this presentation is based on IRS guidance and form instructions as of 2/21/2015 • It may subject to further regulatory clarification • This presentation is not professional, legal, tax, accounting or benefit advice. You are encouraged to engage a professional in these areas • This presentation may not be appropriate for all employers. Some employers, such as those with multi-employer plans, government entities and educational institutions, may have additional scenarios not covered in this presentation
Affordable Health Care Act COMPLIANCE 74% Of companies biggest concern is that Healthcare Reform is constantly evolving ACA Dashboard & Analytics Paylocity’s innovative ACA Dashboard and comprehensive analytics allows companies to easily manage ACA complexity. Armed with Paylocity’s ACA tools employers and their trusted brokers have access to real time data for powerful strategic data driven decisions. It is constantly evolving … how has your application adapted?
Cryptic? We’ll sort it out! 1C 6055 1095-C 1094-C 1E 1A 6056 1B 2E 2C MV MEC 1F 2A 1D 2B 2D 4980(h)
Shared Responsibility Requires… large employers must offer an affordable health plan providing minimum value to a percentage of all full- time employees or face a penalty.
Refresh me on affordability…
Affordability safe harbors The affordability test means single coverage in an employer’s least expensive plan that provides minimum essential coverage cannot exceed 9.5% of “income.” There are multiple safe harbor methods to determine “income” for this test: • Cost of single Box 1 W-2 Wages coverage in the • least expensive Federal Poverty plan providing Level (Single) minimum • essential Full-time equivalent wages – (Employee coverage cannot exceed Rate x 130 hours 9.5% of… per month )
How do I know who is “full - time”?
Who is full-time? Under ACA, an employee is considered full-time of they work on average 30 hours per week or 130 hours per month. If, by the nature of the employees position, he or she is reasonably expected to work on average 30 hours per week or 130 hours per month, they should be classified as full-time for benefit eligibility purposes and must be offered benefits subject to a maximum 90-day waiting period If the employee is definitely not full-time, there is no requirement to offer coverage If it is unknown whether the employee is full-time or part-time, they are known as a variable hour employee
What is a “measurement period”? A measurement period is a company selected 3-12 month timeframe that is used to determine whether a variable-hour employee is full-time for benefit eligibility. If the employee averages 30 hours per week or 130 hours per month or more in this period they are considered full-time employees and must be offered insurance coverage.
What is a “measurement period”? There are two types of measurement periods . The standard measurement period is applied to all employees in a group (more on that later) and begins and ends on the same date for all employees in the group. The initial measurement period is applied per newly hired variable hour employee and generally coincides with the beginning of employment.
What is a “stability period”? If they are determined to be full-time in the measurement period, their full- time status and eligibility for benefits is locked in for the following stability period. In general, the stability period is the same length as the measurement period, but cannot be less than 6 months long.
What is an ‘administrative period’? Employers may elect to use an administrative period up to 90 days between the measurement period and the stability period to determine who is eligible for coverage and to notify and enroll employees. To prevent gaps in coverage, this must overlap with the prior stability period.
Examples
Special rules for new hires For newly hired variable-hour employees, the initial measurement period combined with the administrative cannot extend beyond “the last day of the first calendar month beginning on or after the one -year anniversary of the employee’s start date”
Special rules for new hires For newly hired variable-hour employees, the initial measurement period combined with the administrative cannot extend beyond “the last day of the first calendar month beginning on or after the one -year anniversary of the employee’s start date” Denise F. Hired March 15 Mar. April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. April May Hired End of Measurement Coverage Anniversary March 15 and Admin Period Begins
Special rules for new hires For newly hired variable-hour employees, the initial measurement period combined with the administrative cannot extend beyond “the last day of the first calendar month beginning on or after the one -year Employers with an anniversary of the employee’s start date” 11 or 12 month measurement period cannot use a 90 day Denise F. administrative period with new hires Hired March 15 Mar. April May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. April May Hired End of Measurement Coverage Anniversary March 15 and Admin Period Begins
ACA Reporting Requirements
Why is reporting required? The filing of informational returns to support enforcement of the individual mandate and employer mandate are authorized by section 6055 and 6056 of the Internal Revenue Code
Section 6055 Section 6055 reporting is required by “providers of coverage”. It details all the individuals covered by that provider and which months in the calendar year they were covered. This information is instrumental to the IRS to administer the individual mandate. “Providers of coverage” includes private insurers (think BCBS, Kaiser etc.) public programs (such as VA, Medicare and SCHIP programs). Employers that self-insure are ALSO considered “providers of coverage”. As a convenience to employers that self – insure, the information required by this section can be combined with the reporting required under section 6056.
Section 6056 Section 6056 reporting has a number of objectives: • It provides the IRS with the data needed to administer the employer shared responsibility provisions of the ACA • It provides employees with new data needed to determine eligibility for premium tax credits when purchasing exchange coverage • For employers with a self-insured offering, the associated return can also include the “who’s covered” information otherwise required by section 6055
Section 6056 Section 6056 reporting introduces two new tax forms to the employer: • 1095-C is a new tax document the employer must issue to the employee and file with the IRS outlining details of the coverage offered by the employer, and the status of the employer’s offer of coverage to that employee by month. • The 1095-C is issued only to employees that were full-time for one or more month in the previous calendar year. • This document is unique to each employee (just like a W-2 is) • This document must be furnished to each employee by January 31 for the previous year. • Employers issuing more than 250 1095-Cs must file their IRS copies electronically
Section 6056 Section 6056 reporting introduces two new tax forms to the employer: • 1094-C is a what is called a “transmittal”. It sums up the information from the individual 1095-C forms (much like the W-3 is a transmittal of all the employer’s form W -2s) • It also provides employer-specific details such as the number of full- time employees and total employees per month, and also whether the employer is eligible for other relief criteria • This filing is due to the IRS by March 31 for the previous year’s information if filing electronically (February 28 th if filing on paper)
Which employers must file? • All applicable large employers (50 or more full-time employees and equivalents employed per month on average in a calendar year) must file forms 1094-C and 1095-C. • This must be done regardless of whether the employer offers insurance coverage. What about employers with < 100 FTEs? The IRS introduced transition relief for 2015 which excuses penalties for employers with fewer than 100 full-time employees and equivalents. Even through these employers would not face a penalty for failing to offer coverage (or for offering unaffordable coverage) this transition relief is NOT automatic. These employers must still comply with the aforementioned reporting requirements.
ALE Group Reporting Considerations
For ALE Groups • An employer can choose to file multiple 1094-Cs (one for each division for example). If they do this, ONE of the 1094-Cs must be designated the authoritative transmittal. • The authoritative transmittal reports aggregate information for parts II-IV of the 1094-C (total 1095-Cs, monthly employee counts) • An employee that works for multiple employers in the same ALE group must be issued a separate 1095-C from each employer.
A look at the final form…
Form 1095-C
Form 1095-C Identifying information for the employee and employer
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