Changes to ACA Reporting for 2016: Are you Ready for the Second Round?

Authored by Dannae L. Delano, Jamie M. Westbrook

Aug 16, 2016

Applicable Large Employers (50 or more full-time and full-time equivalent employees in 2015) and Self-Funded Plan Sponsors (employers who sponsor self-funded group health plans) must provide plan participants with Form 1095-Cs or 1095-Bs on or before Jan. 31, 2017 to avoid significant penalties.

If you were an Applicable Large Employer and were required to report for 2015, you know the first round of reporting had delayed deadlines, lenient good faith effort provisions when it came to the assessment of penalties, and lots of hiccups in general, especially with respect to third party providers and system errors.

In addition to facing non-delayed deadlines and the removal of the lenient good faith effort standard for penalties, there are also changes to the actual forms that have been proposed by the Internal Revenue Service (IRS) that must be addressed as soon as possible in order to be ready for the Jan. 31, 2017 deadline. These form changes include:

  • Transition relief is no longer applicable for non-calendar year plans;
  • 4980H Transition Relief applies only to non-calendar year plans through the end of the plan year ending in 2016;
  • The instructions contain more detail and examples on how each Applicable Large Employer should complete the Forms;
  • Code 1l for Line 14 and code 2l for Line 16 of the 1095-C have been eliminated due to transition relief no longer being applicable;
  • There are 2 new indicator codes for Line 14 of the 1095-C that apply to conditional offers to employee spouses;
  • Post-employment COBRA coverage reporting rules now apply to other non-COBRA post-employment coverage;
  • There are additional instructions on determining full-time employees for purposes of column (b) in Part III of the Form 1094-C; and
  • Specialized coding for multiemployer plan (union) participants remains for 2016.

Other pending deadlines will include filing applicable forms with the IRS on or before February 28, 2017 (paper) or March 31, 2017 (electronic). If you are required to file 250 or more forms, you must file electronically. An automatic 30-day extension is available by completing Form 8809 via paper or through the FIRE System as a fill-in form or an electronic file. No signature or explanation is necessary for the extension; however, you must file the Form 8809 on or before the due date of the returns in order to receive the automatic 30 day extension.

The IRS has been clear that the “good faith effort” standard for compliance will no longer apply for 2016 reporting and that an Applicable Large Employer must show “reasonable cause” (an extremely difficult standard) for penalty relief due to failure to file and incorrect reporting. The penalty for failure to file a correct information return is $260 for each return. The penalty for failure to file a correct payee statement is $260 for each statement with a cap on each of the separate penalties of $3,193,000 per calendar year.

There will likely be further changes to the proposed draft forms and instructions prior to the issuance of the final forms, but significant changes are unlikely. Given that we are more than halfway through 2016, employers must start planning now for 2016 ACA reporting based on the draft instructions and make any alterations as necessary when the final instructions and other guidance are released.

If you have any questions about ACA compliance, ACA reporting, or any other employee benefits matter, please do not hesitate to contact Dannae Delano or Jamie M. Westbrook.

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