Authored by Dannae L. Delano
Apr 14, 2016
Employers are now realizing that there are widespread errors and inaccuracies in Forms 1095-C prepared by some third parties.
If you were an applicable large employer (50 or more full-time and full-time equivalent employees) under the Affordable Care Act (ACA) in 2014, you already know that you were required to issue 2015 Forms 1095-C to all full-time employees (30 or more hours per week) on or before March 31, 2016.
Forms filed incorrectly are penalized by the IRS at $250 per return, and the penalty for intentionally disregarding the requirement to file timely and correct returns is $500 per return. The IRS may be lenient for 2015 and 2016, provided Forms 1095-C were issued to full-time employees by March 31, 2016, and you made a reasonable good faith effort to ensure accuracy. Nevertheless, you still need to consider whether correction is necessary for 2015 and, for 2016, ensure your data is accurate and that you have a capable third party provider in place to prepare such forms.
If you discover inaccuracies in your Forms 1095-C, you should do the following:
• Notify affected employees;
• Set up a hotline or email account for employees to report possible errors;
• Audit returns for common errors;
• Discuss with counsel whether correction is necessary; and
• Issue corrected Forms 1095-C, as needed.
Common errors and inaccuracies include:
• Improper reporting of employees who were hired or terminated in 2015;
• Improper reporting of employees who made changes to coverage in 2015;
• Inaccurate reporting of dependents;
• Inaccurate reporting of waiting periods;
• Improper use of non-calendar year plan safe harbor coding where employees were offered and enrolled in coverage; and
• Improper reporting of coverage in Part III (if plan is self funded) for noncalendar year plans.
Time is of the essence because copies of Forms 1095-C are due to the IRS with a properly completed 1094-C on or before May 31, 2016 (if not filing electronically) and June 30, 2016 (if filing electronically). Any employer filing 250 or more forms must do so electronically. In addition, the amount of penalty assessed by the IRS can be dependent on how quickly errors and inaccuracies are corrected.
The only way to truly protect your organization from potential IRS audits and penalties is through accurate data aggregation, accurate generation of the required forms, and thorough documentation of your reporting efforts.
If you have any questions about ACA reporting or any other employee benefits matter, please do not hesitate to contact Dannae Delano or Jamie Westbrook.