Another ACA reporting season is upon us. For HR teams responsible for ACA compliance and management, now is the time to get ready for your IRS annual ACA filings.
Of particular concern is that the IRS has indicated its intention to sunset “good faith relief,” a grace period that has been in place since the ACA’s inception to assist employers as they became familiar with the reporting process and requirements. This grace period exempted eligible employers from penalties for certain missing or inaccurate information.
The discontinuation of good faith relief could drastically increase employer Penalty A or Penalty B assessments for those whose forms are not fully complete and accurate by IRS standards. Unintentional errors can carry penalties of $280 per return, with a cap of just over $3.3 million.
Limit your risk by looking out for these common coding combination errors on Form 1095-C:
Additional coding considerations to take note of include
- Code 2B in Line 16 should be used for employees who are “not a full-time employee.” Remember that under the ACA, a “full-time employee” averages 30 or more hours per week based on either the look back measurement method or monthly measurement method.
- Codes 1L, 1M, 1N, 1O, 1P, 1Q, 1R, 1S, 1T, and 1U should only be used if you offered an Individual coverage HRA (ICHRA) plan. You should not use these codes for any other plan type.
- Code 2E should only be used for individuals when multiemployer interim relief rules apply (multiemployer unions). This code should typically only be used with a code 1H in Line 14.
Why is everyone talking about 1Fs?
Some employers are receiving 226-J letters with the code “XF” indicated by the IRS, meaning that the IRS does not believe that the employee’s offer met the W-2 safe harbor. In other words, you offered a plan that meets minimum essential coverage, but that does not meet the criteria for W-2 safe harbor, according to the IRS’ calculations, which are based on information it received, thereby placing you at risk for penalty B.
Ensuring a successful 2021 reporting season
With the IRS’ intention to discontinue good faith relief, accurate completion of your ACA reporting forms is more important than ever. We can help.
If you are already working with Health e(fx), contact your account manager with questions or for support.
If you don’t currently work with us, please consider our solution to actively manage your ACA compliance for the 2021 reporting year. Selecting a vendor who provides a system, tools and support to manage end-to-end ACA compliance is one of the most important decisions your company can make.