Another calendar year is nearing its end, and that means the 2020 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. Here is our guide to help you do just that.
Currently, the penalties for failure to file a complete and accurate Form 1095-C and related forms by the March 31, 2020, deadline are up to $280 per return, with a maximum penalty of $3,339,000 per organization. If the IRS determines that the failure was intentional, the penalty is $560 per return, and there are no limitations to the total penalty amount per organization. Read more about ACA penalties here.
Your guide to reporting readiness
In order to have a successful reporting season, your team should focus on the following strategies:
1. Be aware of reporting deadlines and extensions
Keep these important dates front of mind as you progress in your ACA information return preparations.
* Note that your ACA solution provider may have additional key dates and deadlines you must meet. For Health e(fx) clients, key dates can be found here.
A recent Notice 2020-76 from the IRS extends the deadline to supply Form 1095. For Health e(fx) clients, reporting dates remains unchanged despite IRS Extension for the 2020 reporting season.
If you plan to file for an extension, make sure you set a deadline that gives you ample time to apply. If you choose to file for an extension, Form 8809 must be filed on or before the due date of the return. All Health e(fx) clients will follow the originally planned fulfillment deadlines and will not follow the extension timelines.
2. Make sure the integrity of your data is accurate
Inaccurate data can result in incorrect forms, form codes and potential compliance issues, so protect yourself and your company by performing an ACA audit. This will allow you to identify problems and correct them quickly.
Use your audit to make sure key data points are accurate, including your employees’:
- Legal name
- Social Security number
- Date of birth
- Employment periods
- Service hours
- Rate of pay
- Employee class
- Health benefits eligibility periods
3. Avoid common form errors
Many companies jeopardize their ACA compliance because of simple information reporting mistakes. You can limit your risk and have a better chance of reporting accurately and on time by planning for the following:
- Employees with multiple employers: Be alert to cases where employees work for multiple employers within the same control group and be sure to avoid related reporting mistakes.
- Offers of coverage: Many companies make errors by not properly identifying offers of coverage, especially for employers who use passive annual enrollment strategies.
- Form 1095-C: Ensure the correct information is populated in Form 1095-C for all employees. Take note of the following and check out our guide for additional detail:
Part II. Part II of Form 1095-C can be the most confusing part of the form. Here’s what to watch out for:
Line 14: Since Line 14 cannot be left blank, ensure the correct offer of coverage code is populated each month for every employee. Remember, coverage must be available every day of the calendar month to be considered an offer of coverage.
Line 15: If you’re required to complete Line 15 based on the information entered in Line 14, confirm you’re populating the employee’s share of the lowest-cost self-only plan offered to the employee. This may be different than the amount the employee pays for coverage. Also, be sure to enter $0.00 if the employee’s cost was zero dollars for the plan.
Line 16: Verify the code in Line 16 is appropriate based on the employee’s status for the month (e.g. not employed, in a limited non-assessment period, enrolled, or waived).
Be on the lookout for bad code combinations like 1H/2C or blank Line 14 or 16.
Line 17: If you offered an employee an ICHRA, this line should be populated. Remember the zip code will be different depending on the code you used in Line 14. Use the zip code of the employee’s residence for codes 1L, I1M, or 1N and use the zip code of the employee’s primary work location for codes 1O, 1P, or 1Q. Want to learn more about ICHRA plans? Check this out.
Part III. Determine if you are required to complete Part III Covered Individuals. Self-insured health plans should complete this section. For employers with fully-insured plans, coverage information will be furnished to employees via Form 1095-B, which is filed by the insurance provider.
- Reporting. Applicable Large Employer (ALE) Members must file Form 1095-C for every full-time employee eligible for medical coverage and for any employee enrolled in self-insured coverage, regardless of full-time status. Forms 1095-C must be filed with the IRS with the Form 1094-C. Anyone who is not eligible yet enrolled in a self-insured plan must also be reported. Review the IRS reporting information page for Form 1094 and Form 1095 instructions and updates. You can also review additional instructions for employers for Form 1094-C and Form 1095-C by reading our What You Need to Know About Forms 1094 & 1095: A Simplified Guide blog.
- Safe Harbor and Measurement Methods. Determining each of your employees’ full-time status can be done using the monthly measurement methods or the look-back measurement method. Ensure that offers of coverage and safe harbor codes are representative of each employee scenario. Read more about safe harbor options here.
Ensuring a successful 2020 reporting season
With the IRS assessing potentially costly Employer Shared Responsibility penalties to companies who may be out of compliance, accurate completion of your forms is more important than ever. We can help.
If you are already working with Health e(fx), you can attend the three-part webinar series called 2020 Health e(fx) Reporting Best Practices or contact your account manager with questions or for support. We will also be reaching out regularly throughout the ACA reporting season to ensure your information is accurate.
And if you don’t currently work with Health e(fx), please consider our solution to actively manage your ACA compliance for the 2020 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.
As a reminder, conducting a monthly audit of your employment classifications — including full-time, part-time, variable and seasonal — will ward against errors and potential fines that accumulate monthly.
Lastly, if you have any questions about the 2020 ACA reporting season or how Health e(fx) can support you in future reporting years, please don’t hesitate to contact us.