Navigating Reporting Requirements
for Applicable Large Employers
With 2016 approaching, Applicable Large Employers (ALEs) need to be aware of their IRS reporting requirements to avoid potential financial penalties.
Who does this affect?
- All employers with at least 50 full-time employees (FTEs) in 2015
What needs to be reported?
- Information on each FTE and the coverage offered
- For self-insured groups, must also report all employees and their dependents enrolled in the plan
What are the reporting forms?
- Form 1095-C: Must be provided to each FTE by March 31, 2016
- Form 1094-C: Must be filed along with 1095-C forms to the IRS by May 31, 2016 or June 30, 2016 if filing electronically (if filing 250 or more returns, must file electronically)
Are there any exceptions?
- Even ALEs with transition relief for 2015 must report information
- ALEs may request a filing extension (use Form 8809)
- ALEs having made good faith efforts to comply with reporting requirements will be provided relief (i.e., no financial penalties) in the case of incomplete or incorrect returns
Small Employer Reminders
According to the IRS, more than 95% of employers are considered Small Employers (fewer than 50 FTEs). While these employers are not subject to the Employer Mandate, they should still keep in mind some important considerations.
- Small Employers who employ close to 50 FTEs—or whose workforce tends to fluctuate throughout the year—need to calculate their employee count carefully.
- Small Employers can purchase health insurance coverage through the Small Business Health Options Program (SHOP).
- Small Employers with fewer than 25 FTEs may be eligible for a small business health care tax credit.
2016 Dollar Limitations
Cafeteria Plans (Code Sec. 125)
For 2016, the dollar limitation on voluntary employee salary reductions for contributions to health flexible spending arrangements remains at $2,550.
Transportation (Code Sec. 132)
For 2016, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass remains at $130. However, the monthly limitation regarding the fringe benefit exclusion amount for qualified parking has increased to $255, up from $250 in 2015.
Opt-Out Payments and Reporting Coverage
The IRS recently released guidance concerning cash payments to employees who decline coverage under the employer-provided plan and whether those “cash-in-lieu” or “opt-out” payments are counted for the purposes of the Employer Mandate’s affordability determination.
The ACA defines affordable as that which does not require an employee under single coverage insurance to pay more than 9.5% of that employee’s household income. This cost includes the employee’s portion of the insurance premium, and the IRS has previously stated that opt-out payments should be considered part of that calculation. According to IRS Notice 2015-87, while it is their intent to eventually count these cash payments for affordability purposes, the IRS is allowing a relief period until those rules are finalized.
The result of this relief period is that employers will not need to include opt-out payments under Line 15 of Form 1095-C when reporting coverage to the IRS, at least not for 2015. Keep in mind though that this relief only applies to opt-out arrangements approved or started before the issue date of the notice: December 16, 2015.