Employee Benefits Compliance, Large Employers, Reporting Requirements

Affordable Care Act: Tracking Information Overview

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Affordable Care Act: Tracking Information Overview for Information Reporting provisions & Employer Shared Responsibility provisions

There are two separate provisions under the Affordable Care Act (ACA) that require a large employer (at least 50 full-time employees and full-time employee equivalents) to track monthly information about the health benefits they offer:

  • Employer Shared Responsibility  (“Employer Mandate”)
  • Information Reporting

The information necessary to track, under both provisions, is related but different.  The information needed for Employer Shared Responsibility will most likely come from a different source than the information need for Information Reporting.  Also, each provision imposes different penalties if an employer fails to accurately comply.  The following is a brief overview of the different information an employer needs to track under each of these provisions

Employer Shared Responsibility

To avoid possible penalties under this provision, large employers (at least 50 full-time employees and full-time employee equivalents) must offer Minimum Essential Coverage (MEC) that meets minimum value and affordability standards to substantially all full-time employees and their dependents.  Many employers have employees for whom it is difficult to determine whether they are full-time.  The regulations provide technical and somewhat complex Measurement Methods to help employers determine to whom they need to offer coverage.

  • The information necessary to track under this provision includes employee “hours of service”  on a monthly basis over a period of up to 12 months.  “Hours of service” includes hours worked and hours such as vacation or sick leave for which the employee is paid even though not actively at work.   At the end of the measurement period, employers will calculate each employee’s total hours of service.  If an employee averages at least 130 hours per month, the employee is full-time and needs to be offered coverage.  (This equates to at least 780 hours in a six-month measurement period or 1,560 in a 12-month period.)

Next Steps:  Ask your Leavitt advisor for a copy of the Leavitt 4 Steps to Compliance under Employer Mandate packet.   After completing Steps 1 through 3, you will as part of Step 4:  1) learn how to use the Measurement Methods, 2) create an eligibility policy based on the measurement methods, and 3) implement tracking procedures.

Taking advantage of the Measurement Methods by tracking employee hours is vital to compliance and to preventing imposition of possible large penalties.  Although there are exceptions, a majority of large employers should have started tracking hours by November 1, 2013.

There are some possible exceptions (called transition rules) to the January 1, 2015 effective date.  Thus, some employers with 50-99 full-time employees or full-time employee equivalents may have until 2016 to comply, and some employers who sponsor non-calendar year plans may qualify for a delay until the first day of their 2015 plan year.

Information Reporting

To avoid possible penalties under this provision, large employers (at least 50 full-time employees and full-time employee equivalents) must provide on an annual basis accurate data to the IRS (through Form 1094-C), and to certain employees (through Form 1095-C).   The regulations provide a “general” reporting method, as well as a few alternative reporting methods that may be used if certain requirements are met.  All methods have specific and technical rules that must be followed when populating the forms. Regardless of the methods the employer uses to report, the employer will likely need to enter month by month information on Forms 1094-C and 1095-C.

Employers should confirm NOW that their payroll vendor or payroll software is tracking the necessary information and has the capability to generate monitoring reports during the year and to populate the Forms 1094-C and 1095-C after the end of the tax year. The information necessary to track under this provision includes the following:

  • Full-time employee counts, by month.
  • Total employee counts, by month.
  • The employee’s share of the monthly premium,  by month
  • Whether an employee was offered your coverage and if so, period of time employee was  enrolled in your coverage, by month
  • Whether coverage offered met an affordability safe harbor, by month
  • Whether other safe harbor relief applies, by month.
  • Information about the covered individuals enrolled in the plan, by month (if the employer offers a self-insured plan).

Next Steps:   1)To  learn the rules about Information Reporting:  read our  August 29, 2014 article entitled “Short Summary of IRC 6056 Information Reporting Requirements.”  Click here.   Also ask your Leavitt advisor for a copy of the longer article In-Depth on 6056  Information Reporting.   Then you should:  2) determine which reporting methods will be used and what specific data needs to be collected monthly for that method,  3) learn how to complete and populate Forms 1094-C and 1095-C, and 4) implement tracking systems to collect and record monthly data.  Again, talk with your payroll vendor or payroll software representative.

Learning and preparing now is vital to compliance and to preventing imposition of possible penalties.  There is NO exception to the effective date for employers with at least 50 or more full-time employees and full-time employee equivalents, and there is no exception to the effective date for employers who sponsor non-calendar year plans.  That means all large employers should already be tracking monthly information starting with January 1, 2015.  Employers who have not yet done this are behind and should make it a priority to get caught up.  Neither Carriers nor Brokers will be tracking or populating the forms for Employers. Waiting until the end of the year to collect the data will create a large and unnecessary amount of extra work for the employer.