Each employer with 50 or more full-time employees (30 hours or more per week) must provide employee-specific information to the IRS about the health coverage offered during 2015, whether healthcare benefits are offered or not. The employer must send a Form 1094-C to the IRS, which gives a company level overview of the benefits offered and hours worked, no later than February 29, 2016. An employer with more than 250 full-time employees must file electronically no later than March 31, 2016. In addition, the employer must provide each employee who was benefit eligible during 2015 with a Form 1095-C no later than January 31, 2016. The information will be used to enforce the ObamaCare mandate and determine the eligibility of individuals for subsidies on the healthcare exchanges. Individuals offered coverage at work aren't eligible for subsidies if the offered plan meets the ObamaCare standards for affordability and value. Coverage is treated as affordable if the required premium contribution from an employee for individual coverage does not exceed 9.5% of the worker’s wages. To provide minimum value, the plan must pay at least 60% of the cost of covered health services. Employers may request a 30-day extension of the reporting deadline, but there is no assurance that such an extension will be granted.
The information on these forms will include total employee headcount per month; health coverage for all full-time employees; name, Social Security number, date of birth, and address for employees and covered dependents; employees' share of the lowest monthly health insurance premium; and other data. The IRS will use this information to determine which employers and employees are complying with Obamacare's coverage requirements.
An employer can encounter problems in compiling this information into a single database. One part of this information may be in the payroll system or with the payroll vendor, which probably does not have the coverage and premium data. Another part of the needed information may be in the benefits administration system or with the benefits administrator, which might not have the individual employee and dependent data and might not be able to report on a monthly basis or easily populate the IRS form. A third possible source of information is the carrier, which has the coverage information for employees and dependents, but probably does not have the employee contribution data needed to determine affordability compliance.
Fines for incorrect employer reports can range from $50 per return if a mistake is corrected within 30 days of filing to $500 or more per return for intentional errors.
Also, effective January 1, 2016, small employers with 50-99 employees must provide healthcare coverage, while those with fewer employees remain exempt. The choice of such employers is to either pay a penalty that applies if at least one worker gets a subsidy to buy healthcare coverage through an exchange, which could total $2,160 for each full-time employee, not counting the first 30 employees.
Kiplinger suggests that 86% of employers plan to offer consumer-directed health plans in 2016, a significant increase over the last five years. Such plans combine a high deductible plan with a health savings account or some similar funding mechanism.
Employers must prepare quickly to determine whether they have sufficient information to timely file the health coverage reports. The solution: If you have not done so already, start now!