1094-C and 1095-C Reporting

All right, we are right at 1 o'clock, so I'm going to go ahead and get started. Can ever— can somebody just let me know real quick if they can hear me okay, and then everybody get back on mute after that? Yep, can you hear me? Yep, perfect. Thank you so much. Well, I just want to start by saying thank you to everybody for taking time out of your day today to spend a little bit of it with us. Hopefully you get some valuable takeaways out of this, this time. So welcome to the ERG HR Half Hour. We're going to be covering an HR— an important HR topic in a half hour or less and allow you to get back on with your day with some actionable information in hand. Once again, remind everybody, try to keep your phone on mute and allow it so we don't have any background noise here. We're going to be recording this also. So for those of you that don't know me, my name is Matt Vady. I am with EDRG Payroll and HR. I'm here giving this presentation because I love HR. I love working within the human resources realm. I've been doing it for over a decade, and I've had the good fortune of consulting with over 1,000 companies here in the Carolinas area where we're headquartered and helping them find ways to maintain compliance, engage and retain top talent, and ultimately be a better employer. Um, today we're going to be talking about a hot compliance topic in ACA reporting. We're going to be moving pretty quick, so it's unlikely that we're going to have time for a lot of questions. So please take down my email address, my phone number, and call me or email me with any specific questions you have with any of this as we finish up. If we took everybody's questions, as you all probably know, this one could probably go on for a few days. So we're going to keep this one, one pretty short and condensed, and I'll be happy to pass along any frequently asked questions to those that are on the live webinar. For those of you watching the recording, please don't hesitate to reach out as well. So here's what we're going to cover today. We're going to cover the who, what, and when of the Employer Mandate provision of healthcare reform. So the Employer Mandate requires all employers with 50 or more full-time equivalent employees to offer a certain level of health insurance coverage at an affordable rate to all those full-time equivalents or face a penalty. So we're going to speak specifically to the year-end reporting component of this provision covered under Section 6056, which is the 1094-C in 1095-C reporting. And so we're gonna talk about that piece and then when it's due. And just as a little bit of an aside here before we dive in, I have no opinions or political team in this race when it comes to the ACA. I just deal strictly with the facts, and this is not to be deemed as legal advice. I got a little chuckle yesterday, or maybe it was the day before. Each of you, when you signed up for this webinar, were asked what your number one concern was with the ACA, And I know this fine man is on the line right now. I'm certain he is. And he had me laughing with this one. He said, "I have 5,000 concerns about the ACA. It would be unfair to the other 4,999 to list one first." And so I've heard very similar comments to this as we continue to work through these 20,000 to 30,000 pages of existing legislation that are in place and continue to move forward with the action items that we can. Hopefully we can alleviate a couple concerns after the call today. So the first thing we're going to spend a very short amount of time on is the who. I think if you don't know who should be reporting at this point, that's probably, you know, another call, another topic for another day. But at a very high level, Section 6056 applies to applicable large employers with an average of more than 50 full-time equivalents from business days during the previous year. So for the purposes of this conversation, we're going to focus on the ALEs. If you have below 50 on average, you know, this, this conversation is really not going to apply to you. And once again, we're going to really focus specifically on these two forms, the 1094-C and the 1095-C. As we look back in 2014, The reporting for 2014 tax year, calendar year was for 2015, early 2015 was voluntary. The 2015 reporting for tax year 2015, sorry, getting a little mouthful here, is due in early 2016 and is required. And it is required for that 50 to 99 space as well. I think that's one of the myths out there is that there is no requirement for them to report. They do have transitional relief as far as penalties from reporting. However, they are still required to submit these reports. So what exactly are the reports and what exactly is required of these organizations that fit into the ALE category? So there are two sections to, to the IRS Code 6056, or excuse me, there are two sections of the IRS Code, Section 6055 and 6056. 6055 applies more to insurance carriers, government plans, and other organizations of that ilk that are providing minimal, minimum essential coverage. We're going to deal once again with the 80%, uh, plus that this deals with, where, uh, the Section 6056 that applies to you and your clientele, the two things that you're going to be required from a reporting perspective are the 1094-C I like to think about the 1094-C much like a W-3. This is the company-level report. It's very similar in that fashion in that it's also going to require a 1095-C to go out to each individual employee. And think of this like the W-2. It's got many of the same requirements that apply to it. And just as a side note, and I believe we'll touch on this again later, but if you're planning on distributing this electronically to your employees, when we look at the 1095-C, you are going to need to get consent the same way you do for your W-2. However, it has to be a separate consent than the W-2 form that you may already have on file. So just bear that in mind as you're planning your distribution strategy for these documents. The next thing I'm going to touch on briefly is the little bit of transitional relief for calendar year 2015. There are a few categories that offer under 4980H of the IRS code some transitional relief for employers as we kind of get acclimated with what the reporting requirements are. So as some of you are aware, in the 50 to 99 full-time equivalent space, there's going to be no penalties for the first year required. However, in order to qualify for relief, you must make a good faith effort and accurately report. So you also cannot have reduced your number of employees to fall into this category. So that's kind of the caveat with each of these transitional releases, that if you're found to have either reduced your number of eligible employees to try to fit into one of these buckets or made some wholesale changes to fit in here, then you— and you were to get audited, then you probably will be disqualified from this and penalized. So the next piece is that for calendar year 2015, rather than having to have 95% participation— or offer, excuse me, of coverage, you're going to only be required to have 70% offer of healthcare coverage, affordable healthcare coverage to your employees. So if you're filling out the Form 1094-C, when we get to that, we'll see a spot where you're going to enter an X if you are only going at the 70% threshold. As applicable. And then the other piece is, so when it comes to the penalties, most of you are aware of the penalties that are associated with, you know, if you choose rather than to play but to pay, there are penalties associated with that. And there are, you know, you get relief for the first 30 employees, you can minus your penalty from that in year 2016. However, for calendar year 2015, that number stays at 80. So you'll be able to get relief for the first 80 employees for calendar year 2015. There are also some transitional reliefs around the non-calendar year plan. However, I think that it's going to be a rare exception. I'm not going to dive too deep into that piece of it. If you have a plan that renews mid-year, it is likely that you've already made the adjustments necessary to avoid any issues there, and this transitional relief I would find to be more rare. The last piece is the dependent coverage component. So, if you were not offering dependent coverage in calendar years 2013 and 2014, however, you are showing that you are making steps towards offering dependent coverage for 2014 and 2015, then you will be able to not be required to offer that dependent coverage for 2015. So, there are some— there So there is a little bit of relief on that component as well. But otherwise, the penalties apply, and we'll talk in just a few minutes about what those penalties are. Let's go ahead and get started with the 1095-C. So this is the employee form. This is similar to the W-2 that you would issue to every employee. If you don't have a copy of this, I did send over a few other items. I didn't send this. It's very readily available. If you just Google 1095-C, you can pull this up relatively quickly and follow along. So Part 1 of the document is where you'll fill out the employee information and the employer information. So 1 through 6 is employee, 7 through 13 is employer. Um, in lines 7 through 13, you need to make sure that all of the employer information is going to match exactly what you put on the 1094-C. So the only real thing to mention of note here in lines 1 through 6 is that, you know, to ensure you've got the employee's address is their address and not the company address. But in line 7, it is asking for the legal entity that employs the particular person you are submitting the 1095-C for. So if you have 3 legal entities in your business, just use the one that employs this person. And we see this— maybe a good example would be a restaurant group that owns 5 different restaurants under 5 different Fed IDs. However, they are part of an aggregated large employer, then you would just use the name of the employer that applies to this particular individual. So line 9 seems relatively simple enough, but when you have corporate structures and multiple addresses, this can also get confusing. With the same example, you can either put the address of the branch location or site, or you can use the corporate headquarter. Whichever address you choose, it's still has to match the 1094-C. So once again, think about the similarities between the W-3 and W-2. You've got to have all this information aligned. And for line number 10, this is, this is one thing that I would definitely suggest is recommend putting the telephone number of someone that you can promptly— that who will be able to promptly reply to any employee inquiries. So I think that's important thing to note here on this. Otherwise, relatively straightforward. Beginning part of the form. Part 1, pretty simple. Part 2 is where it gets a little bit more interesting. So the plan start month up here in the top right can be left for tax year 2015. So this was here to accommodate the 2014 tax year. It's optional for 2015. However, it will not be option— it's, it's rumored anyhow, or likely, that it will not be optional coming up in 2016. However, for this year, you can leave this line blank. Line 14, so this first line here, hopefully I can— offer of coverage and a required code. So I sent each of you who are on the call a— and if you're not on the call watching this recording, please just email me at matt@ergpayroll.com. I'll be glad to get you this document, but sent you the section 6056 reporting code descriptions for the 1095-C, and that's where this is going to come into play. So, for line 14, the real question is, what, if any, medical benefit did you offer the employee? So, line 14 only cares about what you offer the employee. It doesn't care about your excuses of whether you did or didn't or why you did or didn't. It only cares about whether or not you offered the plan. So, line 16 is what cares about your excuses. We'll get to that in just a moment, but You'll want to fill in the applicable code for each employee. The line 14 gets tricky pretty fast because you can't just write in whatever your health plan is. Instead, you have to review a series of codes and identify where you fall as an employer, where the individual recipient falls, and where the medic— medical benefits fall. So these codes are found in the guide I shared with you prior to the webinar. Once you familiarize yourself with the codes, I think it'll be pretty easy for you. There's usually only going to be 2 at max that are going to apply to your organization unless you make some substantial plan changes year over year. So if, if any of you didn't get that guide, let me know and I'll be glad to resend it also. So once you know the codes, you need to input how long the employee had that particular offer. So if they had the offer all year, then just go ahead and check the all 12 months box. If they were— if less, add the appropriate code to the appropriate months. The one key here is that you have to enter 1H for any months the employee was not offered coverage by you. So this includes months that they were not employed by you. So definitely keep that in mind. Once again, you have to enter 1H for any months the employee was not offered coverage by you, including months that they were not employed.— by you. I think that's going to hang a lot of people up. Hopefully nobody on this call. So one frequently asked question I get here: Does somebody in a lawful waiting period qualify as having been offered insurance during a month in which the employee was in a waiting period? So somebody who is in a lawful waiting period, are they qualified as having been offered insurance during a month during that waiting period? The answer is no. Someone in a waiting period did not get an offer of coverage. The reason is irrelevant on line 14. You'll address that on line 16. So answer is no. Moving on, so line 15, how much did that medical benefit cost the employee if you're claiming it was a qualified health plan? So if you use any of the codes 1B, 1C, 1D, or 1E either in all 12 months box or in any of the 12 months box above, you're going to need to fill out line 15. If you enter 1A or 1I in line 14, you have to leave 15 blank. So I'm going to repeat that for everybody. So if you use codes 1B, 1C, 1D, or 1E either in all 12 months or in any of the 12 months, you're going to have to fill in line 15. If you enter 1A or 1I in line 14, you have to leave it blank. If you entered 1G on line 14, you also do not have to fill out line 15 or 16 for those months in which you use the code. So you don't have to fill out line 15 or 16 if you use 1G on any line in 14 or for the applicable months anyhow. Excuse me. So line 15 is asking you to report the employee share of the monthly premium for the lowest cost self-only minimum value coverage. So Line 15 doesn't really care about families or dependents. It is only asking about the self-only employee coverage cost. Line 15 only cares about the lowest cost plan. So if you offer multiple plans, if you're offering a gold, a silver, and a bronze plan, Line 15 only cares about the bronze plan, the lowest plan you offer, price to the employee only, —your audio is on the phone, right? Hey, I'm sorry, could somebody— just came off mute there. Could you go back on mute? Thanks. For line 16, the question is, what did the employee do when you have offered him or her medical benefits, or what excuse do you have for not offering the medical benefits? So You're going to find these codes once again in the guide I shared with you. So, for Part 2, Line 16, there's going to be a handful of codes that you're going to use here. We've went ahead and bolded some of the more frequently used ones like 2A, 2C, and 2D. But once again, that is all that you're going to need to worry about is what the employee did when you offered them benefits. So, that is just incredibly simple, I know, and it all makes perfect sense now that we've sat down and talked through it. It's going to take a little bit of getting used to as far as identifying what codes apply to you, but I'm relatively confident that after you sit down and review this document that we've shared, look at the 1095-C or 1094-C, excuse me, you'll be in a better position. So if you buy your insurance from a carrier, you're done. So if you're not a self-funded plan, if you have a fully insured plan, you're done as far as this document goes. Now you need to just go do this for every employee on the 1095. If you're self-insured, you need to go ahead and fill out Part 3 for all covered individuals. So covered individuals for self-insured plans, they are asking for information about any dependents, any spouses, that type of information. We're not going to spend a lot of time on that today. If you're self-insured, be more than happy to walk through this with you, but probably the minority of folks either on the call or that will be listening to this will be. So now let's look at the 1094-C. 1094-C is very similar to the W-3. You'll submit one for the entire company. The top half of the 1094-C form is fairly straightforward, but I'm going to hit a few key points here. First of all, you're going to want to make sure you are an ALE, right? We've already talked about that. You're going to want to identify the number of forms that you submit with the transmittal. So I recommend doing this last after you've identified everyone that needs to have the form. That's why we approach it secondarily. And once again, this information in the top needs to align with the information on the 1095-C. And I apologize, I misspoke a moment ago about which one we're shifting gears to here. So bear with me as I get through this number soup of 6055, 1094, 1095. So I apologize if I transpose a number here and there. Please bear with me. But so as we move down, the first box on the bottom is number 19. This is for if you are the authoritative transmittal for the ALE member. So You'll likely be checking this unless, unless you have some special circumstances surrounding the issue. For example, if an employer tends to file a separate Form 1094-C for each of its two divisions to transmit Forms 1095-C for each division's full-time employees, one 1094-C must be designated as the authoritative transmittal. So going back to that example earlier, maybe I've got six restaurant groups One of them has to be the authoritative transmittal, even though we've got to file an individual 1094-C for each restaurant. So one of them has to be the authoritative transmittal that everything aggregates that information up to this particular one. So line 20 is the total number of forms. We already touched base on that. So are you a member in line 21 of an aggregated ALE group, and that falls into that same example that we just discussed. Are there multiple organizations that make up this aggregated group? And that is a pretty in-depth issue to get into. I would recommend talking to your broker and/or attorney to discuss that if you've got organizations that are, you know, have multiple ownership structures or something that may puts you into that bucket. But now let's move on to line 22. This is where things start to get a little bit more complicated for this form. So if you fill out the form regularly, this is called the general method. However, you may meet eligibility requirements for one of the alternate methods. So there's the qualifying offer method, the qualifying offer method with transition relief, the Section 4980H transition relief, which are the qualifications we just discussed on a previous slide. Or the 98% offer method. So I'm going to go into these in a little bit more detail here on the next slide. So the general method is where all ALEs are required unless they require— qualify for one of the alternates. So this is where the bulk of folks will be filing. It does require the most work, of course, right? But it is just kind of where the bulk of people will be falling as far as this goes. The qualifying offer method is if you offer a bronze level or higher plan where the cost to the employee of employee-only coverage is less than about $100 in 2015. So that means that the employee would only owe about 90— I think it comes out to about $93 a month, $1,100 a year for a bronze employee-only coverage, then you would qualify for the qualifying offer method. The employer must offer that plan to all members of the employee's family to be eligible for using this reporting method. So what would be different if you use the qualifying offer method? You would only need to report the names, addresses, and tax ID numbers of those employees and the fact that they received a full-year qualifying offer. So you're not required to do monthly employee-specific information on these employees. So if you qualify for the qualifying offer method, you would not be required to do monthly employee-specific information. So, there's really good information about this in the Navigating the Employer Mandate Guide that I sent along also. The 98% offer method, this one I expect we'll see relatively frequently. I have with a decent amount of our client base. So, it's— if you're offering at least 98% of the company's full-time employees a bronze-level or higher plan at an affordable rate, the IRS is offering the 98% offer method. You're not going to be required to identify which employees regularly work full-time hours. Rather, the employer is simply required to include in the report those employees who may be full-time. So a little bit more relief based on how much of your group you offer affordable and how affordable the plans are, right? So the differences of how you're going to report and whether or not you're going to check those boxes based on whether you fall in one of those buckets. I think, once again, referring back to that Navigating the Employer Mandate Guide that was passed along, you can get a full breakdown of these in there. So Part 3 is where we're going to look at the member information. So this is a month-by-month breakdown of was minimum essential coverage offered, how many people was it offered to, was it an aggregated group, and was there transition relief in place. So let's kind of look at this from left to right. So, first thing we're going to ask is, was the minimum essential coverage offered and what months was it offered? So, in most cases, it's going to be in all 12 months, and then you're going to, in the next section here in B, put the full-time employee count for your organization and then the total employee count. So, if you've only got 60 full-time equivalents and you've got 150 part-time folks on top of that, then you're going to put those respectable numbers in each— those respective numbers in each column here. And then if it's an aggregated group, you need to check this box to make that aware as well. So if there is any Section 4980 transition relief here, such as the 50 to 99 employees or any of the other categories we mentioned earlier, you're going to want to put the appropriate code here, uh, to notify that as well. So this is relatively straightforward. I think everybody can figure this part out. It's pretty, pretty straightforward. So you're almost done with the 1094-C. On the last page, you'll need to complete Section 4 if you selected yes on line 21. So this is the other ALE members of the aggregated ALE group. So if you've got those 5 EINs like we talked about with the restaurant group,, then this is where you're going to enter the employer information about those. So the 1094-C, outside of identifying the method of reporting, is going to be a relatively straightforward document. You know, the challenge becomes the filing penalties. So the penalty for failure to file— and you know, the first question I get all the time, especially, uh, sometimes around here, is What if I just don't file anything, Matt? So what if I just say I'm just going to punt on this whole thing and let them catch me if they can? So there are penalties in place for organizations that decide not to file at all. And so we mentioned the 50 to 99, you're getting that transitional relief. However, that does not apply if you do not make a good faith effort to report, and the same applies for the 100+ ALEs. So The penalty for failure to file is $250 for each return for which such failure occurs. The total penalty will not exceed $3 million. The penalty for failure to provide a correct payee statement is $250 for each statement. That's each time you fail to create a correct one. Once again, not to exceed $3 million. There will be some relief from the penalties. They will not impose penalties on a filer for reporting incorrect or incomplete information if the filer can show that it made good faith efforts to comply with the information reporting requirements for 2015. So once again, you're going to be able to avoid these penalties for 2015 as long as you are— and I apologize, I think earlier I mentioned you would, you would hit them if you're at over 100, but everybody's going to be able to avoid them as long as you show good faith effort to submit. So that's the key. If you're consulting with your clients, definitely make sure they are not trying to find a way out of performing this reporting. That would be bad form moving forward for sure. So when does the reporting need to be complete? I'm sure we've opened up plenty of questions. I hope that you guys are sending them along. Like I said, we're going to keep it to 30 minutes here. We're just about done. January 31st, 2016, the employees must receive their 1095-C. So it's just like the W-2. They need to make sure that they're— if they're getting their hard copy, it's postmarked by then. If they're getting their electronic copy, they receive it by then. You must receive the consent once again from the employee separate from the W-2 consent that you may already have on file. So if you're filing paper 1094-C, it is due February 28th, 2016. So if you're filing electronically, you have until March 31st, 2016. If you have at least 250 FTEs, you are required to file electronically. So a couple of frequently asked questions before we hang it up here. So do I have to give a 1095-C to every employee offered coverage in a year? Yes, all employees that were offered coverage in a tax year or calendar year need to have a 1095-C. Once again, think about the W-2. It works much the same way. So Next question we get a lot, do companies have to offer coverage to spouses? No, there is no requirement to offer coverage to spouses, but there is a requirement to offer coverage to dependents up to 26 years old. If you weren't previously offering coverage to dependents and you are making good faith efforts to implement a plan to offer coverage to dependents, then you get that transitional relief we discussed earlier. If I have less than 100 employees, do I need to complete 1094-C for 2015? Yes, all ALEs with more than 50 FTEs are required to report in early 2016. Even though you're being given a pass on the compliance piece, you still have to report and use the appropriate transition relief code when you do it. So those are some of the common questions we get. You know, the unique thing about this is there's 20,000 pages of legi— 20,000 pages plus of legislation already existing. We anticipate another 20,000 plus between now and the 2018-2020 mark. You know, it's going to continue to evolve. However, these are the things that we know right now. So we need to make sure that we are putting everybody in a good position to get this information filed and get it taken care of in the short term. If you or any of your clients are looking for a partner to help you to eliminate some of the administrative burden and tracking of this information, at ERG, we offer payroll with HR benefits and timekeeping fully integrated. To solve this piece of the puzzle for our clients. We do 1094-C and 1095-C reporting. As I mentioned to some of you preparing for this, I will keep the commercial to a limit. However, we have seen some pretty awesome transitions. We just brought a group over this past week that's going to save about $1,000 a month from one of their large national providers that wasn't even going to do their ACA reporting for them, and we put them on our fully integrated payroll HR and timekeeping system. That was just for a 250-man group. So pretty tremendous story there. And we've seen a lot of other very similar stories. And, you know, we're just blessed and fortunate to be able to serve folks here in this local community. And, you know, when it comes to ACA compliance, our solutions are really built to do a little bit more than just the reporting. We help folks determine if they're eligible, analyze the data, manage it over the course of a year, and then ultimately report at the end of the year. So Once again, those of you that aren't familiar with us, we're ERG. We provide payroll and HR support services to small to mid-sized companies around the country. We're headquartered here in Columbia, South Carolina. We can serve all 50 states and help folks maintain compliance with the ACA and all other HR-related matters. If you want more information, you can hit ergpayroll.com or matt@ergpayroll.com. I'm genuinely grateful for everybody spending some time with me today. Um, once again, we're right at 1:30. Keep those questions coming over to me, and anything I can do to help you maintain compliance with the ACA, we are happy to do. Sorry for talking so fast, but as you can see, we just kind of came in right under the bell here. So hope everybody has an awesome rest of your day, and I look forward to speaking with you all soon. Thanks.