Now that the Affordable Care Act (ACA) is having more and more of an effect on the workforce, it’s time for your business to develop a checklist to keep track of key ACA data points in order to maintain compliance.
The Big Question: Are You an ALE?
The ACA requires that applicable large employers (ALEs) report information to the IRS, as well as to employees, regarding employer-sponsored health coverage. The IRS will use the information that ALEs report to verify employer-sponsored coverage and to administer the employer shared responsibility provisions. What ACA data points should you know in order to determine whether your business is an ALE for 2016? Let’s go step by step through the process:
- Calculate the number of full-time employees for all 12 calendar months of 2015. A full-time employee is an employee who is employed for at least 30 hours of service per week, on average.
- Next, calculate the number of full-time-equivalent workers (FTEs) for all 12 calendar months of 2015 by adding up the aggregate number of hours of service for all employees who were not full-time employees for that month, then divide the total hours of service by 120. Make absolutely sure that you’re not confusing the definition of full-time employee here; anybody considered an FTE should not work more than 120 hours a month.
- Add the number of full-time employees and FTEs (including fractions) calculated above for all 12 calendar months of 2015.
- Using the monthly numbers from the preceding step, divide by 12. Disregard fractions.
- If your result is 50 or more, you’re an ALE for 2016.
Keep in mind that there is a special exception for employers with seasonal workers. If your workforce exceeds 50 full-time employees (including FTEs) for 120 days or fewer during the 2015 calendar year, but the employees in excess of 50 who were employed during that time were seasonal workers, you do not qualify as an ALE for 2016.
If it turns out that you are an ALE and your business is not eligible for transition relief, then you must report coverage for all your employees. In December 2015, the IRS extended the deadlines for distributing your reporting paperwork: You have until March 31, 2016, to get Form 1095-C to your employees. The deadlines for submitting these completed forms to the IRS are May 31, 2016, if filing on paper or June 30 if filing electronically.
Under both sections 6055 and 6056 of the Internal Revenue Code, each reporting entity will be required to file with the IRS a separate statement for each individual and a single transmittal form for all the returns filed for a given calendar year. Here’s what you need to know:
- Determine which reporting requirements apply to you and your health plans.
- Determine the information you will need for reporting and coordinate internal and external resources to help compile the required data.
- If you are filing electronically, complete the e-services registration form on the Affordable Care Act Information Returns Program (AIR) to obtain log-in credentials, and then log in within 28 days to confirm registration and activate your IRS user account.
Compliance with the ACA is complicated, but the penalties for noncompliance are far steeper than the time and effort it takes your business to gather all the necessary information. Furthermore, the more comprehensive your ACA knowledge is now, the better you’ll be able to adjust to any changes in the future.
This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.
David E. Williams is president of Health Business Group, a strategy consulting firm serving clients in technology-enabled health care services, pharmaceuticals, biotech, medical devices and software. He is frequently quoted in the media on the business of health care and is the author of the Health Business Blog. David sits on the board of both private health care companies and nonprofits.