Although changes to the Affordable Care Act (ACA) have been debated in recent years, the law appears to be here to stay for the time being. That means that it’s time to study up — with the 2019 tax season well underway, if you haven’t brushed up on updated ACA compliance and reporting details, now’s the perfect opportunity to get started.
ACA Tax Reporting Deadlines (and Extensions)
If you have at least 50 full-time equivalent employees and are thus an applicable large employer (ALE), and the normal deadline for distributing Form 1095-C to your full-time employees is January 31. But make a note on your calendar: The IRS issued an extension giving ALEs until March 4 to distribute the form.
The extension also applies to Form 1095-B. Insurers usually send this out, not employers — however, if you’re not an ALE and your business sponsors self-insured group health insurance, you’ll use Form 1095-B for coverage reporting. If you’re not an ALE and your organization offers fully insured employer-sponsored coverage, you don’t need to worry about the form, since the insurer will send it to your employees.
Forms 1095-B (and transmittal Form 1094-B) and 1095-C (and transmittal Form 1094-C) still have to be filed with the IRS by February 28, 2019 (if filing on paper), or April 1, 2019 (if filing electronically). This is the normal deadline, and it’s not affected by the extended deadline for distributing forms to employees during the 2019 tax season.
New Affordability Threshold for Premiums
ALEs have to offer health insurance that is both comprehensive — meaning it provides minimum value — and affordable. Otherwise, your employees could be eligible for premium subsidies in the health insurance exchange, subjecting you to an employer mandate penalty.
In order to be considered affordable, an employee’s share of the premiums can’t exceed a certain percentage of their household income. For 2019, that rate is 9.86 percent (up from 9.56 percent in 2018). The affordability of an employee’s coverage is based only on the cost of the employee’s premium; the cost to add dependents to the plan isn’t taken into consideration.
Since employers generally don’t have access to information about employees’ total household income, safe harbor methods can help you make sure the coverage you offer is affordable. For example, if you follow the federal poverty level safe harbor method, you can determine the maximum amount an employee would have to pay for their own coverage by calculating 9.86 percent of the poverty level and then dividing that number by 12. By this method, an employee could not be forced to pay more than $99.75 per month for coverage in 2019, up from $96.08 per month in 2018.
To get the most accurate calculation, use the federal poverty level that was in effect six months before the start of the plan year. So, although the 2019 poverty level numbers are available, the calculation for 2019 affordability is actually based on the 2018 poverty level numbers.
Adjusted Employer Mandate Penalties
The IRS assesses penalties on ALEs that don’t offer coverage to at least 95 percent of their full-time workers, or that offer coverage that isn’t affordable and/or doesn’t provide minimum value. There are different penalty calculations for those two scenarios, but both are based on numbers that are indexed each year.
The 2019 penalty amounts are about 25 percent higher than the ACA’s initial penalty amounts — ALEs that don’t offer coverage in 2019 are subject to a penalty of $2,500 per full-time employee (minus the first 30 employees). ALEs that offer coverage that isn’t affordable and/or doesn’t provide minimum value are subject to a penalty of $3,750 multiplied by the number of full-time employees who receive a premium subsidy in the exchange.
Although there have been adjustments to various penalties and thresholds for 2019, nothing has changed about general ACA compliance and reporting. The individual mandate penalty has been eliminated, but the employer mandate is still there. All of the tracking and reporting that employers have been fine-tuning for the last few years hasn’t been a waste — it still applies for 2019. So bring out your notepad and calculator with confidence. You’ve got this.
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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.