The Affordable Care Act’s employer shared responsibility (“play or pay”) penalty tax rules took effect for applicable large employers on Jan. 1, 2015.

Under these rules, an applicable large employer—one with 50 or more full-time employees, including full-time equivalent employees—is subject to penalties if they offer health coverage to fewer than 70 percent of full-time employees and their dependents (after 2015 this threshold changes to 95 percent) and any full-time employee receives premium tax credits for health coverage purchased on a state or federal exchange. Applicable large employers that offer coverage to full-time employees may still be subject to penalties if the coverage is not affordable or does not provide minimum value, as defined by federal regulators.

So the IRS can determine whether employer shared responsibility penalties apply and, if so, the penalty amount, applicable large employers must file information returns with the IRS about the health coverage they offered—or didn’t offer—for each month in calendar year 2015. The information is filed with the IRS on Forms 1094-C and 1095-C in the first quarter of 2016. (Employees must also receive a copy of Form 1095-C by Feb. 1, 2016.) Reporting is mandatory for the 2015 calendar year, so it’s critical that employers take action now to track the required information.

Below is a rundown of information applicable large employers must report for each month in 2015.
Information for Form 1095-C

• Identifying information for employer and employee such as name and address;

• Whether the employee was full-time;

• Information about the health coverage, if any, offered to the employee;

• The employee’s share of the monthly premium for lowest-cost self-only minimum value coverage;

• Months the employee was enrolled in coverage;

• Months the employer met an affordability safe harbor with respect to an employee and whether other penalty relief applies for an employee; and

• If the employer offers a self-insured plan, information about the covered individuals enrolled in the plan.

Information for Form 1094-C
• Identifying information for the employer;

• Whether the employer offered coverage to 70 percent of full-time employees and their dependents in 2015 (after 2015 this threshold changes to 95 percent);

• Total number of Forms 1095-C issued to employees;

• Information about members of the employer’s controlled group;

• Full-time employee counts by month;

• Total employee counts by month; and

• Whether the employer is eligible for certain transition relief.

Tracking this information is a large undertaking for employers. The scope of information reporting is likely to require engagement of a multi-disciplinary team drawing on both internal and external resources.

Employers should consider assistance from the following areas:

• Information Technology—to ensure that all of the required data is accessible by internal and external users involved with employer shared responsibility compliance;

• Finance—to budget, allocate compliance resources, and evaluate the cost impact of various options (such as the cost of offering health coverage to full-time employees as defined by health care reform and, if coverage is offered, whether it should satisfy regulatory standards for affordability and minimum value);

• Tax—to coordinate required reporting with the IRS;

• Legal—to interpret and apply the regulations;

• Human Resources—to identify full-time employees and monitor employee eligibility;

• Payroll—to track hours (to identify full-time and part-time employees) and calculate affordability; and

• Benefits—to develop plan design, eligibility, and communications to employees.

It is also important for employers to coordinate with outside service providers, such as payroll vendors and third-party administrators.

While the guidelines related to the Affordable Care Act are complex and evolving, with the proper knowledge, preparation and support, employers can understand their obligations under health care reform, stay informed, and take action accordingly.

Jeffrey W. Knapp, J.D., is a Senior Editor, EBIA, with the Tax Accounting business of Thomson Reuters. He assisted in the development of Thomson Reuters’ Form 1094/1095 Workbook for Employers and Advisors and is the editor of HIPAA Portability, Privacy Security. He also contributes to Health Care Reform for Employers and Advisors, focusing on employer shared responsibility. Jeff received his law degree cum laude from the University of Pennsylvania Law School. A member of the Oregon State Bar, Jeff practiced law in the employee benefits field for 16 years before joining Thomson Reuters in 2012.