In the years since its passage, the Affordable Care Act (ACA) has been the subject of fiery debate and attempts at repeal. One thing, however, has remained consistent: The law is still in effect. That means many employers still face forms to complete, reporting to be done… and penalties if they’re not in compliance.
As we start 2021, let’s review the basics of the ACA and the most recent updates to required forms.
A Refresher on the ACA
Originally passed in 2010, the ACA was created to make health insurance available to more people. It requires employers with at least 50 full-time employees (or full-time equivalent employees) to provide healthcare coverage for them and their dependents. Companies meeting this threshold are called applicable large employers, or ALEs. This requirement to provide coverage is called the employer mandate.
Regardless of size, all employers providing self-insured health coverage must file an annual return reporting certain information for each covered employee. They must also provide the same information to covered individuals.
Certain affiliated employers with common ownership or employers that are part of a controlled group are considered part of an aggregated group. In this case, you must aggregate (or combine) your employees to determine your workforce size.
If you are considered an ALE, coverage must be offered to at least 95% of full-time employees, with plans that are “affordable” and provide “minimum value.” Specifically:
- The contribution for an employee-only plan cannot exceed a specific percentage of the employee’s household income. (For 2021, this figure is 9.83%, up from 9.78% in 2020.)
- The plan pays at least 60% of the cost of covered services.
ALEs that don’t comply are subject to penalties that can reach several thousand dollars per full-time employee. These fines can be levied for failing to offer coverage, not submitting required forms or submitting forms that are incomplete or incorrect. If you’re an ALE, it’s important to be up to speed on the latest forms and requirements.
ACA Form Updates for ALEs
The IRS released final 2020 forms and instructions for reporting under IRS Code Sections 6055 and 6056.
- 2020 Form 1094-B and Form 1095-B (and related instructions) will be used by providers of minimum essential coverage (MEC), including self-insured plan sponsors that are not ALEs, to report under Section 6055.
- 2020 Form 1094-Cand Form 1095-C (and related instructions) will be used by applicable large employers (ALEs) to report under Section 6056, as well as for combined Section 6055 and 6056 reporting by ALEs who sponsor self-insured plans.
These forms and instructions include a number of changes made to Forms 1095-B and 1095-C related to offers of individual coverage health reimbursement arrangements (ICHRAs). If you are using Form 1095-B, you must enter the new code “G” in Line 8. This indicates coverage under an ICHRA. In addition, Form 1095-C now includes several changes:
- Eight new codes can be used in Part II (Line 14) to describe the types of ICHRA coverage you are offering.
- You must enter the age of the employee as of Jan. 1, 2020.
- You must enter the ZIP code of the employee offered coverage. This is used to help identify the lowest-cost plan.
- Part III has been moved to page 3 of the 1095-C.
The “Plan Start Month” box is now required on Form 1095-C for 2020. This section had previously been optional for each prior year of reporting.
In addition, the deadline for employers to provide employees with a copy of their 1095-C or 1095-B reporting forms has been extended from Jan. 31, 2021 to March 2, 2021. In addition, the IRS again extended “good-faith effort” transition relief to employers for plan year 2020.
The deadlines were not extended for filing 1095 forms with the IRS. They are still due Feb. 28 for paper filing or March 31 for electronic filing.
Your Next Steps
The IRS has posted instructions for Form 1095-B and Form 1095-C on its website. We also suggest you work with a human resources consultant if you have questions. Their up-to-the-minute knowledge of ACA forms and requirements can help you avoid unintentional violations—and costly fines.
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