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Preparing for the ACA: Are You Ready?

October 29, 2015

Rick Chouteau, Senior Vice President
Paycor

The ongoing implementation of the Affordable Care Act (ACA) has put many organizations in frenzy mode as they strive to meet the new regulations introduced by the law. And while the ACA will impact certain organizations differently, they all have at least one thing in common: their reporting obligations to the IRS will increase tremendously. With new requirements going into effect for the 2015 tax year, now is the time for companies to look at their current ACA strategy and adjust their approach accordingly.

While large employers – those with 100 or more full-time employees – were required to provide their full-time employees with affordable health coverage as of January 1, 2015, this requirement will go into effect on January 1, 2016 for those with between 50 and 99 full-time equivalent employees. However, these companies must still comply with the same reporting requirements as large employers for 2015. As the cut-off date for providing coverage and reporting those numbers to the IRS will be here before we know it, it is crucial that companies understand what they can do to fully prepare for these deadlines.

So, what are the main things employers should do to ensure they’re ready for the ACA? Consider the following five points:

1. Lowered threshold for full-time employees: Traditionally, those working 40 hours were considered full time; however, under the ACA, any employee working at least 30 hours per week or 120 hours per month is considered full time. This is an important distinction as it requires a new way of classifying employees.

2. Difference between full-time and full-time equivalent: A full-time equivalent employee is a combination of the hours of your part-time employees. This is particularly important for companies with less than 50 full-time employees that rely on part-time workers. As such, the number of full-time equivalent employees (based on the number of hours per month worked by part-timers divided by 120) may put them over the 50 employee threshold.

3. Changing status year to year: As the number of employees a company has can fluctuate and impact their status as an Applicable Large Employer (ALE) as well as their healthcare obligations, employers can review their status each year. This further drives the need for companies to track all employer hours and report them accordingly.

4. Ensuring form completion: Employers with 50 or more full-time equivalent employees are required to provide their employees with 1095-C forms, which explain what healthcare coverage was made available to eligible employees.

5. Companies with less than 50 full-time equivalents: Those smaller companies that offer benefits are required to have their employees complete 1095-B forms, whether through their insurance carrier or, if they are independently insured, directly to employees. If the company is not offering benefits, there is no need to submit forms to the IRS. However, they should still track all employee hours if their full-time equivalent count could go above 50.

As the landscape surrounding the ACA continues to introduce new challenges – and with the reporting deadline just around the corner – employers of all sizes need to know where they stand in the eyes of the law. Recognizing what your requirements are, and having the right plan and technology in place to see it through, is essential to a successful strategy. Now is the time to reach out to your company’s payroll provider to make sure the required forms are completed in a timely manner, which will assist in meeting filing deadlines as tax time approaches.

Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein.  Such content, comments, or advice may be based on tax statues, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities.  This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.

 

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