Survey data from a 2015 study conducted by the International Foundation of Employee Benefit Plans reveals that thirty-three percent of employers expect the largest cost increase from expenses associated with the Affordable Care Act will be in 2016.
REPORTING – FORM 1095-C
Per the Affordable Care Act, 2016 is also the first year Applicable Large Employers (ALEs) will be responsible for reporting employee information using IRS Form 1095-C. Most employers expect a one- to six- percent increase in compliance expenses. Of those that expect an increase, nineteen percent believe that administrative costs will be the largest drivers of such rising expenses.
ALEs will be responsible for reporting employee information using Form 1095-C. This form must be provided to an ALE’s full-time employees by March 31, 2016. The form will collect detailed month-to-month employee data relating to the 2015 year. Required information includes hours worked, access and employee contributions to employer-provided healthcare.
The employer must collect and file these forms to the IRS by May 31, 2016 if using paper forms, and by June 30, 2016 if using electronic forms.
Penalties will be applied to organizations that do not comply with these reporting requirements but the amounts of these penalties have not yet been determined. Penalties will be assessed in 2016 for employers with one hundred or more employees, based on the 2015 data submitted. Penalties for employers with fifty or more employees will be assessed in 2017.
On the docket of reasons employers are racing the clock to avoid increased 2016 expense is nondiscrimination compliance. IRS guidance regarding the ACA’s nondiscrimination rules is expected in 2016, leaving employers to ramp up to make sure they are compliant and avoid penalties.
Originally scheduled for 2010 implementation, the testing implementation was delayed until the IRS provided more specific regulations on how employers can maintain compliance. Guidance is expected to be released by the IRS in 2016, according to unofficial remarks from government officers.
To prepare for implementation prior to actual testing, employers are reviewing their healthcare plans to verify that their plans do not favor executives or highly-compensated employees and that plans are not offered to some employees and not others.
Penalties for noncompliance are generally up to $100 per day per discriminated individual for each day the plan does not comply with the requirement.
In preparation for the IRS guidance release, some employers are developing new eligibility rules for benefits for the 2016 calendar year or reviewing premium contribution amounts.
The bottom line:
Even though anticipated 2016 ACA-related expenses may increase for many employers, ninety-six percent stated they will continue to offer healthcare coverage five years from now, according to the survey. These benefits are seen as a necessity for retaining existing employees and acquiring high-quality new talent to organizations.
Stay tuned for Parts 2 and 3 of our 2016 Snapshot: Biggest Benefit Changes Impacting Employers Series.