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ACA in Action: Part one - The more things change, the more they stay the same

Authored by Eric Pochas

It is early December 2019, and many employers are bracing to complete their next round of required Affordable Care Act (ACA) reporting. While the 2019 reporting due in early 2020 represents the fifth consecutive reporting cycle, the process of completing it has not become any less confusing, stressful or complicated for many employers, especially those who were subject to proposed penalties for non-compliance along the way. Here is your inside look at what has (and hasn’t) changed heading into ACA reporting year five.

The individual mandate is out, but reporting it is not

Perhaps most significantly, the elimination of the individual mandate effective Jan. 1, 2019 is a big change that many thought could have a big impact on ACA reporting. A longer-than-usual delay in releasing 2019 form drafts seemed to indicate that major changes could be in order. Alas, the drafts delivered in November 2019 revealed little in the way of change. On Dec. 2, 2019, the Internal Revenue Service (IRS) did announce that “B” form filers would no longer have to issue forms to individuals if they make certain simple disclosures and agree to provide these forms upon request. However, what it also made clear at that time was that “B” forms still required filing with the IRS. Presumably, the IRS is going to use this employer-supplied information to police Premium Assistance Tax Credit awards.

There also is a boomerang effect going on when it comes to the individual mandate. More states – with New Jersey and the District of Columbia as the latest for 2019 – are ratifying state-level health coverage requirements for individuals that also call for “ACA-like” employer reporting. What we thought had become old is becoming new again. When satisfying these state-level requirements, employers are going to want to make sure their reporting systems and vendors are capable of limiting the submissions to the minimal amount of data necessary.

The issuance deadline has changed, but the filing deadlines have not

When talking ACA reporting, a clear distinction has to be drawn between form issuance and form filing. The main reason for this is because they require two completely separate sets of actions. Perhaps more importantly is the fact that issuance and filing are pegged separately under the ACA. What this means is that each – separately – is subject to a penalty when either or both is late.

Consistent with prior years, on Dec. 2, 2019 the IRS also announced an extension to the 2019 form issuance deadline. A 30-day extension to the original Jan. 31, 2020 deadline now gives employers until March 2, 2020 to issue their 1095s. We have long held that the Jan. 31 deadline is unreasonable. The reason for this is because the data needed to complete the full year’s reporting does not realize itself until the year ends, and because vendors who supply some of this needed data (COBRA data, for example) are not subject to issuance deadlines. As a result, getting all of this work done and done right in less than 30 days remains a tall task. The IRS seems to agree, given it has extended the issuance deadline for each of the past five reporting cycles.

However, the IRS did not extend the 2019 form filing deadlines. Employers must still file the “B” and “C” forms with the IRS in conjunction with original filing deadlines of Feb. 28, 2020 for manual/paper filings (allowable for 250 or less Forms 1095) or March 31, 2020 (required for filers of more than 250 Forms 1095).

The 250 form limit is not new, but that doesn’t mean everyone understands it

In 2017, we saw the IRS begin issuing penalties to employers who did not comply with the 250 form limit for the paper filing of Forms 1095-C. What often happens is that people and vendors change from one reporting year to the next. When these changes happen, oftentimes the previously used method of electronically filing these forms is no longer available and this “moment of truth” does not play out until close to the reporting deadlines. The 250 conundrum also comes into play for growing organization who unknowingly go over the mark for the first time. Forced with the proposition of not submitting the forms at all, or submitting them the wrong way, an employer holding more than 250 forms decides that doing something is better than doing nothing. The forms then go in the mail and months (or years) later the employer gets a fine.

If your company must file more than 250 Forms 1095-C, it is important that you know now exactly how these forms will be electronically transmitted to the IRS. As we’ll discuss later on in this series, the IRS Affordable Care Act Information Returns (AIR) transmittal process is very complicated and cannot be entered into matter-of-factly. It is a world reserved for use by thoroughly vetted and demonstrated entities. If any of your personnel or vendor resources have changed, now is the time to make sure you have this important base covered for 2019.

While the full utility of Form 1095 is no longer there, what is clear is that employers remain on the hook for compliance with the employer shared responsibility (ESR) mandate. This reporting mandate is how employers demonstrate ESR compliance. Not respecting the reporting mandate subjects the employer to penalties for late, incorrect and missed form issuances and filings – amounts that grow big and fast, as we will also touch upon later in this series. The good news is that while it has changed some, much of what this reporting remains very much the same as it did back in 2015.

For more information on this topic, or to learn how Baker Tilly Vantagen specialists can help, contact our team.

About the ACA in Action series and Baker Tilly Vantagen

ACA in Action is a series of informative articles that provide practical perspectives on current matters of Affordable Care Act (ACA) compliance. Offering these perspectives are certified ACA experts from Baker Tilly Vantagen who are well-versed in how evolving ACA concepts are uniquely affecting everyday operations within impacted organizations.

Baker Tilly Vantagen is the employee benefits administration and human resources consulting arm of Baker Tilly. We have been providing ACA compliance support since 2010, and preparing, issuing and transmitting Forms 1094/1095 on behalf of employers since 2015.

Stay tuned for part two of the four-part ACA in Action series!

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

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2019 year-end tax letter: Affordable Care Act update