The Affordable Care Act (ACA) continues to be a part of everyone’s life and every business owner has to plan for how it affects their business. For several years, we have had the individual insurance mandate, which requires every person to have health insurance coverage unless they meet an exception. In 2015, the employer insurance mandate went into effect for businesses with 50 or more Full Time Equivalents. This included potential penalties for not offering affordable health insurance coverage and reporting requirements to the IRS.
Here is a quick summary of new ACA information that you should be aware of:
Individual Health Insurance – Penalties
The penalties for individuals not having insurance continue to rise and more taxpayers will be subject to the penalty if they do not have health insurance coverage for their dependents and themselves. The penalty for 2016 has risen to the greater of 2.5% of household income or $695 per adult ($347.50 per child). The 2.5% of household income is capped at the average price of the Bronze plan sold through the Marketplace while the fee per person fee is capped at $2,085. If you don’t currently have insurance, you should consult a CPA about exceptions and exclusions related to the penalty.
Employer Health Insurance – Transition Relief and Compliance Test
In 2016, transition relief for employers expired. Companies with over 50 full time equivalent employees are subject to all of the rules related to the ACA. Businesses that are subject to the mandate must offer insurance to a minimum 95% of all eligible individuals. If a business fails this test, they are treated for penalty purposes as if they offered no insurance at all. There is very little room for error.
Employees can be classified as Full Time, Part Time or Variable Hour Employees under the ACA. Full time continues to be any person that is reasonably expected to work more than 130 hours a month or 30 hours per week. If full time employees hours are reduced to under full time status, you have to continue to offer them coverage for the rest of the year. If an employee changes from part time to full time during the year, you have the same waiting period as a new employee before you would need to offer them insurance.
Review of Controlled Groups
As you are aware from past articles, the IRS has rules defining controlled groups when companies, including tax-exempt organizations, have similar ownership or similar control. It would be beneficial to review these rules with your CPA if you have had any changes in the past year.
Advanced Premium Tax Credit (APTC) Notices
Advanced Premium Tax Credit Notices have been issued by the Department of Health and Human Services. What we have seen so far are notices informing employers about individual employees who are receiving the Premium Tax Credits from the Exchange. This fall the IRS will also start auditing the Form 1094 and Form 1095s they received this last filing season.
2016 Filing Deadline
The deadline for Forms 1094 and Forms 1095 will be January 31, 2017 (along with other informational returns such as Forms W-2 and Form 1099-MISC). This is a much tighter deadline than we had this past year (June 30 and March 31). Currently there is no way to extend the due dates of these returns and the penalties for not timely filing are very high – as much as $530 per form.
Ketel Thorstenson, LLP will once again be offering Form 1094/1095 preparation services. If you are interested in learning more about our service or have any health care related questions, please contact a member of the Ketel Thorstenson ACA Team today.