ACA Related Challenges for Large Corporations
Large employers who have long offered compensation packages to their employees that include comprehensive medical programs may be in for a surprise this year. Employers are now responsible for reporting to the IRS certain factors about the insurance programs they offer. These new regulated reports will demand a whole new approach to tax reporting.
Most large employers, as a means of attracting and retaining valued employees, have been offering medical insurance within their compensation package for decades. Until this year, there was no need to report this benefit to the IRS. The Affordable Care Act (ACA) has changed that. Employers are now required to provide proof of offering a minimal insurance package to each employee.
Large employers (those employers who employ 100 or more employees) are now required to demonstrate that they have offered a minimal insurance package to each employee. These insurance packages must be compliant with the legislation.
To document compliance, employers must provide form 1095-c to each of their employees. The employer must also transmit a 1094-c form to the IRS, which means more reporting at the end of the year, crowding an already form inundated end-cycle.
Both the 1095-c form and the 1094-c transmittal must include such information as EIN’s, or TIN’s, employee addresses, employee work status throughout the year, valid proof of the minimal insurance coverage offered (accepted or declined), coverage dates for the insurance, and the employees’ share of premium costs.
TAX SEASON ALLOWANCES
The new ACA-driven reporting system is relegated to a “test” status for the 2015 season. If employers report in good faith, they will not be penalized. It is not only a test for the employers, but also for the employees and the IRS. This new structure will take time to perfect.
ACA RELATED CHALLENGES FOR LARGE EMPLOYERS
Determining Who Will Make the Report
The number one responsibility of the employer is to ensure that their employees are compliant. This will require the establishment of a line of responsibility within the organization. The complex information needed on the 1095s does not typically reside in one department. Programs may be generated that cross department lines. Communication factors may change at each department level.
It becomes evident that a new department with a broad range of expertise must be created to satisfy the needs of the law.
Determining Corporate Strategy
The required information, so often jealously held behind departmental lines, requires that each employer establishes security measures that involve the whole business structure rather than department by department. Most business structures today have a basic firewall in place with more firewall structures within each department. Since the ACA requirements will force the construction of a new department to house and distribute information in the required form and time frame, new and more stringent security measures naturally follow.
The selection of the first team is critical. Expertise in several areas and access to those areas is imperative. Transitioning from a relatively benign compensation package program to one that will become dynamic is difficult. The probability of changes to the ACA from year-to-year is high. The new department and its employees will be dancing to a quick beat every year. Therefore, the necessity of an intelligent and cogent staff is paramount.
The Added Responsibility of Employers to Employees
One of the employer responsibilties to employees is the ability to move from employer to employer without loss of medical insurance. The issue of pre-existing conditions no longer applies as the ACA has wiped that particular matter from the employer playing field. Thanks to the law, a new dynamic now exists in employer/employee relationships.
According to the ACA, the employer is not only responsible for offering, at least, the minimal medical insurance coverage required by ACA standards, they also must inform employees of the consequences of declining the offer. It is not enough to only keep the records and divvy out the information to employees and the IRS at the end of the year. The large employer must also affirm that the employee knows what to do with the information.
ACA changes create a new level of frustration for employers as the responsibility for the tax structure of employees becomes an issue. Not educating employees on requirements can result in fines for employees from the IRS, which, in turn, may bring about a collection process that creates further bureaucratic burdens on corporate structure. Pleading ignorance, whether as an employer or an employee is no excuse.
It follows, then, that the education of employees on ACA reporting rises in the level of importance. Education on employer time is expensive, but not as expensive as the frustration of employees who have no idea what ACA parameters mean to them.
Education is another duty that must fall on the new department. Only those with the collective expertise can elaborate on the complexities and simple points of the actions required.
This content was provided by Neches FCU, an Equal Employment Opportunity Employer Credit Union.
Neches FCU is a leading Texas credit union with a superior team, always ready to deliver service their 45,000+ members.
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They are all dedicated to providing a memorable service experience each and every time for clients they consider as family.