ACA Reporting: IRS Deadline of March 31 Looms for Applicable Large Employers
- The Affordable Care Act (ACA) imposes new reporting requirements on applicable large employers, generally those employers with 50 or more full-time or full-time equivalent employees.
- The first deadline for the new reporting requirements is March 31, 2016.
- The penalties for failing to meet the 2016 deadlines were recently increased to $250 per return, up to a maximum of $6 million. Only in limited circumstances will employers be able to get these penalties abated.
Applicable large employers have new reporting requirements under the Affordable Care Act (ACA). Whether an employer is an applicable large employer is determined each calendar year by looking at the employer's workforce during the prior year. Generally speaking, an employer with an average of 50 or more full-time employees, including full-time equivalent employees during the prior year, is considered an applicable large employer.
By March 31, 2016, these employers must use new Internal Revenue Service (IRS) Form 1095-C to furnish information to each of their full-time employees about the healthcare coverage they offer. Additionally, by June 30, 2016, employers must file these forms, along with new IRS Form 1094-C, with the IRS electronically. (Employers that are permitted to file with the IRS on paper only have until May 31, 2016.)
Considerations for Employers
Given the looming March 31 deadline, employers have hopefully already provided complete and accurate information to their full-time employees. For employers facing challenges in meeting the new reporting requirements, the following should be kept in mind.
- Significant penalties are associated with providing inaccurate or incomplete information and for failing to meet the established deadlines. The penalties were recently increased to $250 per return, up to a maximum of $6 million ($3 million for failures related to furnishing the Forms 1095-C to full-time employees and $3 million for failures related to filing with the IRS).
- For filings made in 2016 and only in certain situations, the IRS has provided relief for employers that have provided inaccurate or incomplete information. However, the IRS has not provided relief for employers that fail to meet the 2016 deadlines. Moreover, the IRS has already extended the deadlines and has been clear that no additional extensions would be given this year.
- If assessed a penalty for failure to meet the deadlines, an employer can seek abatement if it can show that its failure was due to "reasonable cause and not to willful neglect." This standard would apply in limited circumstances. To meet this standard, an employer would have to demonstrate that it acted in a "responsible manner" and that there were either: 1) significant mitigating factors with respect to the failure to meet the deadlines (e.g., this was the first year this reporting was required), or 2) the failure arose from events outside of the employer's control (e.g., a fire destroyed the employer's computer system). Under this standard, it is unlikely that an employer's ignorance of the new ACA reporting requirements, without other factors, would meet the requisite standard. By contrast, an employer may be successful in seeking an abatement of penalties if it can show that it took actions to determine whether it was subject to the new reporting requirements, worked to gather the required information and was otherwise compliant with its reporting obligations.
- Employers should be aware of a few special rules that apply to penalties. For example, penalties double if there has been intentional disregard of the new reporting requirements or alternatively are reduced if a correction is made within the required time.
Holland & Knight is prepared to answer any questions employers have about these new ACA reporting requirements, including whether they are subject to the new reporting requirements, how to comply, what immediate actions they can take to help ensure they will not be assessed penalties and how to seek abatement of any assessed penalties.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.