2020 ACA Reporting Updates and Changes
It’s that time of year again and clients are beginning to ramp up for 2020 ACA Reporting. While many components of ACA go unchanged, we have a few reminders, and some notable changes, that we address in this bulletin.
ACA Reporting for Applicable Large Employers
Nothing has changed with regards to reporting requirements under ACA regulations. Applicable Large Employers (ALEs) are still required to submit 1094/1095 C forms to the IRS. ALE’s are companies who average 50 or more full-time or full-time equivalent employees (FT/FTE). This is determined the year prior. For example, if your company averages more than 50 FT employees in 2019, health insurance coverage that meets ACA guidelines must be offered in 2020 and then reported on and submitted to the IRS in 2021. HR Service has a calculator available to help determine whether or not your company is an ALE which you can access here ALE calculator.
ACA Reporting for Small Self-Insured or Level-Funded Employers
ACA Reporting must also be completed by employers who average less than 50 FT/FTE employees but are self-insured or level-funded. This is because the IRS considers the employer as the insurer and therefore the 1094/1095 B Forms must be submitted each year to show which employee and each of their dependents were covered by health insurance the year prior.
Due Dates and Good Faith Waiver
The IRS just recently published Notice 2020-76 and the due date for distribution of 1095 B/C forms to employees has been extended from January 31, 2020, to March 2, 2020. The dates for submissions to the IRS have not been extended and employers may apply for a 30-day extension for these dates using IRS Form 8809.
3/1/2021 Paper forms mailed to IRS
3/2/2021 Forms distributed to employees
3/31/2021 Electronic Filing to the IRS (required for 250+ forms)
In addition to extending the date to employees, the Notice also indicates that as an employer (or any other reporting entity) that distributes B forms (self-insured employers), the IRS will not assess a penalty to reporting entities who fail to furnish a 1095 B to employees if the following conditions are met.
First, the reporting entity must post a notice prominently on its website stating that responsible individuals may receive a copy of their 2020 Form 1095-B upon request, accompanied by an email address and a physical address to which a request may be sent, as well as a telephone number that responsible individuals can use to contact the reporting entity with any questions.
Second, the reporting entity must furnish a 2020 Form 1095-B to any responsible individual upon request within 30 days of the date the request is received.
However, for those ALE’s who must submit combined reporting on the 1095 C form (Parts II and III), the IRS will continue to assess penalties if both sections are not completed.
The Notice also provides an extension for a Good Faith Relief for reporting entities that report incorrect or incomplete information on the 1094/1095 Forms if the entity can show they made a good faith effort to comply with all the ACA reporting requirements.
Please note the Federal Poverty Level (FPL) calculations are for the 48 contiguous states and District of Columbia. For 2019, the affordability calculation used 9.86% and an FPL threshold of $99.75. In 2020, the affordability calculation uses as 9.78% and an FPL threshold of $101.79. For more information on an affordability calculation, please contact one of HR Service’s ACA Specialists.
Form Changes and New Codes
Currently, the IRS has only provided draft copies of the updated 2020 forms. Based on the draft forms, there are not any changes to the 1094/1095 B forms or the 1094 C form. However, there are changes to the 1095 C form based on new regulations covering ICHRA (pronounced ‘ick ra’) that includes additional one-series codes (1L-1S) and an additional line (Line 17) in Part II of the 1095 C for the zip code that was used (the employee’s primary residence or primary place of business) to determine the cost of an accessible exchange-based plan. A copy of the draft 1095 C forms can be found here DRAFT 2020 1095 C Form.
Approved in 2019 and effective January 1, 2020, ALE’s may now offer Individual Coverage HRAs “ICHRAs” at a set dollar amount each year, tax-free, to eligible FT/FTE employees that allow employees to purchase health coverage that meets ACA Guidelines (MEC, MV and Affordability). The additional information on the 1095 C form will allow employees to better understand how their employer-determined ICHRA amounts and affordability. In general, the contributions made by an employer, using an ICHRA, must be high enough that an employee could purchase the lowest-cost silver plan in his or her marketplace. ICHRAs must also meet the following guidelines:
- An employer may limit its offer of an ICHRA to a permitted class of employees but must offer it to everybody in that class and may not offer coverage under the employer’s group health plan to any person in that class.
- The ICHRA must be available on the same basis to all employees within a class; however, the employer may vary the amount available under the ICHRA as follows:
- An employer may increase the maximum dollar amount as the number of covered dependents increases. o If the number of dependents changes during the year, the amount can remain the same for the remainder of the year or pro-rated.
- An employer may increase the maximum dollar amount as the age of the participant increases, provided that the amount does not exceed three times the amount available to the youngest participant.
- If variations in the maximum dollar amounts are applied based on number of dependents or age, the variance must be the same for all participants in the same class with the same number of dependents or the same age.
Joining New Jersey and Washington DC this year are California and Rhode Island that now require state health care reporting. New Jersey and California only require filing if the employer health plan is a self-insured or level-funded health plan. Washington DC requires both fully insured and self-insured plans. All of the states require E-filing and HR Service is able to accommodate the reporting in partnership with their E-Filing services. Please note that employers filing 1095/94 B forms must also be E-filed in these states as well.
Minimum Value (MV) – An employer-sponsored plan provides minimum value if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan and provides substantial coverage for inpatient care and physician treatment.
Minimum Essential Coverage (MEC) – types of coverage that satisfies the ACA’s individual mandate, typically insurance policies that provide major health coverage.
Affordability – Because employers are not likely to know the household income of their employees, there are three safe harbors that an employer may use to determine affordability for purposes of the employer shared responsibility provisions. In general, under employer shared responsibility affordability safe harbors, employers are allowed to use Form W-2 wages, an employee’s rate of pay, or the federal poverty line, instead of household income in making the affordability determination.
ACA Reporting Solutions
There are many options available to provide needed reporting assistance such as payroll providers, HRIS providers, and HR Service, Inc. Make sure reporting is done on time and accurately or risk IRS fines and penalties.
We recommend you work closely with your insurance broker to make sure you have a provider you can trust. If you would like full-service assistance with someone taking care of it for you, contact HR Service, Inc (833) 685-8400 x 1.
Prepared by Holly Young, MA, SPHR, SHRM-SCP
Human Resources Business Partner