It’s that time of year again and clients are beginning to ramp up for 2021 ACA Reporting. While many components of ACA go unchanged, we have important ACA updates, that we address in this bulletin.
ACA Reporting for Applicable Large Employers
Applicable Large Employers (ALEs) are required to submit 1094/1095 C forms to the IRS in early 2022. ALEs are companies that average 50 or more full-time or full-time equivalent employees (FT/FTE). This is determined based on the previous year. For example, suppose your company averaged more than 50 FT employees in 2020. In that case, health insurance coverage that meets ACA guidelines must be offered in 2021 and then reported on and submitted to the IRS in 2022. HR Service has a calculator available to help determine whether or not your company is an ALE, which you can access here: ALE Calculator Download.
ACA Reporting for Small Self-Insured or Level-Funded Employers
ACA reporting must also be completed by employers who average fewer 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 to the IRS each year to show which employee and each of their dependents was covered by health insurance the year prior. In 2020, the IRS extended a relief that is still in place. The IRS will not assess a penalty to reporting entities (including self-insured small employers) who fail to furnish a 1095 B to employees if the following conditions are met:
- The reporting entity must post a notice located prominently on its website stating that responsible individuals may receive a copy of their 2021 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 those responsible individuals can use to contact the reporting entity with any questions.
- The reporting entity must furnish a 2021 Form 1095-B to any responsible individual upon request within 30 days of receiving the request.
Due Dates for 2022
The dates for submissions to the IRS have not been extended as of the date of this bulletin, but employers may apply for a 30-day extension to these dates using IRS Form 8809 found form 8809.
1/31/2022 – Forms distributed to employees
2/28/2022 – Paper forms mailed to IRS
3/31/2022 – Electronic Filing to the IRS (required for 250+ forms)
Affordability and Safe Harbor Codes
ACA affordability is based on the lowest cost plan available to the employee for employee-only coverage. Because employers are not expected to know their employee’s household income, the IRS allows for three affordability safe harbors that ALEs can use to ensure that the annual affordability threshold is met. For 2021, the affordability calculation uses 9.83% to determine affordability by using a calculation from:
- W2 earnings (safe harbor code 2F). The earnings found in Box 1 are multiplied by 9.83% and divided by the number of months the employee is benefit eligible.
- Rate of Pay (safe harbor code 2H). The IRS calculation requires the lowest rate of pay the employee had during the year, multiplied by 130 hours (for the month, regardless of how many hours they actually worked) and then multiplied by 9.83%. For example, Joe earns $15.00 an hour — $15 x 130 = $1950 x 9.83% = $191.69, which means the monthly premium for Joe cannot be more than $191.69 if it is to be affordable for him.
- Federal Poverty Level (“FPL” safe harbor code 2G), the FPL, as determined by the Department of Health and Human Services each year, is multiplied by 9.83%. For 2021 it was $12,760 for mainland USA states multiplied by 9.83% = $1254.31/12 = $104.53. This means that a premium of less than $104.53 per month for employee-only coverage meets FPL affordability.
Get your free download of the Safe Harbor Calculator by clicking here.
Please keep in mind that the 2020 affordability calculation uses 9.78% for off-calendar plan years with an FPL amount of $101.79. In 2022, the calculation is reduced to 9.61%, and the FPL is $103.14.
2021 Forms and New Codes
The IRS has recently published the 2021 1094/95 B/C forms, but only has the draft version of the 2021 instructions. There are no changes to the 1094/1095 B forms or the 1094 C form. This year, the only modification to the 1095 C form is the addition of two new codes, 1T and 1U, for individual coverage HRAs offered to the employee and spouse but not dependents. The draft of the instructions can be found here: 2021 Draft Instructions. 2021 1094/95 B/C forms can be found here: 2021 1095 C Form, 2021 1095 B Form, 2021 1094 C Form, 2021 1094 B Form.
NOTE: 2022 UPDATES COMING SOON
In addition to the federal ACA reporting requirements, several states have passed individual mandates to require their residents to purchase and maintain qualifying insurance coverage or pay a state tax penalty. This is a list of the states who are currently requiring some sort of reporting and/or mandate:
|State||Type of Insurance Plan||Forms Required||Dates Due||Submission Type|
|California||Self-Insured||IRS 1094/95 B/C Form||Distributed to employees by 1/31/2022State Filing 3/31/2022||Requires E-filing|
|New Jersey||Self-Insured||IRS 1094/95 B/C Form||Distributed to employees by 2/28/2022State Filing 3/31/2022||Requires E-filing|
|Rhode Island||Self-Insured||IRS 1094/95 B/C Form||Distributed to employees by 1/31/2022State Filing 3/31/2022||Requires E-filing|
|Washington DC||Self-Insured and Fully Insured||IRS 1094/95 B/C Form||Distributed to employees by 2/28/2022State Filing 4/30/2022||Requires E-filing|
|Massachusetts||Self-Insured||MA 1099-HC Form||Distributed to employees by 1/31/2022State Filing 3/31/2022||Requires E-filing|
|Connecticut||Yet to be released||Yet to be released||Yet to be released||Yet to be released|
|Hawaii||Yet to be released||Yet to be released||Yet to be released||Yet to be released|
|Maryland||Yet to be released||Yet to be released||Yet to be released||Yet to be released|
|Minnesota||Yet to be released||Yet to be released||Yet to be released||Yet to be released|
|Vermont||Yet to be released||Yet to be released||Yet to be released||Yet to be released|
|Washington||Yet to be released||Yet to be released||Yet to be released||Yet to be released|
ACA Reporting Solutions
Many options are available to provide needed reporting assistance, such as payroll providers, HRIS providers, and HR Service, Inc. We are anticipating that there will not be a Good Faith Waiver provided by the IRS this year, which means the reporting will require accuracy to avoid the risk of additional IRS penalties for incorrect forms.
We recommend that you work closely with your insurance broker to ensure you have a provider you can trust. If you would like full-service assistance with someone taking care of complex ACA reporting requirements for you, contact HR Service, Inc. at (833) 685-8400 x 1.
Prepared by Holly Young, MA, SPHR, SHRM-SCP, Human Resources Business Consultant
NOTE: 2022 UPDATES COMING SOON