Winter is here, which means it’s time for plaid, twinkle lights and figgy pudding. But there’s something else on HR managers’ minds this time of year: The Affordable Care Act (ACA). Whether it’s open enrollment, tax forms, or benefits eligibility, ACA compliance is probably on your radar. As a result of the Tax Cuts and Jobs Act, signed by the president in December 2017, the individual mandate penalty will reduce to $0 for the first time in 2019.
The Affordable Care Act consists of two mandates: the individual mandate and the employer mandate. The ACA generally requires that individuals obtain health care coverage during the year or pay a shared responsibility payment known as the individual mandate penalty. The individual mandate penalty is generally calculated as the cost of purchasing the lowest premium healthcare coverage available on the applicable Health Marketplace or, if less, a monthly flat dollar penalty amount. The monthly flat dollar penalty amount varies based on family size and household income.
While the employer mandate – a.k.a. the employer shared responsibility payment – has not been modified by the Tax Act, the individual mandate penalty has been reduced to zero for years after 2018, eliminating individual mandate penalties altogether. This means that, effective January 2019, the government will no longer attempt to collect the individual mandate penalties if an individual or family does not obtain healthcare coverage in 2019 and thereafter. The elimination of the penalties does not technically remove the requirement for health care coverage, but without penalties, there will be no enforcement and, in effect, no practical mandate to obtain coverage for 2019 and later years.
The IRS requires an employer or insurance company to report on Form 1095 whether an individual had ACA compliant coverage for the tax year. Individuals use the information on Form 1095 to substantiate healthcare coverage for themselves and any covered family members on the individual’s federal income tax return (Form 1040) for that tax year, in order to avoid paying the individual mandate penalty for the year. Employer reporting on Form 1095 was not eliminated by the new Tax Act, but it is possible that Form 1095 will be modified or eliminated for 2019 and later tax years, since it will have no practical application going forward.
This change could indirectly impact employers. If fewer employees obtain coverage on the ACA Exchanges and the related government subsidies, the employer’s penalty risk under the ACA employer mandate will decrease. On the other hand, the lack of an individual mandate may further destabilize the ACA Exchanges, resulting in potentially more employees looking to their employer to obtain healthcare coverage that may no longer be affordable on the Exchanges.
To help HR managers prepare for the 2018 tax reporting year in 2019, we’ve put together a helpful list of the important ACA deadlines every HR, payroll, and benefits manager should know. The IRS has published final forms and instructions to help employers prepare for next year’s reporting on the health coverage they offered employees in 2018. Employers subject to the Affordable Care Act (ACA) must distribute reporting forms to employees and file with the IRS early in 2019.
Filing deadlines for the reports are:
- January 31, 2019 for furnishing returns to individuals;
- February 28, 2019 to file with the IRS on paper; or
- April 1, 2019 to file with the IRS electronically (Note: employers with more than 250 returns are required to file electronically).
Note: The IRS just announced a 30-day extension of the 2018 due date to provide Form 1095 to individuals for the 2017 reporting year. Form 1095 now must be provided to applicable individuals no later than March 2, 2018. This extension for Form 1095 distribution is automatic, and does not apply to the deadlines for employer reporting to the IRS, which remain as February 28, 2018 for paper filers, and April 2, 2018 for electronic filers.
Checklist for 2018 ACA Reporting
- Determine ALE status for 2018 based on 2017 data.
- Check reporting obligations for ALEs the self-insure group health plans, ALEs that offer fully insured group health plans and non-ALEs that self-insure group health plans.
- Determine electronic filing status.
- Evaluate whether proper data collection is in place to meet reporting requirements.
- Review the instructions for the forms that must be completed for changes from prior years.
- Make sure Social Security number request obligations are being fulfilled.
- Have a plan for timely form completion by Jan. 31, 2019 for employee statements.
- Issue employee statements to employees on or before Jan. 31, 2019.
- Submit required paper forms to IRS on or before Feb. 28, 2019.
- Submit required electronic forms to IRS on or before April 1, 2019.