Federal quick reference guide to the Tax Cuts and Jobs Act.

The provisions in the Affordable Care Act (ACA) were a hot topic this past year as Republicans in Congress attempted once again to repeal and replace ACA provisions as part of tax reform. While Republicans succeeded in including a provision that effectively eliminates the ACA’s individual mandate in the Tax Cuts and Jobs Act, it’s important to understand this doesn’t entirely repeal the ACA. By repealing the mandate, obtaining health insurance will be voluntary and individuals won’t be penalized for failure to obtain coverage. However, this provision doesn’t take effect until tax year 2019; therefore, there’s no change for tax year 2018.

All other provisions in the ACA remain in effect, including the employer mandate, which requires applicable large employers (ALE) to offer minimum essential coverage that provides minimum value to full-time employees, and the associated reporting requirements. With that in mind, affected employers should be aware of provisions, reporting requirements and deadlines to avoid significant penalties.

Reporting Requirements

In 2018, reporting requirements remain unchanged, i.e., ALEs are required to furnish Form 1095-C to applicable employees and file Form 1094-C with the IRS. Self-insured employers not defined as ALEs will furnish Form 1095-B to covered employees and file Form 1094-B with the IRS.

Reporting Requirements - Chart

Determining ALE Status

For 2018, an employer must determine its status as an ALE by calculating the number of full-time equivalent individuals it employed during 2017. For purposes of this analysis, employees of affiliated group members must be aggregated. For each month during 2017, the employer combines full-time employees (those working 30 hours a week or 130 hours a month) with full-time equivalent employees. At the end of the year, the total sum of all 12 months is divided by 12. If the average number of employees calculated is 50 or more, the employer is an ALE.

2018 Compliance Dates

For tax year 2018, the compliance dates to prepare and distribute Forms 1095-B and 1095-C remain unchanged at this time. With the complexity of the reporting, affected employers should analyze employee data monthly to limit the effect of these deadlines.

2018 Compliance Dates - Chart

Failure to file or late filing of these required forms could subject an employer to significant information reporting penalties.

Employer Mandate

In 2018, employers may have received employer shared responsibility payment (ESRP) notices related to tax year 2015 reporting. While many of these notices were a result of incorrect reporting by the employers and could be resolved with a response to the IRS, others were a result of employers not complying with the employer mandate instituted under the ACA.

ESRP notices sent via Letter 226-J were calculated based on information reported on Forms 1094-C and 1095-C filed by the ALE and individual income tax returns filed by the ALE’s employees. The letter contains a summary table, which includes a count of employees who received a premium tax credit and which provision (Internal Revenue Code (IRC) Section 4980H(a) or IRC §4980H(b)) the ESRP falls under. The ESRP included in Letter 226-J can be disputed by filing Forms 14764 and 14765 with the IRS.

As a reminder, an ALE must offer minimum essential insurance coverage to 95 percent of its full-time employees or face a penalty under IRC §4980H(a). For 2018, this penalty is calculated by subtracting 30 from the number of full-time employees and multiplying the difference by $193.33. This penalty is calculated monthly and triggered if just one full-time employee qualifies for and obtains subsidized Health Insurance Marketplace coverage.

An employer also may face an IRC §4980H(b) penalty if it doesn’t offer affordable insurance providing minimum essential value. This penalty is triggered when at least one full-time employee qualifies for and receives subsidized Health Insurance Marketplace coverage. The penalty is $290 per month per full-time employee who receives the subsidized coverage. In situations where both penalties apply, the penalty is limited to the lesser of the two.

Going forward, the IRS has announced it has the data to begin calculating potential penalties and issuing ESRP notices related to the 2016 tax year.

BKD Solution

BKD will once again assist employers looking to ease their stress in meeting these reporting requirements with a compliance solution. Our solution also gives clients the opportunity to work closely with an ACA advisor who can assist with determining appropriate coding for Form 1095-C, a full-time employee count, electronic filing through the IRS ACA Information Return system and other processing needs. BKD clients also will have direct access to our reporting guide and information-gathering templates designed to help ease the reporting process. BKD also can help resolve any ESRP notices for prior year filings.

For more information, contact Brandon or your trusted BKD advisor.

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