Why did we want to write about the new ACA requirements for California employer reporting?
Well...we read the existing online info and immediately looked for an open window on a high floor.
Reporting's never going to be exciting but at least it should be tolerable.
We want to look at the key reporting requirements and provide the info in a clean and easy to understand format.
For HR geeks, this will all be pretty easy.
Let's get started and break down the new ACA reporting requirements into digestible pieces.
Before we start, understand that there are penalties for not filing the correct reports or filing late.
Let's stay on the good side of the IRS!
by Due Date:
*6/30/2016 if filed electronically
You can see there are two sets of reporting needed.
One goes to the employees (earlier).
One set goes to the IRS (later).
Not so bad, right?
Okay, so who needs to file?
What is an FTE?
It's the new way to calculate health insurance mandates and penalties.
Essentially, the law now looks at:
We add up all those employees (let's say we have 10).
Next, we take the total # of part time hours for our other employees and divide by 30.
10 part time employees working 15 hours is EQUAL to 5 full time employees
(10 x 15 = 150; divide 150 by 30 and we get 5)
We add the full time employees (10) to the full time equivalent (5) and we get 15.
Even though we only have 10 full time employees, to the IRS, we have the equivalent of 15!
They did this so that companies don't drop full time employees down to part time in order to avoid the health coverage mandate for 50+ FTE.
So back to our reporting requirement.
If you have 30 full time employees and another 40 part time employees at 15 hours each, guess what.
You've hit the 50+ threshold.
You are subject to the reporting AND you may be subject to the mandate to offer group health insurance (or pay the penalty. Find out more on the penalty of for not offering coverage here).
Companies under the 50 FTE will generally not be subject to the reporting requirements and/or group health insurance mandate.
What Period to Look At?
This is tricky.
For example, 2017 penalty and reporting is actually being based on 2016 employment data.
This whole calculation can be confusing (what period of time, what about seasonal employees, etc).
So we figured out the threshold for which companies...let's break down each reporting mandate.
There are two forms that need to go to employees by end of Q1.
Think 1095 = Employee (earlier)
Think 1094 = IRS (later)
Let's try to make sense of this.
Okay, there are two sections: 6055 and 6066
Each has one part that goes to the employee and one part that goes to the IRS.
This form addresses a company's compliance with the Employer Mandate ("Play or Pay")
Essentially, for companies with 50+ FTE's, they have to offer affordable, ACA compliant group coverage (play) or pay a penalty (pay).
Section 6056 reporting confirms whether an eligible company is Playing or Paying. One part of it goes to the IRS and one part goes to the employee.
The 6056 report is all about Employer-based health insurance. It basically determines whether an affected company (50+) offered qualified coverage or needs to pay a penalty.
What about the 6055 report?
6055 deals with whether an individual was eligible to get a tax credit on the individual/family Covered California market.
Here's the gist....which millions of California individuals and 100's of thousands of California companies don't know!
Keep in mind that Covered Ca only looks at the cost of the employee coverage...not dependents.
Let's understand this a bit.
If an employee's share of his/her coverage is less than 9.5% of their gross w-2 income, they are offered affordable coverage.
It doesn't matter how much the dependent cost is.
Read that again...it's a huge deal and many people enrolled in California answered that question incorrectly!
Maybe 100's of thousands. We get the calls every day...."but it's not affordable for the family since the company doesn't pay for our coverage...only employee"
Officially, they are not eligible for a tax credit. They're getting it anyway until the IRS introduces the left hand to the right hand.
That introduction is Section 6055 (form 1094B and 1095B)!
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