As reported by The Wall Street Journal in late February, President Donald J. Trump acknowledged the daunting complexity of healthcare after meeting with Republican governors and insurers — the two groups who can readily make or break an attempt to repeal and replace the Affordable Care Act (ACA) that currently requires employer compliance and reporting.
This acknowledgement by the President about the ACA sheds little light on the immediate or even the long-term status of the healthcare mandate. Knowing what is next regarding healthcare — and specifically employee 1095 notification and IRS reporting — requires a crystal ball and crossed fingers, especially when analyzing current news and notable quotes.
Additionally, Democrats have made it known they intend to defend the ACA vigorously at the grassroots level, which has some Republican politicians hesitating about wholesale support of repeal and replace.
The President’s joint address to Congress on February 28, 2017 also provided little insight into the coming changes, with the only take away being the current administration is dedicated to repeal and replace, but no detail on the reporting requirements for the “replace.”
So how does a rationally thinking businessperson, whose business includes this required reporting, plan for the future? Let’s start with a few practical thoughts:
Enacting the Mandate
The original ACA laws and subsequent regulations required four years to define. After the initial regulations, it has taken two additional years of refining and redefining and confusion still reigns.
Focus is Not on Reporting & Tracking
Most of the published ACA focus is centered on insurance provision, coverage considerations, tax credits and HSA expansion, not reporting or tracking.
Party Majority Is Not Enough
While the Republicans have a majority in both houses, they lack the Congressional supermajority (60 votes) needed to defeat any filibuster by the Democrats aimed at stopping a repeal bill.
Remove Individual Penalties, Remove Funding
The House Republican plan would immediately eliminate tax penalties for people who do not have insurance and employers that do not offer it. Additionally, this plan would eliminate taxes and fees that help pay for the coverage expansion, fees collected from health insurance companies and brand-name prescription drugs manufactures, and excise taxes on medical device makers.
Without the above funding sources, paying for current subsidizes and expanded ones will add to the national debt, not a revenue neutral arrangement. Adding to the national debt may cause conservative republicans to withdraw replacement support.
‘Repair’ vs. ‘Replace’
On February 5, 2017, Rick Roddis of Insightful Accountant wrote, “Now, more lawmakers are looking to “repair” the ACA, with the President and House Speaker both predicting a 2018 timeframe for making measurable changes.”
Employer Penalties for ‘No Reporting Effort’
Even with a Presidential proclamation to lessen the employer’s burden, the IRS is pursuing penalties for employers who make no reporting effort.
At present, ACA IRS regulations require employers to report healthcare coverage information to employees using forms 1095-B and 1095-C and to the IRS electronically. W-2 reporting of healthcare costs is also required. Therefore, the IRS is collecting substantial data on healthcare cost, employer healthcare provision and employee direct cost. This is valuable data for future decision-making.
If an employer did not file required ACA forms, they most likely will receive an IRS notification requiring one of the following responses within 30 days from the date of the letter:
- I was an ALE for calendar year 2015 and already filed Form 1094-C and Forms 1095-C with the IRS using <name> and <employer identification number> on <date>.
- I was an ALE for calendar year 2015 and my Form 1094-C and Forms 1095-C are included with this letter.
- I was an ALE for calendar year 2015 and will file my Form 1094-C and Forms 1095-C with the IRS using <name> and <employer identification number> by <date>. (If more than 90 days from the letter, the response must explain why.)
- I was not an ALE for calendar year 2015.
- Other (must explain)
No response to the IRS? Then the IRS will begin assessing penalties to ALEs who fail to report according to IRS Section 6056.
Notifications and Filing
Remember, even if you offered compliant coverage or if you chose to accept the “IRS sledgehammer penalty,” you must produce Form 1095-C for employees and file Form 1094-C for the IRS or face penalties.
Our experience and that of the employers we serve, reveals tracking and reporting employee healthcare coverage is no easy task. Getting accurate data about coverage, especially month by month, requires manpower cost and direct expense due to the employee form distribution. ACA has proven to be expensive and exhaustive for employers.
What to Do: Stay the Course with the ACA Reporting Requirements
Based upon current information, the IRS will most likely expect employers to continue tracking the required data throughout 2017 with subsequent 2018 reporting.
Remember, even a full ACA repeal may not eliminate the IRS reporting requirements. New legislation could carry a tax-related component, such as tax subsidies or tax breaks, which would involve some level of IRS reporting.
Plus, new healthcare legislation could increase the burden in the early days, especially if tracking and reporting requirements change significantly.
Given the political gridlock, anticipate at least 18 months before new ACA legislation takes effect. A data-hungry federal government will not likely discard collected health coverage data or the data collection plan for health coverage information. Without employer reporting, the federal government has no other data source for employer-supplied healthcare coverage. Should the employer mandate go away, the burden of healthcare coverage would fall to the federal government – an undesirable consequence of any new ACA legislation would be more federal, long-term unfunded liability.
In conclusion, “stay the course” is the recommended current action plan, and “be prepared” is the watch phrase. And, if you did not provide 1095 forms to your employees and should have filed, take action now. It is not too late to file a 2016 extension and contact a provider like PSST ACA-Track™ to fulfill your obligation – NOW.