MZQ Insights

8 Questions You Should Be Asking About ACA Reporting

October 1, 2020

It’s no secret that employee benefits compliance is confusing. It’s an ever-changing landscape full of uncertainty, red tape, and serious implications for every decision made. After all, we’re dealing with issues of healthcare, taxes, IRS penalties, and more.

At MZQ Consulting, our job is to help you navigate this space with confidence and ease. That’s why we pulled together this list of the top questions every business owner needs to be asking themselves about Affordable Care Act (ACA) reporting.

Take a look at our Q&A below and send us an email to learn more about how we can help you today:

ACA Forms

1) What are the current ACA Reporting Requirements and required ACA forms?

Applicable Large Employers (ALEs), generally companies with 50 or more employees, must report to the IRS information about any health care coverage they offered to full-time employees. The IRS will use this information to administer the employer mandate and government health care subsidies. ALEs also must send employees a statement that includes the same information. Generally, this means:

  • All employers over 50 employees must submit a 1095-C to employees and a 1094-C to the IRS.
  • Self-Insured employers under 50 employees must submit a 1095-B to employees and a 1094-B to the IRS.

ACA Form Deadlines

2) What is the deadline to file 2020 Forms 1094 and 1095?

1095 forms delivered to employees - March 2, 2021

Paper filing with IRS - February 28, 2021

Electronic filing with IRS - March 31, 2021

Deadline Extension

3) Will the deadlines be extended due to COVID-19?

Unknown at this time.

Employer Mandate Penalty

4) What is the Employer Mandate Penalty and is it still in effect?

There are actually two employer mandate penalties. The first occurs when ALEs fail to offer a health plan to at least 95% of its full-time employees. It is a fee of $2,700 for 2021 (up from $2,570 for 2020) TIMES the employer’s total number of full-time employees (minus 30).

The second penalty applies when an ALE offers a health plan to the required percentage of full-time employees but a specific full-time employee gets government-subsidized coverage through an exchange and that individual: (1) was not offered coverage by their employer, (2) was offered “unaffordable” coverage, or (3) was offered coverage that did not offer “minimum value” such as a skinny plan. This fee is $4,060 for 2021 (up from $3,860 for 2020).

affordable coverage

5) What counts as affordable coverage under the ACA?

In 2021, employer-sponsored coverage is considered affordable if the employee’s required contribution does not exceed 9.83% of their household income for the tax year. For 2020, the threshold was 9.78%.

ACA’s Affordability Safe Harbor

‍‍6) What is the ACA’s Affordability Safe Harbor rule?

Imagine that you offer coverage to an employee and they waive it. An example of this might be someone who is married and gets coverage from a spouse instead or an employee under 26 who gets coverage from their parents. At this point, however, you still have to prove to the IRS that you made them an offer and that it was affordable to them. There are three ways an employer can prove the coverage was affordable.  The employer can show that the employee’s share of the premium for the lowest-cost employee-only plan option is:

  • Federal Poverty Line Safe-Harbor.  Equal to or less than $104.53 for 2021 ($101.79 for 2020).
  • Rate of Pay Safe-Harbor.  Affordable assuming the employee makes there applicable rate of pay TIMES 30 hours per week.
  • W-2.  Affordable based on the employee’s Box 1 W-2 income for the applicable year.

furloughed employees

7) Do employers need to worry about giving furloughed employees a 1095-C? What if they were terminated?

Yes, any employee who worked full-time at any point during 2020 needs to get a 1095-C.  This includes furloughed and terminated employees.

Employer Tracking

8) Do employers need to worry about tracking variable hour employees during COVID-19?

Yes, and for good reason. As an example, say you run a restaurant but due to the pandemic employees are working minimal hours.  Nevertheless, you may need to continue offering them coverage because they worked a full-time pace in the prior measuring period.  The reverse may happen next year, you could have employees not working a full-time pace in 2020 that therefore don’t qualify for coverage in 2021 even though they begin working a full-time pace again later.  

All very confusing—and leading to some nonsensical results.  Let’s hope the IRS provides us some much needed regulatory relief here!!

Supreme Court Ruling

Bonus:  Do we really have to do ANY of this?  I thought the Supreme Court was going to overturn the ACA?!

The Supreme Court is hearing California v. Texas in November 2020.  While it is theoretically possible that the case could lead to the entire ACA being overturned, most legal experts from both sides of the aisle think this is HIGHLY unlikely.  In any event, this case will not impact the requirement to file 2020 Forms as the decision in the case will not be issued until the Summer of 2021.