3 reasons ACA reporting will be smoother in 2016 (and 4 reasons why it won’t)
It’s only the second year of Affordable Care Act (ACA) reporting, but a year can yield some hefty changes.
The confusing forms and the last-minute communications and changes from the IRS made for a difficult process that, luckily, was just a trial run and didn’t count toward penalties. This year, ACA reporting has real deadlines and real penalties to comply with, and while the process should be smoother, it still won’t be easy. Here’s why.
Why ACA reporting will be better this year
- The process will no longer be a complete mystery: With last year’s practice run behind us, there is at least some understanding of what goes into the overall process of filing. Last year it was new for everyone, including the IRS, which had its share of hiccups. It only finalized the 1094 and 1095 series forms late in the year and this, along with a number of other factors, led the IRS to push back the fulfillment and filing deadlines. The process isn’t blind anymore; everyone knows, at a basic level, what to expect. This means that employers know what data they need to keep track of, they can fix any mistakes they may have made last year, and they have clearer instructions from the IRS to reference. It’s not a simple process, but it’s no longer a completely mysterious one.
- The forms will look more familiar: Similarly, you’ll recognize 2016’s forms, which are essentially the same ones as last year. They may be dense and confusing, but you’ll at least be aware of which sections gave you trouble before, and can avoid making any errors twice. While there are a few minor tweaks to the forms and the codes used on them (spousal coverage is taken into account on the 1095-C this year), for the most part, employers should be more comfortable with the various sections they’re filling out. Despite this, it may not be any easier than last year to accurately determine the correct codes each month for each employee.
- E-filing should be a smoother process: While simple in theory, e-filing was a bit of a mess last year. The IRS created the Affordable Care Act Information Returns (AIR) Program, which over the course of five months underwent multiple iterations. This meant the online filing process was unbelievably difficult to keep up with. The problems with the program included error messages on accurate input, technical difficulties, and problems matching employee data. While the process may not be completely bug-free for 2016 reporting, improvements and knowledge from last year’s experience should make for smoother filing.
What will still be just as challenging for 2016
- Data gathering still isn’t simple: Keeping every employee’s data and hours of service straight is difficult, no matter how practiced you are at it, especially when payroll and benefits data is still disconnected (and sometimes outdated) for many companies. Especially if you have a high number of part-time employees, tracking who falls above and below the 30-hour-of-service mark is not a simple process. There’s a lot of information to monitor for each employee, and some of it is only relevant to the ACA, so pay close attention to make sure you have correct, current data—all of it.
- Deadlines are earlier and stricter: Last year’s choppy process meant a lot of extended deadlines granted by the IRS. Expect no such luck this year. If you haven’t been keeping up with your data tracking in hopes that the deadlines will just get pushed back—or the process taken away completely—you might want to get moving. With less time to get everything in place this year, expect the time crunch that could stem from a lack of preparation.
- No transition relief means higher expectations: Last year, applicable large employers needed to offer health care coverage to only 70 percent of full-time employees to avoid penalties—this year, that number has risen to 95 percent. It was so low last year because of transition relief, but now you have to follow the letter of the law. Get on top of your health care benefits … or pay up. This higher percentage shouldn’t cause too much friction for those who have been on top of the ACA regulations from the beginning, but for anyone who enjoyed the transition relief last year, this might complicate your 2016 reporting.
- The language will still be confusing: Familiarity with Forms 1094- and 1095-C gives you a head start, but these documents are still riddled with confusing language and misleading questions. For example, Part III of Form 1094-C asks for an indication of whether minimum essential coverage is being offered, but the question isn’t as straightforward as it seems once you read the instructions for the form. The phrasing implies any health care offer can count as minimum essential coverage, while the true definition of that term is much more specific. While these language barriers haven’t changed, using resources to help fully explain the documents piece by piece, what they’re asking for, and how to fill them out can do wonders for the overall process.
ACA compliance and reporting is never easy—but this year should have some marked improvement over the last. Familiarity with the processes and forms, along with established procedures, should lead to less confusion all around. Just make sure you’re taking the proper steps to prepare your company for the tighter deadline and avoid potential fines.