1. Affordable Care Act: Lessons Learned
Affordable Care Act: Lessons Learned September 20, HB Solutions LLC Presented by Joshua D. Steele

2. Agenda Lessons Learned in 2015 Changes for Compliance in 2016
The Employer Mandate
IRS Information Reporting Requirements
Changes for Compliance in 2016
Audit Threat
Questions

3. Introduction
The ACA requires large employers to provide affordable health coverage that meets minimum standards to their full-time employees in order to avoid penalties.
Employers must also demonstrate compliance with new disclosure and reporting requirements.
When an employer fails to comply with ACA requirements, the penalties can be severe, so documentation of compliance is essential in the event of an ACA audit.
The Congressional Budget Office and the Joint Committee on Taxation currently estimate that $228 billion in penalty payments will be collected from employers over the next 10 years.

4. Introduction
ACA is not only about completing 1094-C and 1095-C forms at the end of the year – Employer Mandate penalties are incurred on a monthly basis.
Compliance must be approached on a monthly basis and monthly compliance binders should be maintained.
Many companies simply scrambled to get potentially inaccurate 1095-C forms out the door in March of 2016.

5. 2015 Lessons Learned – Employer Mandate
Employer Shared Responsibility Provisions
Commonly referred to as the Employer Mandate, it requires applicable large employers (ALEs) to offer qualifying affordable coverage to their ACA full-time employees and dependents.
Applies to employers with 50 or more full-time and full-time equivalent (FTE) employees.
Penalties are severe.

6. 2015 Lessons Learned – Employer Mandate
4980H(a): If a large employer does not offer coverage to a certain percentage of its full-time employees and their dependents, and one full-time employee receives a premium tax credit or cost sharing reduction in the exchange, the monthly penalty will be:
(1/12) x $2,160 x (# of full-time employees – 30)
4980H(b): If a large employer offers coverage, but the coverage is not affordable or does not provide minimum value, and one full-time employee receives a tax credit or cost sharing reduction in the exchange, the monthly penalty will be the lesser of:
The 4980H(a) penalty; or
(1/12) x $3,240 x the number of full-time employees who receive a tax credit or cost sharing reduction in the exchange

7. 2015 Lessons Learned – Employer Mandate
Difficult for employers to determine who “ACA Full-Time” employees are.
First issue: Who are “employees” under the ACA?
ACA applies the common law standard
Focus is on the right to control and direct the individual.
Factual determination and is not necessarily dependent on the label the employer has placed on the relationship in the past.
Critical to review the status of relationships with independent contractors and staffing firms.

8. 2015 Lessons Learned – Employer Mandate
Difficult for employers to determine who “ACA Full-Time” employees are.
Second issue: Who is “full-time” under the ACA?
An employee will be considered full-time in any month he/she averages 30 hours of service per week.
130 hours of service in a month is the equivalent.
ACA permits 2 methods for determining full-time status:
Monthly measurement method
Look-back measurement method
The use of one of these methods is not optional.

9. 2015 Lessons Learned – Employer Mandate
Best practices for identifying ACA Full-Time employees
Conduct audit of relationships with independent contractors and staffing firms.
Record and maintain accurate records of employee hours of service.
Develop and accurately implement and utilize the selected measurement method.

10. 2015 Lessons Learned – Employer Mandate
Common issues related to “Affordability”
Monitoring compliance is complicated where:
Employees have varied pay types
Eligibility and/or contribution rates are varied across workforce
Affordability standard of 9.5% (9.66% in 2016) is difficult to satisfy with low earners
The penalty amount is often less expensive than the overall cost of penalty avoidance.

11. 2015 Lessons Learned – Employer Mandate
What did 2015 teach us about penalties under the Employer Mandate?
Easy to trigger in 2015, even easier moving forward.
Penalties are triggered on a monthly basis, which requires employers to take a proactive approach each month of the calendar year.
It is now September – Employers may have already accrued 9 months of penalties.

12. 2015 Lessons Learned – IRS Information Reporting
The ACA established two types of required reporting under the Internal Revenue Code:
Section 6055 requires insurers and employers that sponsor self-insured plans to report annually on individuals receiving “minimum essential coverage”
Provided to individuals and the IRS
Used by the IRS to enforce individual mandate
Section 6056 requires “applicable large employers” (“ALE”) to prepare annual reports regarding coverage offered to full-time employees
Used by the IRS to enforce the Employer Mandate
Assists individuals in determining eligibility for premium credits

13. 2015 Lessons Learned – IRS Information Reporting
Information Reporting is completed through 4 forms
1094-B: Transmittal of Health Coverage Information Returns
Contains basic identifying information regarding the Insurer/self-insured employer/plan sponsor
1095-B: Health Coverage
Used to report certain information to the IRS and to taxpayers about individuals who are covered by minimum essential coverage and therefore are not liable for the individual shared responsibility payment
1094-C: Transmittal of Employer Provided Health Insurance Offer and Coverage Information Returns
Basic information about the employer and number of 1095-C Forms
1095-C: Employer Provided Health Insurance Offer and Coverage
Detailed information about full-time employees and offers of coverage made to those employees. Forms are provided to both IRS and employees

14. 2015 Lessons Learned - Who is Required to Report?
Type of Employer
IRC Section
IRS Form
Filed By
Recipient
Self-Insured
Less than 50 FTE
6055
1094-B
Employer
IRS
1095-B
IRS/Employee
More than 50 FTE
6055 & 6056
1094-C
1095-C
Fully-Insured
Insurer
6056

15. 2015 Lessons Learned – Method and Timing of Reporting
All ACA reporting is required on an annual basis, although the reports track and record information on a monthly basis.
IRS Reporting
All forms must be filed with the IRS by February 28 (or March 31 if filed electronically). Extended to June 30, 2016 for 2015 reporting.
Entities with 250 or more returns must file electronically
Statements to Employees
All employees must receive 1095-B or 1095-C by January 31. Extended to March 31, 2016 for 2015 reporting.

16. 2015 Lessons Learned – Information Needed for Forms 1094-C and 1095-C
Identification of all ACA full-time employees for each calendar month
Requires employers to track/record hours of service
Total number of employees for each calendar month
Employee SSN or birth date if no SSN
Identification of employer IRS contact person at each applicable large employer member
Monthly information on coverage offered, premium costs, and enrollment (including enrollment data on all covered individuals for self-insured employers)
The dollar amount each FT employee would have to pay if they enrolled in the lowest cost qualifying self-only coverage

17. 2015 Lessons Learned – Form 1094-C Transmittal Form
Each ALE Member must file a Form 1094-C, which operates as a cover sheet for filing Form 1095-Cs.
Part I
Basic identifying information regarding the ALE
Part II
Total number of Forms 1095-C being submitted with this Form 1094-C
Certification of eligibility for certain transition relief or simplified reporting methods

18. 2015 Lessons Learned – Form 1094-C Transmittal Form
Part III
For each month of the calendar year, whether or not the employer offered qualifying coverage to at least 95% of its ACA full-time employees and their dependents (70% threshold for 2015)
The total number of ACA full-time employees in each month
The total number of employees in each month
Whether the employer is a part of an aggregated/controlled group in any month
Whether the employer is eligible for certain Section 4980H Transition Relief
Part IV – Name and EIN of other Aggregated Group members.

19. Form 1094-C, Part III Continued

20. 2015 Lessons Learned – Form 1095-C
Form 1095-C: Employer-Provided Health Insurance Offer and Coverage
All ALEs must complete Parts I and II for each employee who was ACA full-time at any point during the year.
Employers that sponsor self-insured plans must also complete Parts I, II, and III for each employee that was enrolled in a self-insured plan for a single day of the year, regardless of whether or not they were ACA full-time.
Completed Form 1095-Cs must be given to employees and filed with the IRS.

21. 2015 Lessons Learned – Form 1095-C
Part I
Basic identifying information regarding the employee and the employer.
Part II
Applicable monthly coding with respect to the offer of coverage made, the cost of coverage offered, and any applicable safe harbors/transition relief.
Part III (for self-insured ALEs only)
Basic identifying information regarding individuals covered by the self-insured plan.

22. 2015 Lessons Learned – Form 1095-C, Part II, Lines 14-16
Lines 14 through 16 provide the IRS with almost all of the information necessary for it to determine whether an employer is subject to a penalty under the ACA’s Employer Mandate.
Extremely complicated and potentially confusing.

23. 2015 Lessons Learned – Line 14: Indicator Code Series 1 for “Offer of Coverage”
1A: Qualifying Offer - Minimum essential coverage providing minimum value offered to full-time employee with employee contribution for self-only coverage equal to or less than 9.5% mainland single federal poverty line and at least minimum essential coverage offered to spouse and dependent(s). 1B: Minimum essential coverage providing minimum value offered to employee only. 1C: Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) (not spouse). 1D: Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to spouse (not dependent(s)). 1E: Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse.

24. 2015 Lessons Learned – Line 14, Continued
1F: Minimum essential coverage NOT providing minimum value offered to employee, or employee and spouse or dependent(s), or employee, spouse and dependents.
1G: Offer of coverage to employee who was not a full-time employee for any month of the calendar year and who enrolled in self-insured coverage for one or more months of the calendar year.
1H: No offer of coverage (employee not offered any health coverage or employee offered coverage that is not minimum essential coverage).
1I: Qualifying Offer Transition Relief 2015: Employee (and spouse or dependents) received no offer of coverage, received an offer that is not a qualifying offer, or received a qualifying offer for less than 12 months.

25. 2015 Lessons Learned – Line 15
Line 15: Employee Share of Lowest Cost Monthly Premium, for Self-only Minimum Value Coverage
Line 15 is used to report the employee’s monthly required contribution or cost toward the lowest cost self-only MEC and minimum value coverage.
Only complete Line 15 if you used code 1B, 1C, 1D, or 1E on Line 14 either in the “All 12 Months” box or in any of the monthly boxes.

26. 2015 Lessons Learned – Line 16: Indicator Code Series 2 for Applicable Section 4980H Safe Harbor Codes and Other Relief for Employers
2A: Employee not employed during any day of the calendar month.
2B: Employee not a full-time employee
Indicates that the employee was not a FT employee for the month and did not enroll in minimum essential coverage OR that they were a full-time employee for the month but their offer of coverage ended before the last day of the month because their employment was terminated.
2C: Employee enrolled in coverage offered for each day of the month.
Use regardless of whether any other code in Code Series 2 might also apply (For example, the code for a section 4980H affordability safe harbor).
2D: Employee is in a Limited Non-Assessment Period.
Use code 2D, not 2B, if an employee is in an initial measurement period. Code 2D also applies to employees during allowable waiting periods and in their month of hire (unless hired on the first of the month).
2E: Use if multiemployer plan interim relief applies.

27. 2015 Lessons Learned – Line 16, Continued
2F: Section 4980H affordability Form W-2 safe harbor.
Use if the employer used the W-2 safe harbor to determine affordability for the employee (if used, must be used for all 12 months).
2G: Section 4980H affordability federal poverty line safe harbor.
Use if the employer used the federal poverty line safe harbor to determine affordability for the employee for any month(s).
2H: Section 4980H affordability rate of pay safe harbor.
Use if the employer used the rate of pay safe harbor to determine affordability for the employee for any month(s).
2I: Non-calendar year transition relief applies to this employee.
Enter code 2I if non-calendar year transition relief for section 4980H(b) applies to this employee for the month. To qualify plan must have been a non-calendar plan prior to March of 2010.

28. 2015 Lessons Learned – IRS Information Reporting
Most employers found reporting to be the most difficult and time consuming component of ACA compliance. Requirements for success included:
Familiarity with Employer Mandate regulations and IRS Reporting Instructions;
Comprehensive understanding of all benefit offerings and eligibility;
Accurate workforce data; and
The ability to access, understand, and manipulate workforce data.

29. 2015 Lessons Learned – IRS Information Reporting
Common issues presented by IRS reporting:
Confusion surrounding who must receive a 1095-C;
Incorrect identification of employee share of monthly premium for lowest cost, self-only minimum essential coverage;
Incompatibility between payroll/HRIS system and ACA reporting tools;
Inaccurate workforce, payroll, and benefits data;
Faulty 1095-C coding logic or incorrect understanding of codes.

30. 2015 Lessons Learned – IRS Information Reporting
Additional complexity for self-insured employers
Permitted to satisfy Section 6055 and Section 6056 requirements with “C” series forms.
Must file for all individuals enrolled in coverage, not only ACA full-time employees.
Part III on Form 1095-C must contain information for all individuals covered under employer’s sponsored plan, including part-time employees, former employees, spouses, and dependents.
Not commonly maintained by employers.

31. 2015 Lessons Learned – IRS Information Reporting: Common Form Errors
1094-C Errors – Incorrect Employee Counts
1094-C, Part III, ALE Member Information–Monthly (Lines 23-35)
Employers are required to report the number of ACA full-time employees each month in Column (b). Employees in a “limited non-assessment period” (those that received a Code 2D in Line 16 of their 1095-C) must not be included in this count.
Employers are required to report the number of total employees each month in Column (c). All employees must be included in this count, including employees in a “limited non-assessment period.”
For the vast majority of employers, these numbers should fluctuate throughout the year.

32. 2015 Lessons Learned – IRS Information Reporting: Common Form Errors
1095-C Errors – Incorrect Line 14, 15 & 16 values
Qualifying Offer Code 1A
Only allowable if Line 22, Box B is selected on the 1094-C. If utilized, Line 15 must be blank. If utilized for an employee, the only other acceptable Line 14 code is 1I.
Failing to differentiate between full and partial month offers.
Line 14 Codes 1B through 1F may only be utilized if the employee received an offer of coverage for an entire month. Failing to offer coverage for the entire month, regardless of reason, requires the employer to utilize Code 1H, “no offer of coverage”
Applies often to months of hire and months of termination.

33. 2015 Lessons Learned – IRS Information Reporting: Common Form Errors
1095-C Errors – Incorrect Line 14, 15 & 16 values
Failing to correctly utilize Line 16, Code 2C
Employees should received a Code 2C on Line 16 for any month in which they were enrolled in the offered coverage for each day of the month.
This code trumps any other potentially applicable Line 16 codes (except multi-employer plan relief).
Employers must ensure that the Line 14 code matches Code 2C. For example, 1H (no offer of coverage) should not be matched with 2C in any given month.

34. 2015 Lessons Learned – IRS Information Reporting: Common Form Errors
1095-C Errors – Incorrect Line 14, 15 & 16 values
Failing to correctly utilize Line 16, Code 2D
Code 2D indicates that an employee is in a limited non-assessment period, which includes the first partial month of employment, an employer waiting period, and an initial measurement period for a newly hired variable, part-time, or seasonal employee.
Other than the first partial month of employment, Code 2D may only be utilized if the employee is actually offered health coverage by the first day of the first month following the limited non-assessment period.
This results in issues and potential penalties where an employee leaves employment during a limited non-assessment period.
Unfortunately, this issue was not corrected in the first draft of the C and 1095-C instructions.

35. 2015 Lessons Learned – IRS Information Reporting: Common Form Errors
1095-C Errors – Incorrect Line 14, 15 & 16 values
Misuse of Code 1G
Code 1G in Line 14 indicates that an offer of coverage was made to an individual who was not a full-time employee in any month (including someone who was not even an employee, such as a retiree or a spouse of a retiree) and that the individual enrolled in self-insured coverage for one or more months of the calendar year.
Code 1G is only appropriate for individuals in self-insured plans that were never ACA full-time in the reporting year. If Code 1G is utilized for an individual, it must be utilized for all 12 months.
If Code 1G is utilized, Line 15 must remain blank.
If Code 1G is utilized, covered individual information must be accurate.

36. 2015 Lessons Learned – IRS Information Reporting: Common Form Errors
1095-C Errors – Inconsistent information between Part II and Part III.
For self-insured clients, covered individual information on Part III must be consistent with the information on Part II.
Employers with self-insured plans must report covered individuals on Part III of the 1095-C, regardless of their employment or non-employment status.
Employers must ensure that their covered individual files are consistent with the codes utilized in Lines 14/16.
For example, an individual that receives a Code 2C for a month in Line 16 should also be marked as covered for that month in Part III.
Under most circumstances, an individual that receives a Code 1H in Line 14 would not me marked as covered for that month in Part III (not true for partial months of coverage and COBRA coverage).

37. 2015 Lessons Learned – IRS Information Reporting: Common Form Errors
1095-C Errors – Employees Experiencing a Status Change
Under the ACA, an employee will generally not lose their ACA full-time status simply because they transfer to a part-time position (even if the employee requested the transfer).
This also occurs where employees retire from a full-time position and immediately return to work on a part-time basis.
Reporting systems that base 1095-C coding on an employer designation of full-time or part-time will usually code these situation incorrectly.

38. 2015 Lessons Learned – IRS Information Reporting: Common Form Errors
1095-C Errors – Short-Term or Temporary Employees
Employers are not allowed to take into account the fact that an employee will only be employed for a short and definite duration when determining full-time status. Internal designations of “temporary” or “per diem” should have no impact on ACA reporting.
An employee who is hired to work at least 30 hours/week for a 4 month temporary position will be capable of subjecting the employer to a penalty if they are not offered coverage after a permitted waiting period.
Under current IRS rules, a newly hired employee that leaves employment prior to the expiration of a permitted waiting period will be capable of subjecting the employer to penalties under the employer mandate.
Employee is in a section 4980H(b) Limited Non-Assessment Period for section 4980H(b).
Use code 2D, not 2B, if an employee is in an initial measurement period . For an employee in a section 4980H(b) Limited Non-Assessment Period for whom the employer is also eligible for the multiemployer interim rule relief for the month code 2E, enter code 2E (multiemployer interim rule relief) and not code 2D (employee in a Limited Non-Assessment Period).
2E: Use if multiemployer plan interim relief applies (More on that in a moment).

39. 2015 Lessons Learned – IRS Information Reporting: Common Form Errors
1095-C Errors – Rehire Rules
A rehired employee must be treated as a continuing employee, rather than a new hire, unless the employee had a period of at least 13 weeks during which no hours of service were credited (26 weeks for an educational institution)
Continuing employees may constitute ACA full-time employees upon their return based on hours of service worked prior to their termination, regardless of whether they return to a full-time or part-time position.
Continuing employees will be treated as having been offered coverage upon resumption of services if offered coverage no later than the first day of the calendar month following their return.
Systems that fail to account for the rehire rules result in incorrect 1095-C production and/or coding.
Employee is in a section 4980H(b) Limited Non-Assessment Period for section 4980H(b).
Use code 2D, not 2B, if an employee is in an initial measurement period . For an employee in a section 4980H(b) Limited Non-Assessment Period for whom the employer is also eligible for the multiemployer interim rule relief for the month code 2E, enter code 2E (multiemployer interim rule relief) and not code 2D (employee in a Limited Non-Assessment Period).
2E: Use if multiemployer plan interim relief applies (More on that in a moment).

40. 2015 Lessons Learned – IRS Information Reporting: Electronic Filing
Even the process of filing with the IRS was complicated
Employers filing at least 250 Form 1095-Cs must file electronically.
IRS developed Affordable Care Act (ACA) Information Returns (AIR) system specifically for this process.
Including communication procedures, transmission formats, business rules, and validation procedures for returns filed electronically through the AIR system.
All employers filing were required to follow the AIR procedures and transmission formats.
Including in-depth testing process.

41. 2015 Lessons Learned – IRS Information Reporting: Penalties
ALE member that fails to comply with the reporting requirements may be subject to penalties under Section 6721 (failure to file correct information return) and Section 6722 (failure to furnish correct payee statement).
The penalty of failing to file an information return is $250 per failure, not to exceed $3,000,000.
The penalty for failure to provide a correct payee statement is $250 per statement for which a failure occurs, not to exceed $3,000,000.
Special rules increase the potential penalties if there is intentional disregard of the reporting requirements.
CBO Congressional Budget Office

42. Reporting Errors: Summary
2 Main Causes of incorrect reporting:
Bad or incomplete data
Incorrect application of codes
Consequences of incorrect reporting:
Incur the reporting penalties
Trigger a wider ACA audit

43. Filing Corrections

44. 2015 Lessons Learned – IRS Information Reporting: Corrections
Employers will receive 972CG, Notice of Proposed Civil Penalty, for failing to file correct/accurate forms. Employers must answer within 45 days (60 days for foreign payers) from notice date.
Employers may substantially reduce potential filing penalties if corrections are filed within 30 days of the date they filings were originally due.

45. 2015 Lessons Learned – IRS Information Reporting: Corrections
Errors are found in three ways: 1. You receive error messages from the IRS during the information return submission process; 2. You, as the reporting entity, determine that information you submitted was incorrect; or 3. The covered individual or employee reports an error to you.

46. When Do Corrections Need to be Filed?
You are expected to file accurate information returns with the IRS and furnish a copy to the recipient by the due date.
Once the information returns have been filed with the IRS, you´re expected to file any corrections as soon as possible.
In some circumstances, you may receive error messages for missing and/or incorrect information but you do not have the correct information available to correct the return.
A common example of this would be if the name and TIN of the covered individuals do not match the information in the IRS system.
The error message is not a proposed penalty notice.

47. AIR Filing Responses
When you file returns with the AIR system, you will get one of five responses : accepted, accepted with errors, partially accepted, rejected, or not found by the AIR system.
If your transmission is accepted with errors, then it was accepted because AIR did not find any fatal errors –those that cause a rejected return—while processing the transmission metadata.
Ultimately, if the return is accepted with errors, you are expected to make corrections.
For more information on the transmission statuses, see IRS publication 5165.

48. IRS Error Identification
The transmitter will receive an acknowledgement in XML for the transmission containing an Error Data File.
This Error Data File includes three parts to help you find the error, Unique I.D.s to identify which records had errors and error codes and error descriptions to identify the specific errors and often identify the associated data element.
The most common error currently experienced by clients is the “TIN Validation Failed”

49. TIN Errors
A "Correction Needed" or "TIN Validation Failed" message from the IRS indicates that the IRS found a Name/TIN (Taxpayer Identification Number) combination on a 1095-C form that does not match IRS and/or Social Security records.
For self-insured employers who utilized Part III of the Form 1095-C, the error messages are not straightforward because the IRS does not specify which name(s)/TIN(s) caused the error and there may be multiple errors of this type on a single form (both the employee and a dependent may have mismatched name/TIN).  

50. TIN Errors
Whether you have information available to make a correction in response to the error message depends upon where you are in the TIN solicitation process and whether individuals have declined to provide their TIN.
For purposes of reporting the names and TINs of covered individuals, IRS regulations provide that if the TIN is not available, a date of birth may be entered on the form 1095-B or form 1095-C, if applicable.
However, before using the date of birth, the filer must have asked for the TIN of the covered individuals.

51. TIN Solicitation Process
Employers cannot rely on the “good faith efforts” standard to avoid penalties for filing incorrect returns if they do not, in fact, make a good faith effort to correct returns that received an error message.
Utilization of the formal TIN solicitation procedures set forth in IRS Notice , along with filing a corrected return when the solicitation is successful is the safest way to ensure compliance. 
The IRS also issued proposed regulations in August of 2016 in an attempt to clarify the TIN solicitation procedures.
One of the problems commenters complained about with regard to missing TINs is it did not adequately define the term “opened” which was relevant to determine when the initial solicitation needed to be made to satisfy the regulations. An initial solicitation for a missing TIN must be made at the time an account is “opened”. Prior to the existence of the Form 1095-C, missing TIN solicitations were typically performed for financial accounts. These accounts are generally considered “opened” on the first day the account is available for use by the owner. However, this understanding of the term “opened” does not translate well to health coverage. To rectify this problem,
However, footnote 2 of the proposed regulations appears to call this into question. Footnote 2 states: “A filer of the information return required under section may receive an error message from the IRS indicating that a TIN and name provided on the return do not match IRS records. An error message is neither a Notice 972CG, Notice of Proposed Civil Penalty, nor a requirement that the filer must solicit a TIN in response to the error message.”  This footnote could be interpreted several ways. I recommend treating the AIRTN500 error message  until we have further clarification. We also think the instructions to the Form 1095-C require an employer receiving an AIRTN500 error message to make some sort of effort to identify a correct TIN for a covered individual. Among other items, an employer is responsible for filing a corrected Form 1095-C if there was an error in the TIN in Part I or Part III related to covered individuals. The source of the error identification may be an IRS error message when submitting the Form 1095-C. The AIRTN500 error message is telling an employer there is an error in a TIN in either Part I or Part III of the Form 1095-C. However, the instructions for the Form 1094-C/1095-C state: “Regulations section (relating to information return penalties) does not require you to file corrected returns for missing or incorrect TINs if you meet the good faith/reasonable cause standard.” This appears to be contradictory to the Form 1094-C/1095-C instructions requirement that a corrected return be filed for an incorrect TIN in Part I or Part III.  The current regulations require an employer to include the updated TIN with any information return that has an original due date which is after the date that the employer receives the updated TIN (see section (f)(1)(iv)).  At the end of it all, to meet the reasonable cause criteria of section , an employer must follow the solicitation procedures for missing and incorrect TINs discussed in section (e) and section (f) respectively, so it is best to make the attempts through a formal solicitation as the best practice unless an informal inquiry allows you to make the appropriate correction.  Additionally, we view filing a corrected return as the best practice.

52. Changes for Compliance in 2016

53. Changes for Compliance in 2016
Significant increase in Employer Mandate penalties and enforcement.
The 4980H(a) and (b) penalty figures are increasing to $2,160 and $3,240, respectively.
Employers must offer coverage to at least 95% of full-time employees to avoid the 4980H(a) penalty, instead of the required 70% threshold in 2015.
Affordability is now measured against 9.66% of household income.
Penalties are triggered and calculated on a monthly basis!
CBO Congressional Budget Office

54. Changes for Compliance in 2016
IRS proposed regulations address the treatment of opt-out payments in computing affordability.
Topic of discussion during 2015 that created confusion among employers.
Under proposed rules, unconditional opt-out payments will be treated as a salary reduction for purposes of determining affordability.
Payments made under conditional opt-out arrangements will be disregarded.

55. Changes for Compliance in 2016
Unconditional opt-out
Arrangement where the employee must only decline employer-sponsored coverage to receive payment.
Conditional opt-out
Arrangement where payment of opt-out is conditioned on the employee having minimum essential coverage through another (non-exchange) source.
Employees must provide reasonable evidence of alternative coverage.
Applicable after December 31, 2016.
Except where unconditional opt-out arrangement was adopted after December 16, 2015.

56. Changes for Compliance in 2016
Stricter enforcement of IRS reporting rules and timelines
Loss of the “good faith effort” exception to incorrect information returns
Original reporting timeline must be met
IRS Reporting
Forms must be filed with the IRS by February 28 (or March 31 if filed electronically).
Entities with 250 or more returns must file electronically.
Statements to Employees
Employees must receive 1095-B or 1095-C by January 31.
CBO Congressional Budget Office

57. Changes for Compliance in 2016
Draft Forms and Instructions for 2016 released by IRS.
Draft 1095-C:
Draft 1094-C:
Draft Instructions:
Drafts are similar to previous versions with a few notable differences:
Code Changes
1J and 1K have been added for Form 1095-C, Line 14 to address “conditional offers of spousal coverage”

58. Changes for Compliance in 2016
Additional changes in draft Forms and Instructions for 2016 released by IRS.
Elimination of Qualifying Offer Method Transition Relief
In 2015 this was only available to employers that made a qualifying offer of coverage to at least 95% of its full-time employees in one or more months.
Form 1094-C, Line 22, Box B is now marked “reserved” and code “1I” is no longer valid for Form 1095-C, Line 14.
Elimination of Section 4980H(b) Transition Relief
Relief exempted employers with non-calendar year plans and FTEs from penalties, and decreased the requirement for employers with 100 or more FTEs to offer coverage to 95% of full-time employees.

59. Changes for Compliance in 2016
Issues not addressed in the draft Forms and Instructions
Limited Non-Assessment Periods
The draft instructions do not address the issue surrounding the use of Code 2D on Line 16 for individuals who leave employment before they are offered covered.
2015 and draft 2016 instructions generally allow 2D only if employee is offered coverage at the end of a limited non-assessment period.
Multiemployer Interim Rule Relief
Employers required to contribute to a multiemployer plan on behalf of an employee will still be permitted to utilize 1H/2E code combination.
For 2017, employers may be required to report offers through a multiemployer plan differently.

60. Summary: Compliance Changes 2016
Higher “Offer of Coverage” threshold
Higher penalties
New codes, retirement of some existing codes
Enforcement of original deadlines for filing with employees and the IRS
Loss of “Good Faith” standard

61. Audit Threat

62. Department of Labor ACA Audit
The Department of Labor has authority to audit employee benefit plan compliance with federal laws, including the ACA.
These audits generally require submission of requested documents related to employee benefit plans and are announced via investigatory letter sent by the DOL.
In ACA audits, the DOL specifically requests documents demonstrating ACA compliance.
5500, health plan filing, documentation, compliance with MEC, grandfathering, pre-existing conditions, waiting periods, wellness programs, independent contractors, staffing company arrangements

63. DOL Audits: Requested Information
For health plans, DOL audit letters have been requesting documents and information pertaining to:
the plan’s preventive health services and emergency services;
the plan’s internal claims and appeals procedures;
contracts or agreements with TPAs providing external review;
notices regarding adverse benefit determinations;
final external review determination notices;
documents pertaining to any annual or lifetime limits;
records pertaining to any rescissions of coverage
For grandfathered health plans, DOL audit letters have been requesting all information necessary to establish that a plan has properly maintained its grandfathered status.

64. ACA IRS Audits
IRS auditors will look for red flags, including incorrect or inconsistent coding and information on the 1094-C and 1095-C forms. IRS may also target specific industries.
The biggest avoidable ACA audit trigger is timely, complete, and accurate reporting.
Employers should create and maintain monthly compliance folders, as well as records evidencing: (1) all offers of coverage and waivers; and (2) the method and calculations utilized by the employer to determine ACA full-time status

65. Thank you for attending!
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