Most Applicable Large Employers (ALEs) didn’t anticipate the extent of the challenges they would face while completing the ACA Section 6056 Forms 1094-C and 1095-C for the first time this year.
Complex code series indicators were often difficult to interpret, employees didn’t know what to do with the forms, data submitted to the IRS failed validation and correcting data errors was a frustrating and time-consuming process.
And the two small reprieves from 2015 – the deadline extensions and the “good faith effort” standard – have not been extended for another year. This means companies that just submitted their final corrections to the IRS now have to jump right into planning for 2016 filing to avoid paying penalties for basic human error, such as using an incorrect code or missing a deadline.
So what can you do to avoid 6056 headaches and frustration next year? Start by listing and evaluating the challenges your company faced when completing the 2015 forms. Below are the five most common reporting challenges:
Review your payroll, employee classification and benefits data to identify errors or incomplete data on your 2015 forms that could potentially trigger penalties next year. Then determine the root cause (e.g. programming errors or lack of training) and set a timeline for making corrections.
Compare the indicator codes on forms 1095-C to your payroll and benefits data. Are “offer of coverage” codes correct? Did employee status convert to the correct code? And remember to validate the codes for multiple months because they could have changed mid-calendar year.
The most common reason for receiving a TIN validation error from the IRS AIR electronic submission system is that the employee name and social security number do not match. For example, say an employee’s maiden name was submitted on the file but the married name is the one actually registered with the Social Security Administration. If your company received a high percentage of TIN errors, consider a proactive outreach to employees to encourage them to update their information prior to the end of the year.
Many companies did not plan for the additional financial cost associated with printing and mailing the form 1095-C to employees and the burden of sending corrected forms. Allowing your employees to opt-in to accessing the form 1095-C electronically, either through your own website or a vendor’s, will save printing, fulfillment and mailing costs.
Review the volume and type of questions you got from employees after they received the 2015 form 1095-C and use that information to create a centralized forum or list of frequently asked questions. This will provide a resource for employees so they understand how to interpret and use the forms. It will also help limit the time you will have to spend responding to questions.
Finally, review the recently released draft instructions posted on the IRS website. Here you’ll find additional codes and modified instructions. Highlights include new codes for conditional offers of spouse coverage (for example, an offer to cover an employee’s spouse only if the spouse is not eligible for coverage under a group plan sponsored by another employer) and new directions for ALEs that make certain employer contributions, including opt-out credits or HRA contributions. While there may be further modifications to the instructions before the IRS issues the final version, being aware of the changes in the draft version will be helpful in ensuring a smoother experience next year.
This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.
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