Updated: July 6, 2016
The Employer Shared Responsibility (ESR) provisions under the Affordable Care Act (ACA) went into effect in January 2015. All Applicable Large Employers (ALEs) will be required to provide detailed reporting to the Internal Revenue Service (IRS) of full-time employees and of health insurance offered to these employees, their spouses, and their dependents. This is an added administrative task, and you should be preparing now to meet these provisions.
Make sure you know your status and what is required for 2016.
Am I an ALE?
If you don't know already, you need to determine whether you are an Applicable Large Employer, or ALE — that is, any employer with 50 or more full-time employees, including full-time equivalents. An employee who works an average of 30 hours per week or 130 hours per month is considered full time. New hires expected to meet these hours should also be included. Your 2016 ALE status is based on workforce hours in 2015.
All member entities within a controlled group under Code Section 414(b), (c), (m), and (o) are taken into account when determining ALE status.
If you have fewer than 50 full-time employees (including full-time equivalents) you are not subject to the ESR provisions, but if you are self-insured, you must report covered employees and spouse/dependents under IRC section 6055.
What Coverage Do I Need to Provide?
The employer shared responsibility provisions state that employers must offer health coverage that meets the requirements of minimum essential coverage (MEC), minimum actuarial value and be affordable to substantially all FTEs or they may be assessed penalties. There are two potential penalties:
- The larger penalty is assessed if an ALE does not offer MEC to at least 70 percent of full-time employees and dependents in 2015 and at least 95 percent in 2016.
- Another penalty may be assessed for each full-time employee who is not offered affordable coverage or coverage that does not meet the minimum actuarial value, meaning a health plan that covers at least 60 percent of the allowed costs of plan benefits.
These provisions go into effect for employers with more than 100 full-time employees in 2015 and for employers with more than 50 full-time employees in 2016.
Employers who do not meet the ESR requirements may face penalties.
What are the ACA Reporting Requirements?
Reporting begins January 2017 for the 2016 tax year, but the IRS encouraged ALEs to file in 2015 as a dry run. Under IRS Section 6056, you will need to provide forms 1094-C and 1095-C, and provide all full-time employees with a 1095-C. These forms document how many full-time employees you have and to whom you offered coverage.
These forms must be filed by February 28, 2017 (March 31, 2017 if filing electronically), and employees must be provided copies of form 1095-C by February 1, 2017. Employers face penalties for failing to file on time.