Employers wrangling with Affordable Care Act compliance have been given a bit of extra time on IRS reporting requirements and a two-year reprieve on a tax targeting high-cost employer-sponsored health plans.
On the immediate front, employers have a two-month extension to provide employees eligible for coverage with forms reporting their 2015 offers of health coverage and the coverage provided, as well as a three-month extension to file these forms with the IRS.
In addition, a controversial 40 percent excise tax on high-cost health plans known as the Cadillac Tax has been delayed from 2018 to 2020.
Both extensions are welcome news as tax preparers scramble to assist small businesses with ACA compliance.
“For our clients it’s absolutely a sigh of relief,” says Jessica Stelfox, director of human resources consulting at Advantage Payroll Services, a Freeport payroll and human resources firm.
The extra time on the reporting requirements “gives us an opportunity to make sure the client understands the requirements and we’re filing the forms accurately,” she notes, adding many clients were struggling with the associated tax forms.
“We’ve spent hours upon hours consulting clients on how to determine what code is associated with each employee for which month,” says Stelfox.
Forms originally due to employees from employers on Monday regarding their coverage are now due March 31, she says.
Forms originally due from employers to the IRS on Feb. 29 for non-electronic filers are now due May 31, and for electronic filers the deadline has been extended from March 31 to June 30, notes Steven Goldstein, an audit partner at Jericho-based Grassi & Co., a CPA and business advisory firm.
While the extension gives employers some relief, “the delays just add more uncertainty and confusion on what needs to be done and when the filings need to take place,” he notes.
These forms will help the IRS determine whether the employer provided minimum essential coverage and affordable coverage as mandated by ACA for those employers with 50 or more full-time or full-time-equivalent employees, as well as determine if an employee is eligible for a tax credit if he purchased insurance on his own through the government exchanges, says Goldstein.
These forms must be filed even by employers that weren’t obligated to provide coverage until 2016 (that is those with fewer than 100 full-time or full-time equivalents), he notes. Employers with under 50 workers are exempt from the mandate.
“It’s confirmation to the IRS of who had coverage and a month-by-month breakdown to when the coverage was available to them,” explains Theresa McLaughlin, director of benefits at Prestige Employee Administrators, a Melville professional employer organization.
Employees meeting certain income levels may be eligible for tax credits if their employer didn’t offer affordable coverage and they had to purchase health insurance from the exchange, she notes.
In general, for 2015, coverage is deemed affordable if the employees’ share of the premium doesn’t exceed 9.56 percent of their annual household income, says Stelfox.
Separately, there was concern over the Cadillac Tax on high-cost health plans that exceed certain thresholds ($10,200 for individuals and $27,500 for families for 2018).
“It’s not just a big-business problem,” explains Kevin Kuhlman, director of federal public policy at the National Federation of Independent Business in Washington, D.C. “Small businesses will be impacted as well.”
According to the NFIB, small businesses typically pay upward of 18 percent more than others for health insurance.
McLaughlin says the pushback from Jan. 1, 2018, to Jan. 1, 2020, is a “very big welcome delay,” particularly for businesses in the Northeast, where health care costs are higher.
This will give businesses more time to plan, but they shouldn’t get too complacent on either delay.
“The sooner they get on this, the better,” says Kuhlman.
LAND OF CONFUSION
While employers with more than 50 full-time employees need to compile data for the new tax forms to demonstrate employee health care coverage offerings under ACA, two in five employers say they are unfamiliar with these forms altogether, according to a new ADP study.