Any of your clients who are deemed applicable large employers, 50 full-time equivalent employees or more, should have already started tracking employee hours to determine who is a full-time employee (an employee who works on average 30 or more hours per week) in order to comply with both the Affordable Care Acts employer mandate and the IRS 6056 information reporting requirements.
Under the employer mandate, commonly referred to as pay or play, applicable large employers may be subject to a penalty tax if they have not properly identified their full-time employee population and offered them the required benefits.
The IRS has identified two measurement methods employers can use for calculating employees hours, as part of determining full time status:
1) A monthly measurement period: An employer determines each employee's status as a full-time employee for a calendar month by counting the employee's hours of service for that same month.
2) A look-back measurement method: An employer may count the employee's hours of service during a look-back measurement period to determine the employee's full-time status. Reliance on this method is important since, in most cases, the look-back measurement period must have started no later than July 1, 2014.
Are your clients aware of these different measurement periods and the pros and cons of using one, or the other, or both? The decision they make will greatly affect the flexibility they will have when employees experience a change in employment event.
IRS Code Section 6056 reporting
Applicable large employers must file annual returns with the IRS to report whether they offer their full-time employees and their employees' dependents the opportunity to enroll in minimum essential coverage. The reporting is needed by the IRS for the administration of the employer mandate requirements discussed above. On July 24, 2014, the IRS released draft Form 1094-C, the form that applicable large employers will use to report the required information.
The reporting is done on a calendar year basis, regardless of the employers plan year. Reports must include and identify each employee who was full-time for one or more months during the calendar year. Some of the data required for reporting includes:
- the total number of employees by month;
- the number of full-time employees for each month;
- identifying information for each full-time employee for any month the employee was covered under the plan; and
- whether an employees effective date of coverage was affected by a permissible waiting period.
The information tracking must begin in January 2015, even though the first report is not due until early 2016. In order for employers to properly report the number of full-time employees the employer had for each month during the calendar year the employer must have some type of tracking system to determine full-time status during any given month.
In addition, sponsors of self-insured plans will have to comply with IRS Code Section 6055, which requires reporting identifying information and the dates during the calendar year that any individual was covered under the employer plan.
So, now is the time to consult with your clients and let them know that they should have a solution in place to start tracking employee hours for both of these ACA requirements.
Rito iscompliance officer for Group Associates, a national benefit outsourcing firm located in Bingham Farms, Mich. Reach her at firstname.lastname@example.org
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