The continued challenges imposed by the Affordable Care Act come in two primary forms: First, regulations that negatively impact health plan sponsorship such as Patient Centered Outcomes Research Institute (PCORI), reinsurance and HIT taxes or second, regulations that create extra work, for example W-2 reports or variable hour tracking.

It’s the second category where employers start to become front-and-center as we move into 2015. All employers with more than 50 full-time equivalent employees, as well as those that are self-funded, will face difficult reporting and recordkeeping with the Internal Revenue Service’s 6055 and 6056 rules. This section of the ACA is designed to report the health care coverage offered to full-time employees and their dependents. IRS 6055 will enforce minimum essential coverage for the individual mandate. IRS 6056 will enforce employer shared responsibility requirements around the employer mandate. Both of these filings will be due in the first part of 2016 for the plan year of 2015.

What employee-specific information is required?

1. 6055: Employees and dependents covered under the health plan; their name, address, Social Security number and a list of the specific months where they were covered at least one day.

2. 6056: For each calendar month, a report of the number of full-time employees, with corresponding names, addresses and Social Security numbers of each; whether the employer coverage offered provided minimum essential coverage, minimum value, met the 9.5% affordability test, was offered to full-time employees and their dependents, and the employee’s share of the cost for the lowest-cost employee-only coverage offered. A lot of additional information is required, which the final regulations allow employers to report using indicator codes.

Challenge with current payroll and HRIS Systems

When it comes to benefits information, most employer HR systems usually only keep track of the payroll deduction amount and corresponding code for employees. Form 6055 will require dependent information and 6056 will need dependent election details, which is not normally captured in an HR database. IRS 6056, especially in the standard reporting form, requires an extensive amount of information including employee details and coverage counts on a monthly basis, affordability tests, cost sharing and reason coverage was not offered to certain employees.

To qualify for the simplified filing, which will be far less onerous, the employer has to certify that coverage was offered to 95% of all full-time employees. The certification also eliminates the possibility of paying the $2,000 per employee penalty. Without some form of electronic tracking to record the enrollment election/waiver (for employees and dependents) and a time and date stamp of the event, employers will have a difficult time meeting the simplified filing guidelines.

Simplified filing options reduces the burden of 6056

Most applicable large employer clients will strive for simplified filing as they significantly reduce the data requirements and work required around the IRS filing. With simplified filing an employer can report on an annual basis (rather than monthly). To qualify, the employer needs to make a “qualifying offer” to full-time employees for all 12 months of the year. The employee contribution for this offer cannot cost more than $1,100 for the year for employee-only coverage, and must also include an offer of coverage to the employee’s spouse and dependents. An employer that certifies this qualifying offer to at least 95%of its full-time employees can take advantage of the simplified filing. Also, if the employer makes a qualified offer to at least 98% of full-time employees they qualified for even more streamlined reporting. As referenced earlier, it is difficult to properly certify this offer in a manual paper environment because paper enrollment lacks in its ability to demonstrate offer to dependents and timing of election needs to be dated. 

Annual statements to employees will also have to be provided around 6055 and 6056.These are similar to the new ACA-required W-2 forms that employers already must provide to employees on an annual basis, but they only include information about the health benefits offered to the employee. An employer can just provide eligible employees with a copy of the 6056 information return.

Next steps

As you plan for 2015 with your employer clients, it would make sense to strategize how you can collect this required data for each filing, generate proper employee statements and meet the simplified reporting requirement for IRS 6056. There is a strong likelihood an employer’s HR system and process will not deliver the core data needed to file the required report. To address this concern you will need to identify an ideal method to collect and measure the required information. This may require the deployment of an enrollment system or simply the creation of and additional process or capability within your HR department.

Michael Weiskirch is principal at EmployeeTech, Inc. Reach him at (847) 236 1932 or mweiskirch@employeetech.com.

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