Our latest webinar featured Briana Cline, our HR Installations Consultant. Briana has a Bachelor’s Degree in Business Management with a focus on Human Resource Management; she also is a certified payroll professional (CPP) and she is currently working on getting her SHRM HR certification. Briana shares with us her best practices for organizations preparing for year-end. Above is the webinar, below is the transcript.
For part 1 of 3 of Preparing for Year-End, we will be discussing:
- Benefits of Preparing Ahead of Time
- What is Year-End?
- ACA Guidelines
Benefits of Preparing Early for Year-End:
- Better organization.
- Development of the most efficient year-end process.
- Alleviates stress and fatigue.
Did You Know…?
Studies show that stress can have the same side effects as alcohol, meaning stress and fatigue can potentially lead to unnecessary errors and expensive consequences.
For Example: Filing untimely or inaccurate W-2s can result in penalties from the IRS or SSA that start from $30 per W-2 up to $100 per W-2; large businesses can see a maximum penalty of $1.5 million dollars per year and a small business can see a maximum penalty of $500,000 per year.
To avoid potentially costly mistakes and late nights during year-end processing, we’ve put together information that not only helps you prepare in advance, but also lays out a process flow you can continue to follow and perfect each year.
So What Exactly is “Year-End?”
When we talk about Year-End we are generally talking about these three areas:
- Preparing wage and personnel information for W-2 reporting so W-2s are accurate.
- Preparing for payroll in the new year, which takes into consideration any changes within your payroll that need to occur.
- Releasing W-2s to employees.
Year end is a flow of tasks occurring between October, November and December of one year, and then through the end of January in the new year, but the most efficient process will include some tasks you complete with each quarter of the year so your year-end is a bit less chaotic.
ACA (Affordable Care Act) Guidelines:
If you are an organization that is self-insured, or you are an organization with 50 or more full-time equivalent employees (FTE’s) you now fall under the ACA reporting requirements, meaning you must report to the IRS information about health insurance that was offered for the 2015 calendar year.
ACA Guidelines Overview
The Affordable Care Act Employer Shared Responsibility provisions that went into effect this year say that any employer with 50 or more full-time (FT) or FTE employees during the previous calendar year would be known as an Applicable Large Employer (ALE). Any ALE is required to provide affordable health insurance that provides minimum essential coverage to their full-time employees or receive a penalty.
There is a transition relief in effect that protects some ALE’s who failed to offer insurance, but have between 50 and 100 FTE’s from penalties. However, these ALE’s have to meet specific requirements defined in the relief.
ALE status is based on the number of FTE’s employed in the previous calendar year. The IRS has specific calculations to determine the number of FTE’s in an organization.
This calculation looks at the amount of both:
- Full-Time Employees: Those who work on average 30 hours or more per week throughout the calendar year.
- Part-Time Employees: Those who work less on average than 30 hours per week throughout the calendar year.
If you have five full time employees and two employees who are part time and each work 15 hours on average per week, the part-time employees each equal ½ of an FT employee. When you add their hours together they equal 30 hours per week, so pooled together they equal one full time equivalent employee for the year. In this example, the total FTE count for ACA purposes is six employees.
ACA Sections 6055 and 6056
Section 6055 states that any provider of minimum essential coverage must provide reports to the IRS and to covered individuals about coverage information for the calendar year. These reporting requirements cover insurance providers and any employer who provides self-insured health insurance to their employees.
Section 6056 states any employer who is an ALE must provide information reports to the IRS and the employees regarding employer provided insurance that was offered.
If you are an ALE, you will need to complete information reports and file those to the IRS and to employees, much like the W-2s. The deadlines for providing these reports to employees and to the IRS are the same as W-2s as well.
So, what forms are required for the reporting and what needs to be reported?
If you are an ALE, even if your organization provides self-insured health insurance, you must report using forms 1094-C and 1095-C .
The 1095-C form is required to be completed and provided to each employee that was offered insurance to or should have been offered insurance. This includes any full-time employees offered insurance, part time employees offered insurance, and any full-time employees not offered insurance. The 1095-B form is the transmittal form and is used to report information to the IRS, and must be accompanied by a copy of a 1095-C form for each employee.
If you are an employer with self-insured health insurance, but you have less than 50 FTE’s, then you must report using forms 1094-B and 1095-B.
These are the same forms health insurance providers will report on. You are required to provide a 1095-B form to each responsible covered individual. The form 1094-B is then used as a transmittal form to report information to the IRS, and must be accompanied by a copy of a 1095-B form for each employee as provided to each individual.
Example: Section II of 1095-C
Line 14 is where you will need to:
- Document if an offer of coverage was made or not.
- Show whether it was offered to just the employee or their dependents and spouse.
- Display whether the offer met minimum essential coverage and minimum value or not.
The IRS has specific codes which you must choose from and you must enter the code as pertaining to all 12 months of the calendar year for that employee, or you must enter the code per month in the case that it changed at all throughout the year. If that code doesn’t happen to be accurate for all 12 months, you need to go month by month and select the code which applies to that employee for each of those months. Make sure to be familiar with the series 1 codes- The IRS refers to the codes for line 14 as the series 1 codes so be sure to review those.
Line 15 is where you will:
Enter the employee's share of the lowest cost monthly premium for self-only minimum value coverage.
This doesn’t matter which plan the employee selects, the dollar amount requested here is based on the lowest plan single-only coverage the employer offers to the employee and it is only asking for the portion the employee would be required to pay. This field is only entered if certain codes are entered on line 14 but it is good information to record for your employees.
Line 16 is where the employer will:
Record what the IRS calls Series 2 codes which indicate any applicable 4980H Safe Harbor information, such as whether the employee was not a full-time employee, whether they were not an active employee, or whether they did elect the health insurance offered.
Health insurance providers and payroll and timekeeping vendors have been working diligently over the past few years to learn about the ACA requirements as the final regulations were released to ensure they prepare their systems to assist clients with these reporting requirements. Dominion has features available to assist clients with pinpointing whether they are an ALE, and if so, who their FT employees are who are eligible for insurance. Coming very soon will be the feature which will allow clients to track the data mentioned in these slides for the reporting forms which will be provided as an additional service which will include the filing of the forms with the IRS and to the employees.
Be sure to contact your health insurance provider and payroll and timekeeping providers for more information on how they can assist you with ACA requirements. We recommend tracking this data through a spreadsheet until tracking features are available through your payroll or timekeeping systems, or if you plan to create the reports and file the reports on your own.
What Should I Know for Year-End?
Are you an ALE for this year, and will you be an ALE in the future?
If you are an ALE, who are your FT employees who you will need to offer insurance to? Do you plan to not offer insurance to these employees and assume the penalties if any are imposed by the IRS?
Do you fall under any transition reliefs that would protect you from penalties if you don’t offer your employees insurance?
Are you required to report information to the IRS and employees regarding health coverage offered?
Get to know the forms and begin tracking the data required for the forms.
There are a lot of resources available for learning about this information; now is the time to use all your resources! The IRS website is a great resource; they have question and answer pages, the forms and instructions, and lots of other information there to assist with learning about the ACA.
Stay tuned for part 2 of 3 of this webinar.