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Living With Obamacare Reporting

side detail of pile of paper work, some curled over
photo by Petra Bensted

Whether you like Obamacare or not - and regular readers of this blog have no doubt where I fall - it is the law, and businesses have to live with it. The question for companies right now is how to handle compliance as new requirements take effect.

This is the first year in which employer reporting mandates for the Affordable Care Act fully kick in. In 2016, employers are expected to make a good faith effort to comply with filing requirements for calendar year 2015. The fact that incorrect filings will not be penalized as long as employers file on time and at least attempt to fulfill their obligations is a hint that the people writing and enforcing the rules expect the rest of us to have trouble following them.

The mandates have a wide reach: For calendar year 2015, all employers with 50 or more full-time employees must file one of two forms with the Internal Revenue Service. Employers should be careful if they think they fall below this threshold; for the Affordable Care Act’s purposes, employees are “full-time equivalent” if they work an average of 30 hours or more per week more than 120 days a year. Seasonal employees also count toward the total under certain circumstances. Self-insured employers of all sizes must also file.

The two forms employers may have to deal with are Form 1095-B and Form 1095-C. (Form 1095-A relates to coverage purchased through the Health Insurance Marketplace.) Form 1095-B is for the relative handful of employers that sponsor self-insured health plans; such employers must report on all the individuals who receive coverage through the plan. For everyone else, Form 1095-C provides details to employees of any coverage offered to them by their employer, whether or not they chose to enroll. Paper copies are due to the IRS on February 29 (since 2016 is a leap year); employers who e-file have until March 31. However, employers must provide employees with their 1095s by January 31, just like W-2s.

If this sounds complicated, that is probably because it is. Services do exist that offer to help with compliance for the new employer mandates. But for employers that already use some form of payroll service, I suspect many will find that their services have already geared up to add or include such compliance help.

Our firm uses Intuit Online Payroll, formerly known as PayCycle, which provides a fairly thorough overview of the Affordable Care Act employer mandates, including a chart outlining which employers are subject to penalties for noncompliance. However, due to human resources information required to fill out Form 1095-C and the related Form 1094-C, Intuit does not support either form, at least for now.

For the time being, at least, our firm is off the hook; employers with fewer than 50 full-time equivalent employees are not subject to the mandates at all. Some small employers that provide health care to their employees may be eligible for a tax credit (which has been available since 2011); however, they do not need to file form 1095-C in order to claim it. Small employers who provide coverage do have to report the value of the coverage on employee W-2s, as they have for several years.

Since 2010, Palisades Hudson has not covered the cost of health insurance for the firm’s employees. Instead, we have boosted cash compensation and left employees to make their own arrangements. Some participate in the company-sponsored plan, but they bear the full cost of the premiums themselves through payroll deductions. Most seek coverage through alternative channels, such as securing coverage under a spouse or parent’s plan or purchasing individual insurance on their own.

Then and now, for our firm the decision was the best of several unappealing options. And it is obvious that other businesses have also struggled with whether to offer coverage and, if so, what coverage to offer. The Affordable Care Act created the Small Business Health Options Program (SHOP) to, in theory, offer better options for employers with fewer than 50 full-time workers. Yet only about 11,000 businesses nationwide have signed up, despite the aforementioned tax credits for which some employers are eligible if they participate. SHOP offers fewer and more expensive plans than outside coverage in many states, and the software problems that have plagued many aspects of Obamacare also deterred signups when the program launched in 2013.

The math of rising premiums and extended requirements for coverage is leading to predictable results for large businesses too. Many employers are requiring employees to cover a larger portion of their premium costs; others worry about retention, but spending more money on insurance premiums for employees means there will be less available to put into cash wages, which have stagnated for most Americans. As long as health insurance premium increases outpace inflation and wage growth by such a wide margin, there will be no good solution for employers or employees. A recent article in The New York Times reported that even when employers offer plans to avoid penalties, many low-income workers opt out because even “affordable” plans strike them as out of reach (and significantly more expensive than the penalty they pay for remaining uninsured).

I have written many times, at length, about Obamacare’s critical flaws. Most of them have not changed. But for employers with 50 or more full-time workers, the mandates take effect whether they like it or not. Employers that fill out 250 or more W-2 forms annually have been required to report the cost of employer-provided health coverage since 2012, so many large employers presumably have some systems in place to handle insurance-related reporting requirements. And reporting was voluntary for calendar year 2014, but some companies may have treated it as something of a dry run in preparation for the mandates taking full effect this year. That said, early 2016 is still likely to be bumpy for many payroll and HR departments nationwide.

Like it or loathe it, we have to live with Affordable Care Act until further notice. This winter, a new group of American businesses will struggle with its burdens.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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