The new employer health benefits reporting forms and instructions look complicated to ordinary insurance agents and brokers — and they also look complicated to Sibyl Bogardus, a compliance specialist at Hub International.
She has a bachelor’s degree from Duke University, a law degree from Washington University, and 25 years of employee benefits law experience, and she sees setting up a Form 1094-C and Form 1095-C program as a big job.
“There is quite a bit of information that has to be gathered,” Bogardus said recently in an interview. “Most employers don’t have a system that’s absolutely ready.”
A surprisingly large number of employers are still relying heavily on paper-based benefits administration systems, and the start of 1095-C reporting will probably force most of those employers to get automated systems, Bogardus said.
A 1095-C form is a form an employer is supposed to use to give employees the health benefits information they need to fill out their own tax forms and insurance coverage applications, and to give the Internal Revenue Service (IRS), the Employee Benefits Security Administration (EBSA) and the U.S. Department of Health and Human Services (HHS) the information they need to detect individual taxpayers’ violations of PPACA rules.
An employer is also supposed to send the IRS a 1094-C summary form, or report on the information provided in the 1095-C forms, along with copies of the 1095-C’s.
The IRS and other agencies are supposed to use the 1094-C’s, together with the 1095-C’s, to detect any problems with employer compliance with the PPACA employer mandate rules described in Internal Revenue Code (IRC) Section 4980H.
The draft versions of the 1094-C and 1095-C forms and instructions were not available until October, and the final versions will not available until February, even though employers will have to provide data from January.
Bogardus, who serves on an IRS advisory committee, said she believes that the IRS and other federal agencies will take a gentle approach to overseeing employer reporting efforts for several years, and that the agencies will try to work with employers that show they have been making a good faith effort to comply with the rules.
But Bogardus said she also believes that the IRS will be making a major effort to detect violations starting in May 2016. She said employers would be wise to do what they can to avoid the burden of going through a benefit plan audit, even if the risk of facing significant penalties might be low.
For a look at some of the reporting compliance traps Bogardus sees, read on.
1. An employer has to put just as much effort into tracking part-time employees, even if it’s unlikely that those part-time employees will end up getting 1095-C forms.
One problem is that some part-time employees might turn into full-time employees, and another problem is that an employer must file a 1095-C for a part-timer if the part-timer becomes a full-timer for even one month out of the year, Bogardus said.
“I think that took some people by surprise,” Bogardus said.
2. An employer and the employer’s advisors have to recognize and avoid terminology traps.
Employers and benefits advisors might find that some form fields that seem straightforward are problems, because the form drafters have used terms in unexpected ways, Bogardus said.
She said one example is a question that asks employers to give information about “qualifying offers” of coverage.
Employers may think they have provided employees with a “qualifying offer” of coverage, but the answer to that question is based partly on how the employee’s pay relates to the federal poverty level, and many employers have little or no experience with the federal poverty level, Bogardus said.
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3. An employer has to be able to knit benefits information together with payroll information.
For many employers, Bogardus said, the biggest problem will be that the employer has been using a paper-based benefits system, or benefits system and payroll systems that have a hard time connecting.
For a similar reason, she said, employers may have a hard time letting one insurer, payroll company or plan administrator handle all of the 1095-C reporting work.
A typical insurer or administrator will have the benefits information, but not the payroll information, and a typical payroll operation will have the payroll information, but not the benefits information, Bogardus said.