ACA: Step Away from that Form 1095 ‘Til You Read This
“Never do today what you can as well do tomorrow” – Aaron Burr
This statement, sometimes written in the context of postponing an unpleasant task, was originally expressed by our country’s third vice-president to acknowledge that in certain circumstances, a premature action may be regrettable. Alexander Hamilton would agree.
The same can be said for reporting on the Affordable Care Act: CPAs may regret completing any related forms without first taking some precautions. We are in the business of helping our clients with a full range of accounting and tax needs, so offering services in this space seems to fall neatly into the area of tax compliance. This is a compliance matter, but the nature of the material required to prepare these information returns adds an additional level of complexity. CPAs who aid clients with the completion of these forms need to consider the applicability of privacy rules under the Health Insurance Portability and Accountability Act (HIPAA).
Providing these services involves reviewing information that is non-financial in nature, including confirming health insurance coverage obtained by spouses and other family members. As part of the engagement acceptance process, CPAs should consult their legal counsel and professional liability insurer to determine if they are qualified to perform these services, and if HIPAA rules apply. If so, the CPA is considered a business associate and would be obligated to execute a separate business associate agreement (BSA).
This document would allow the covered entity (i.e., a health plan) to disclose certain protected health information to the CPA. The designated business associate (CPA) would provide satisfactory assurances that the firm will appropriately impose safeguards on the information it receives. To help you consider what a BSA might look like for your practice, the U.S. Department of Health and Human Services has sample Business Associate Agreement provisions.
During 2014 (now thought of as the good old days), employers only had to comply with basic requirements related to making sure that their medical plans met certain coverage restrictions, waiting period limits, etc. The employer incurred no costs if they chose to not offer health care coverage to their employees, nor was there any separate reporting requirement besides providing the value of health insurance coverage on an employee’s Form W2.
Although only one year has passed, the reporting landscape has changed dramatically. Employers may incur a sizable cost to accumulate the data necessary to demonstrate that they offer adequate coverage and are not subject to any additional penalties. Complicating matters, this is often information that employers don’t track.
Before you determine if the employer is subject to any additional penalties, an immense amount of information is required to be accumulated by the employer, some of which is not easily obtainable.
Although businesses are required to gather the information necessary to complete these forms, we as CPAs need to educate employers and inform them as to what information is required to be obtained and how to submit it in a timely manner. This fact sheet on Applicable Large Employers from the Tax Practitioner’s Toolkit may help, as well as these Small Business FAQs.
The Employer Shared Responsibility Payment (ESRP) is imposed on employers with greater than 100 full-time equivalent employees (FTE). However, employers with more than 50 FTEs are subject to the reporting requirement related to the coverage afforded to individual employees. The determination of the number of FTEs for both the ESRP and the annual reporting requirement is based on the prior calendar year.
In addition to information about the employee’s status as a FTE, the form must also report the type of coverage, if any, offered to the employee, the employee’s spouse and the employee’s dependents. (For more information on what data needs to be gathered, review this fact sheet from the IRS.)
The clock is ticking to file these forms — 1095-B/1095-C forms must be sent to individuals no later than March 31 and filed with the IRS no later than May 31 (or June 30 if filing electronically). Employers who fail to comply with these deadlines may be subject to penalties for the failure to file correct information returns and failure to file correct payee statements. The penalty is up to $250 per return with a maximum penalty of $3 million per calendar year. For 2015 reporting, the IRS has announced they will not impose these penalties on filers who have made good faith efforts to comply with the reporting requirements.
If you prefer not to undertake this type of engagement, seek the assistance of another service provider who is qualified under HIPAA and allow for the client to comply with these complex reporting regulations.
Our clients need our help in understanding myriad rules related to the ACA. It is our job to provide that assistance to them when it is appropriate. As professional advisers we must also recognize that other competent individuals might be required to be brought to the table. By assembling the right team, our clients can do the work that needs to be done today and not put it off until tomorrow.
Henry Grzes, CPA, Lead Technical Manager-Tax, American Institute of CPAs.
Proceed with caution courtesy of Shutterstock.