IRS Offers a Little Breathing Room on Data Transmittal
Businesses faced a major deadline to transmit health insurance data to the IRS. However, after some technical problems and an extension, penalties in 2016 will likely be much more lenient than 2017.
The time to transmit your health insurance data has passed, but don’t freak out just yet.
June 30 marked a very important deadline for employers in regards to the Affordable Care Act. If employers did not get a response back from the IRS about their transmittals of health insurance data by that date, they faced the possibility of large fines and penalties. This is applicable to U.S. employers with more than 50 full-time employees.
However, the IRS has been very lenient this year, said Mark Holloway, senior vice president and director of compliance services at Lockton Cos. The IRS extended the deadline once from March 31 to June 30, but it hasn’t articulated when it will begin collecting fines. It remains to be seen how lenient it will be in 2017, but 2016, a “best efforts” year, allowed for some leeway and extensions, he said.
“The problem this year was that it was the initial year of reporting,” Holloway said. “A lot of vendors and a lot of companies were learning as they went along.”
This transmittal process is what the IRS uses to ensure eligible employees are receiving the affordable medical plans that they’re entitled to under the act. Companies track employees’ hours, and employees are eligible for benefits if they work more than 30 hours a week. Companies report that information to the employees themselves and then transmit the data to the IRS, which checks for errors. At some point, companies will be penalized for each employee they should have offered an affordable health plan to but did not.
The IRS’ perceived leniency can also be attributed to technical difficulties and a week in May when the transmission site shut down, said Jon Shanahan president and CEO of Businessolver Inc., a benefits technology company that specializes in managing eligibility data. Finally, because this was the initial year, awareness was low in some companies, he added. Many did not know this was coming or they weren’t prepared for the complexity of the process.
Many businesses were eligible for an extension — as long as they made their best efforts to clean up data sent to the IRS. Companies got 30 days to correct any errors. If the IRS rejected data files completely, companies got 60 days to scrub the data and refile.
Finally, if a company could prove it had been looking for an outside vendor or if it hired an outside vendor and the vendor pulled out, the company could file for a short extension with the IRS, said Angel Hower, the ACA product owner at Businessolver.
For companies that did not get an extension, the solution is simple.
“If someone doesn’t make this deadline, they still need to file, and they need to file as soon as possible,” Hower said. “The longer you wait, the bigger red flag that will raise with the IRS.”
The deadline in 2017 will be what 2016’s deadline was before the extension: March 31. And in future years, both Holloway and Shanahan predict the process will be more smooth sailing.
Shanahan said one problem this year was that many companies would have one vendor doing the tracking, another doing the reporting and another doing the transmitting.
“Hopefully, at some point technology and knowledge will catch up with this, and — if we’re having this same conversation in another five years — filling out the 1095 [ACA] form will be [a push of the button], and vendors will have it down cold,” Holloway said.
Finally, he noted, we’ll get a better flavor for what reporting will look like next year when the updated instructions to the tax forms are released. Last year, the instructions came in September, and he doesn’t predict that to be any different this year.
To learn more about the transmittal process, go to tinyurl.com/ACA-Transmittal.
Andie Burjek is a Workforce associate editor. Comment below, or email at email@example.com. Follow Workforce on Twitter at @workforcenews.