1095-C filing deadlines extended

Yesterday, the IRS released Notice 2016-4, extending the deadlines for providing the 1095-C form to employees and filing the 1094-C/1095-C with the IRS.

The old deadline for providing the 1095-C form to employees was February 1, 2016.  The new deadline is March 31, 2016, giving employers an additional 2 months.  (Note: if you planned on mailing the 1095-C with the employees’ W-2, the deadline for providing W-2’s has not changed.  Therefore, you will either need to stick to the original deadline to mail the forms together, or mail them separately.)

The old deadline for filing the 1094-C and 1095-C on paper with the IRS was February 29, 2016.  The new deadline is May 31, 2016, giving employers an additional 3 months.

The old deadline for filing the 1094-C and 1095-C electronically with the IRS was March 31, 2016.  The new deadline is June 30, 2016, also giving employers an additional 3 months.

These extensions are automatic and do not require filing an application.

If you have not been using the HR software for the entire year, or are transitioning from another payroll/accounting system to Datatech’s software, this will provide you with additional time to import/enter data, compile information and review the forms for accuracy.

ACA Reporting Status in HR

The current release of the HR program includes the Compile 1095-C Information option with the updated logic needed to automatically assign Series 1 and 2 codes for each month when using the the monthly measurement period.  (Previously releases of the HR program only included a preliminary Compile option that was meant for testing.)  We expect to complete the logic for the look-back measurement period this week, and have a new version that includes this ready for download early next week.

If you have not already done so, review the “Preparing for 1095-C reporting”  series of articles (1, 2, 3, 4) on our blog that were published earlier this month, then review the following topics in the online help for the HR program:

Compile 1095-C Information
Enter/Edit Form 1095-C
Print 1095-C Reports

The Compile 1095-C Information includes sub-topics discussing the logic used to assign the series 1 and 2 codes and codes that may be open to interpretation.  (The next post on our “Preparing for 1095-C reporting” series will cover these topics and summarize much of the information that is already published in the help file.)

A video is also planned showing how the 1095-C options work as well as how to review and check the results of the Compile process.

Transitioning Methods

Employers that are transitioning from the monthly measurement period to the look-back measurement period may need some additional logic added to the 1095-C reporting to determine the applicable Series 2 codes during the transition period.  We will provide additional information on this next week.

Offers of Coverage During Open Enrollment

Some additional logic may be added to the program to handle offers of coverage during an open enrollment period (as opposed to an offer of coverage when an employee becomes eligible).  This may depend on whether or not a health benefit record was entered for every employee offered coverage during the open enrollment period.  The instructions provided by the IRS for the 1095-C do not explain how these offers should be reported.  We are reviewing information from the IRS and will provide an update on this.

Electronic Reporting

The IRS will begin their “business rule” testing of the electronic 1094-C/1095-C files in January.  We will be submitting test files as soon as this testing period opens to get our software certified for electronic reporting.  An update will be released to the HR program when the testing phase has been completed.  Until then, the Generate Electronic Files option will only create a test file.

Year End Update Released!

The 2015 Year End Update has been released for The Farmer’s Office, The Labor Contractor’s Office, The Shipper’s Office and The Broker’s Office.  This update includes new tax rates for 2016 as well as the forms and programming changes for year end tax forms (940, 943, W-2) for 2015.

Use the Tools->Check for Updates option in your program to download the Year End Update.  The version number for The Farmer’s Office and The Labor Contractor’s Office is 7.55.1345.  The version number for The Shipper’s Office and The Broker’s Office is 7.48.624.

The Year End Update for The Farmer’s Office and The Labor Contractor’s Office includes the latest version of the Human Resources program.  The HR update will need to be downloaded separately for users of The Shipper’s Office by using the Tools->Check for Updates option in the HR program.

This year we will have multiple update released as new features are released for AB 1513 compliance and 1095-C/1094-C reporting in the HR program.  More details will be posted on blog when those releases are available.

W-2 Code DD-Cost of employer-sponsored health coverage

A new feature has been added for 2015 to calculate the amount to report on the W-2 under Code DD for the Cost of employer-sponsored health coverage.  This option requires that you have coverage information for employees in the Human Resources program.  It determines which months each employee was coverage by a plan, and uses the annual cost for each plan to determine the amount to report based on the number of months each employee was enrolled.

If you do not have the coverage information entered in the HR program, this new option will not be able to calculate the correct amounts and you will need to edit the information by hand, as in past years.

Preparing for 1095-C reporting #4

Line 16 Codes

The codes that appear on line 16 of the 1095-C may be the most difficult thing to understand about this form.  You can think of the codes as your way of telling the IRS why your company should not be subject to a penalty.  There are multiple reasons why you are not subject to a penalty.  The Compile 1095-C option combines information from both your payroll records and the health benefits records in the Human Resources program to determine the appropriate code to report for each month on line 16.

Because this may be difficult to understand we have built in a feature to help explain why the system chooses the codes that it does for line 16 of the 1095-C.  After the 1095-C information has been compiled, a tooltip is available for each month showing you the code(s) that apply and the reason behind the code(s).

Preparing for 1095-C reporting #3

Declines

One thing we forgot to mention in the first post in this series is to make sure (if at all possible) that you have entered a date declined on all decline records.  It is better for your records to have this date on file (either when coverage was offered to the employee or when you received their paperwork declining coverage).  If a decline record is missing a date declined, then the program will assume that it was entered before the employee was eligible for coverage and base the logic for line 16 codes on that assumption.

A year ago when customers were pre-enrolling employees, it was not clear that entering a date would be helpful, so we told customers that it was optional.  The important thing was to get the decline record entered so that the employee did not get automatically enrolled in coverage.

Early this year, when entering a decline record we changed the “Date Offered” to read “Date Declined”, added the date entry to the Add Decline Coverage Records window, and started recommending that customers enter that date when recording a decline record.

As we move forward and multiple years of coverage will be tracked in the program, it will be required to enter this date for both coverage and decline records.  Since employers must provide an offer of coverage to employees each year, decline records that are over a year old will stop applying to employees on the Hour Eligibility Report.  When an employee’s coverage choice expires, you should provide them with a new opportunity to accept or decline coverage for 2016.

Ambiguous Coverage Records

Another thing to watch for is coverage records that do not tell the program any useful information.  A record where the Declined Employee Coverage checkbox is not checked and there are no coverage dates tells the program nothing except possibly that the employee was offered coverage, but either never returned the insurance forms or the employee’s selection was never entered into the program.  We will be adding a report to find these records.  Since they do not tell the program any useful information for 1095-C reporting purposes, they will not hurt anything if they are left in the system.  But if an employee actually declined coverage and this was never properly recorded, then the system will not be able to report the correct codes on line 16.

Preparing for 1095-C reporting #2

Line 14 Codes and Line 15

Before you can fill out the 1095-C, you’ll need to determine which codes apply to the insurance plan(s) that your company has offered employees.  A “Code Series 1” code is entered in each month of the calendar year to describe the offer of coverage made to employees.  These codes describe the type of coverage offered (whether it offers minimum value and/or minimum essential coverage), who it is offered to, and for the first code, what affordability safe harbor was used to determine affordability (there are three different safe harbors).

If you are not sure which code to use after reviewing the 1095-C instructions, check with your insurance company, to verify whether the plan(s) you offered provided minimum value (MV) and minimum essential coverage (MEC).  We cannot help you with this, so don’t ask us what line 14 code you are supposed to use!

You should know whether you are offering the coverage to the employee only, employee and dependents, employee and spouse, or employee, spouse and dependents.

The final piece of information you need to know is your affordability safe harbor.  You do remember what affordability safe harbor you used, right?

In case you forgot (or never knew!) this is the method that you used to determine whether or not the employee’s share of the premiums was affordable.  There are three methods:

• 9.5% of mainland single federal poverty line (MSFPL)
• Form W-2
• Rate of pay

If you are covering the entire cost of the insurance, then the employee doesn’t have any cost, and the affordability safe harbor is not particularly relevant, but you still must pick one.

If you are basing the employee contribution on a percentage of gross wages, the Form W-2 safe harbor could apply.  The percentage that the employee contributes must be 9.5% or less.

The Rate of pay safe harbor may be a relatively easy calculation to perform that would apply to all employees.  Using this calculation, you would multiply $9.00/hour (minimum wage) by 130 hours/month.  This gives you the minimum wage that any employee would need to have before qualifying for coverage of $1,170/month.  Taking 9.5% of that total gives you $111.15.  As long as the employee’s contribution is less than this, the insurance can be considered affordable.

(Of course, the affordability calculation could be done with each employee’s individual hourly pay rate.  Using the minimum wage calculation provides you with a cap on employee contributions that could be used across the board for all employees.)

Between these three pieces of information, you should be able to determine which code to use. Each plan that you have set up should have a code assigned to it from one of the following:

Code 1A applies if the insurance coverage you offer includes MEC and MV, was offered to the employee, spouse and dependents, and you use the MSFPL safe harbor.

Code 1E applies if the insurance coverage you offer includes MEC and MV, was offered to the employee, spouse and dependents, and you used either the W-2 or Rate of Pay safe harbors.

Codes 1B, 1C, 1D apply when the coverage is not offered to either the spouse and/or dependents.

Code 1F would apply to a plan that provides MEC but not MV.

When code 1A is used, it is not necessary to report any amounts on line 15.  When one of the other codes is used (1B, 1C, 1D, 1E, 1F) then you must report the amount of the employees contribution for each month on the 1095-C.  This program will use the Employee Share for Self Only coverage to report this amount.  (Of course this should already be a part of your plan setup for the employee deductions to be calculated.)

If your plan is age rated, then this amount will vary for each employee depending on their age.  To handle this, an Age Rated Costs tab page has been added to the Health Insurance Plan setup window where this amount can be entered for each age range that applies to your policy.  The payroll program will also use the Age Rated Table to determine the cost for the employer sponsored health coverage amount (DD code on the W-2).  A future update will also use the Age Rated Plan table in determining the employee’s deduction.

 

 

Preparing for 1095-C reporting

Here is a short check list to help prepare for the 1095-C reporting:

1. Read and understand the instructions from the IRS.  Make sure you understand what relief your company may be eligible for and how this is reported on the forms.  Datatech cannot advise you in this area.
2. File for an extension (Form 8809).  There is more information in the instructions.  Although we don’t expect it to be needed, it doesn’t hurt.  If something beyond our control occurs, the extension will provide an additional 30 days to file your 1094-C/1095-C’s with the IRS.
3. Make sure that all offers of coverage have been entered into your system.  This includes all offers that employees accept as well as offers that were declined.  The Compile 1095-C program option will combine information from the payroll system with the information on the plans you offer and the offers made to employees to determine what codes will be put in the line 14/15/16 boxes.
4. Check with your insurance company to see if they will be able to provide a file after the end of the year listing all employees that were enrolled and the months in which they were enrolled.  For employers that have self-funded plans, this information will be reported in Part III of the 1095-C.  If your insurance company cannot provide you with this type of file and you want to check the information in the HR system against the insurance companies information, it may be necessary to compare detail bills from the insurance company against the HR’s list of employees that were enrolled for each month.
5. There may be situations where the codes reported on the 1095-C are ambiguous or open to interpretation.  The IRS has not provided any examples of how the 1095-C is to be filled out in different scenarios.  Nor have they provided an equivalent to Publication 15 for employers to follow for ACA compliance/reporting.We will do our best to clearly explain the logic used by the program in determining the codes that are reported based on our understanding of the instructions.  If you have questions about a particular scenario, we will likely not be able to provide advise on how to handle a particular situation.  We may be able to submit a question to the IRS, but they may choose not to answer.  The IRS has refused to answer several of our questions about the correct codes to use in different scenarios.

An update the HR program should be available in the next few days with revisions to the Compile 1095-C option.  We will post another article when this version is released detailing the changes.

 

DIR releases AB 1513 information

We will have more to say as soon as we have had time to digest this information.  In the meantime, here is the link:

New Piece-Rate Legislation (AB 1513)

We recommend all customers start studying the FAQ to learn about the new requirements, which go into effect January 1, 2016.  A few initial impressions after a quick read through:

It’s not clear whether the new rules take effect with any checks issued on or after 1/1/16 or if they apply to labor on or after 1/1/6.  Just in case, if you normally date your checks on Friday or Saturday, you may want to consider dating checks on Thursday, December 31st, to insure you have an extra week to come into compliance.

The law does not require tracking time for rest breaks, only paying for these breaks that are compensable.  Given this, we may be able to develop rules to define compensable breaks based on total hours worked.  If this feature is added, customers that are currently tracking breaks on their crew sheets or through in the field data collection system may be able to stop doing this.

Employees that are paid on both an hourly basis and a piecework basis in the same week will need to have all of their break time paid using the same calculation, even the breaks taken on days when the employee is paid only on an hourly basis.  This is an interesting wrinkle, to say the least.

What this means is if an employee is paid on a piecework basis the first day then paid on an hourly basis for ten hours of work on the second day in the workweek, you cannot pay the employee 10 hours at their hourly rate on the second day.  It will be necessary to subtract the compensable breaks from the 10 hours worked (e.g. two ten minute breaks = .3333), and pay the employee for 9.6667 hours at their regular hourly rate and the break time at the calculated rest and recovery rate.

If an employee is paid only on an hourly basis during the workweek, then the legislation does not apply because the employee is not a piecework employee.  In this case, break time is included in the total hours paid.

Automatic enrollment requirement repealed

Every so often we get a question about the Automatic Enrollment box on the Health Insurance Plan setup.  What does that do?

The answer has been nothing; it is there for future support of automatic enrollment features pending the Department of Labor issuing regulations.  Originally, employers with more than 200 full time employees were required to automatically enroll employees in coverage.

The last information we found from the Department of Labor was this technical release back in 2012.

Like many elements of the ACA, it took the government a lot longer to implement this provision than expected.  After recently checking on the status of this provision, we were surprised to find that it has been quietly repealed.  See the links below for more information.

Health Care Reform: Automatic Enrollment: Is automatic enrollment required under the PPACA?

Health Plan Auto-Enrollment Won’t Be Required but Still Allowed

We will likely remove the Automatic Enrollment checkbox from the medical plan setup (just so we don’t get questions about it).  If any features are added in the future to support automatic enrollment based on requests from customers, we will add it back in.  For now employers do not need to be concerned about meeting any requirements for automatically enrolling employees in coverage.

Update 12/14/15 3:56:  Fixed first link.

A tale of three rates (AB 1513)

A number of customers have questions about AB 1513 compliance.  We have questions too.  We are hoping that the California DIR will provide some answers before the end of the year.

Consider the following detail from a check on the Daily Payroll Batch Report:

This example uses the average piecework hourly rate calculation to determine the pay rate for the Rest and Recovery wage type (which is “NP”).  There are two lines of piecework with a total of 19 hours, the employee earned $234 working piecework, so the average piecework hourly pay rate is $12.32.  This is the rate that is used on the “NP” lines.