Health Benefit Reporting Looms for Affected Small Businesses

Posted by Charles Middleton on 05/20/2016

Q: The health benefit information reporting deadline is May 31; June 30 for e-file. Which small businesses are impacted?

A: In the next couple months, certain employers are required by the Affordable Care Act to report information about health benefits offered in 2015. This obligation extends beyond employers with 50-plus full-time equivalent employees (FTEs) to two kinds of small employers. First, the reporting requirements apply to a small employer that is part of a control group or affiliated service group with aggregated FTE count of 50 or more, as this employer is deemed an applicable large employer (ALE) subject to the ACA's mandate to offer certain health coverage (Employer Mandate). Second, the reporting requirements apply to any small employer that sponsors a self-funded health plan, even if the employer is not an ALE subject to the Employer Mandate. A self-funded plan is one that is funded by the assets of the employer, as opposed to through a contract with an insurance company.

Q: How do small businesses report?

A: A small employer that is a member of an aggregated ALE group prepares an information return on Form 1095-C for each applicable employee and files the returns using transmittal Form 1094-C. Applicable employees are those who were full-time for any month of the year, regardless whether he/she participated in a health plan; and those who participated in a self-funded plan, regardless of whether he/she was full-time. A small employer that sponsors a self-funded plan prepares an information return on Form 1094-B for each employee who participated in the plan and files the returns using transmittal Form 1094-B. The reporting deadline is May 31 for conventional filing and June 30 for electronic filing. An employer is exposed to penalty in the amount of $250 per return for failure to report accurately and $500 per return for failure to report at all.


Q: What are the Small Business Health Options Program and the Small Business Health Care Tax Credit?

A: The Small Business Health Options Program (SHOP) is a health coverage option available on the ACA Marketplace to businesses with 50 or fewer FTEs. The stated goal of SHOP is to provide small businesses affordable access to high-quality coverage and reduce administrative burden and cost. The Small Business Health Care Tax Credit is designed to help small businesses (and nonprofits) who use SHOP with the cost of coverage. A small business is eligible for the credit if it buys coverage through SHOP, has fewer than 25 FTEs, pays an average annual employee wage of less than $50,000, and contributes at least 50 percent toward employee premium cost for self-only coverage. The tax credit is valued at up to 50 percent of the employer's premium cost contribution.

Q: What alternatives to health coverage are available to small businesses?

A: A small business that is not an ALE is not subject to the Employer Mandate; thus, it is not exposed to penalty for failing to offer health coverage. Further, providing comprehensive coverage can be financially and administratively burdensome. Employers nonetheless desiring to assist employees with the cost of health care wonder about alternatives. One thing that an employer without an ACA-compliant health plan may not do, without risk of $100 penalty per day per applicable employee, is pay for individual health insurance. As explained in IRS Notices 2013-54 and 2015-17, this arrangement constitutes an employer payment plan that doesn't satisfy the ACA market reform requirements. There is some suggestion that an employer can avoid this prohibited arrangement through a health reimbursement plan that allows for tax-free reimbursement of premiums and preventive care costs. Otherwise, an employer might consider workplace wellness initiatives or monetary compensation untied to health benefits.


Published The Oklahoman, May 20, 2016