Tuesday, June 24, 2014
An Affordable Care Act Update for Nonprofits
Posted by Armanino Nonprofit Team
The Internal Revenue Service (IRS) has streamlined the reporting burden for employers under the Affordable Care Act (ACA)—but only if companies qualify and receive certification for 2014.
In its effort to determine which employers are offering qualified coverage and which face penalties for not playing, the IRS has outlined new reporting rules for employers with more than 50 full time employees (FTEs) or FTE equivalents.
IRS Section 6055 requires health insurers—including self-insured employers—to provide information on the type and period of coverage for every employee on the payroll during 2014. One copy goes to the IRS and another goes to the employee by Jan. 31, 2015 (or by March 31, if filed electronically).
IRS Section 6056 requires employers with more than 50 full-time employees to tell the IRS what health care coverage it offered to each employee and over what portion of the year that offer covered. That form is due Feb. 28, 2015, or March 31 if filed electronically.
Sec. 6056 also requires large employers to furnish related statements to employees that the employees can use to determine whether, for each month of the calendar year, they can claim a premium tax credit.
The goal of all this is to measure whether employers have complied with ACA’s requirement to offer “minimal essential” health care coverage at an affordable price that reaches a “minimal value” threshold for all employees and their families. Employers that don’t meet the test—and just one of their FTEs or equivalents received a premium tax break for buying insurance on the health exchange—will face significant tax penalties.
The new regulations are a significant improvement from earlier drafts. Gone are demands for some data that would have been costly to administer and have not helped the IRS determine penalties. The latest rules offer a combined form that allows employers to meet both Sec. 6056 and Sec. 6066 requirements (Form 1095-C). It’s a handy tool, especially for those employers who do not self-insure and do offer qualifying coverage to all of its FTEs.
The latest regulations also provide some short-term relief from penalties for employers who can show they have made good-faith efforts to comply with the ACA’s information reporting requirements in this first year.
To learn if your organization is eligible for transitional relief, review our latest webinar: Affordable Care Act: Tax Update for Nonprofits.
Like much of the ACA, the concrete hasn’t hardened yet and there could be additional changes before employers start filing in 2015. But these IRS regulations give employers a better measure of what’s expected as they weigh their employee benefit options.
If you’re unsure if your organization is required to take action to comply with ACA requirements, or if you’re still trying to minimize your FTE and FTE-equivalent headcount, contact Dan Jones (925-790-2644 or Dan Jones) to learn more about how Armanino can help you minimize your “pay-or-play” tax risk.
Nonprofit organizations have specialized audit, tax and operational needs that require specialized service. Armanino has been committed to the nonprofit sector since 1953, and we now work with more than 500 nonprofit clients. This hands-on experience gives our staff of CPAs and former CFOs a deeper understanding of the issues nonprofits face, so we’re able to meet their needs and help them fulfill their missions in the most efficient, cost-effective way possible.