ACA Reporting Advisor

Welcome to MSEC’s new weekly column on ACA reporting. While we won’t cover details on how to complete the IRS reports, we will discuss general questions on reporting requirements. For detailed information on form completion, contact your broker, tax advisor, payroll company, or insurance carrier. If you have a general ACA reporting question, please email it to us at aca@msec.org. We’ll answer the most commonly asked questions in this forum. As always, the Health Care Reform Learning Zone, found on the MSEC website, is a rich source of information about the Affordable Care Act (ACA).

Q:  I’ve heard a lot of talk about ACA reporting. How do I know if I have to report, and what report(s) I should file? 

A:  There are two reports under the ACA your plan may need to file: the Minimum Essential Coverage report (IRC § 6055), and the Applicable Large Employer report (IRC § 6056). Which report(s) you must file depends on your organization’s size and whether you have an insured or self-insured health plan. The table below shows more information about each report:

Minimum Essential Coverage (MEC) (§ 6055) Applicable Large Employers (ALE) (§6056)
Purpose Allows the IRS to determine which individuals had MEC that satisfies the Individual Coverage Mandate of the ACA. Allows the IRS to administer penalties under the Employer Mandate and the premium tax credit program for coverage purchased through the Marketplace.
Applies To Any entity that provides MEC to an individual. ALEs. Must be filed for every full-time employee including those that waive coverage and are not offered coverage.
Who Files Insurer, if plan is fully insured.
Employer, if plan is self-insured or partially self-insured.
Employer for fully insured plan.
Employer files combined 6055 and 6056 report if plan is self-insured or partially self-insured.

 

Q: What is Minimum Essential Coverage?

A: Generally, the term “minimum essential coverage” means coverage under any of the following:

  • A government-sponsored program, including coverage under Medicare, Medicaid, the CHIP program, and TRICARE;
  • An eligible employer-sponsored plan;
  • A health plan offered in the individual market;
  • A grandfathered health plan; or
  • Other health benefits coverage (such as a state health benefits risk pool) as the Department of Health and Human Services recognizes.

An eligible employer-sponsored plan can include a self-insured group health plan, a governmental plan, group health insurance coverage offered in a state’s small- or large-group market, retiree health coverage, and COBRA coverage. It could also include coverage that a plan offered “on behalf of” an employer. This may include not only multi-employer and single-employer collectively bargained plans, but also plans offered by a professional employer organization (PEO) or leasing company.

Minimum essential coverage does not, however, include certain excepted benefits. This could include limited-scope dental and vision plans that are offered under a separate policy.

Q: How do I know if I am an ALE?

A: An Applicable Large Employer (ALE) is an employer with respect to a calendar year, who employed an average of at least 50 “full-time (FT) employees” (defined as working 30 or more hours per week) including “full-time equivalents (FTE)” on business days during the preceding calendar year. Therefore, the employer must take part-time employees into account to determine whether it is an ALE. Final regulations state 120 hours of service in a calendar month can be used as a monthly equivalent in identifying FT employees.

Formula: FT employees (including seasonal) for each month + FTEs (including seasonal) for each month ÷ 12.

Employers determine the number of FTEs on a monthly basis by adding together the hours worked in a month by employees who are not full-time (including only up to 120 hours maximum per employee) and dividing the total by 120 hours. The result equals the employer’s FTEs for that month. Next, add the 12 months together and round down for the annual FTE total.  See Employer Mandate – Part 1 on the Health Care Reform Learning Zone on www.msec.org for more information on the calculation of FTEs.

However, an employer with fewer than 50 full-time employees may still be considered an ALE if:

  • They are part of a “controlled group” and the total full-time employees (or FTE employees) of the controlled group equals at least 50;
  • The employer is a new employer and expects to employ an average of at least 50 full-time employees in the current calendar year;
  • The employer is deemed as “large” due to a predecessor employer; or
  • The employer has enough FTE employees to cause them to be treated as a large employer.

For the 2015 calendar year, an employer is an ALE if it employed an average of at least 50 “full-time employees” (including “full-time equivalent” employees) on business days during any consecutive six-month period in 2014 (rather than the entire 2014 calendar year). This six consecutive calendar month period may be chosen at the employer’s discretion. See Employer Mandate – Transition Relief for 2015 on the Health Care Reform Learning Zone on www.msec.org for important guidance on how to determine if the employer is an ALE for 2015.