Confused About ACA? Here Are 4 Ways It Might Affect Your Employee Payroll
The Affordable Care Act has changed a lot of things, and it looks like the changes are going to keep on coming. Among these changes are new IRS requirements for employer payroll departments. Employers and their payroll departments are struggling to keep up with the reporting and compliance requirements, on top of changing regulations. Originally, these mandates were to go into effect in 2013, but the government has extended the deadline several times. Most recently, the deadline was changed to January 1, 2016. The ACA regulations will phase in over the next year.
ACA Compliance – What 2016 Will Look Like
This year, large employers must offer health insurance coverage to their employees. Large employers are any that have over 100 or more full-time employees. Coverage offered must be affordable and offered to at least 70% of full-time employees. Employers who don’t offer coverage will be penalized. Full-time employees are defined as working 30 hours a week, not 40.
By 2016, large employers will be expected to offer health coverage to 95% of their full-time employees or else pay a penalty. Employers will also need to report information about health coverage and employees using IRS Forms 1095 and 1094 starting in 2016.
7 ACA Payroll Requirements
Mid-market large employers may have trouble adjusting. IRS reporting standards will require extensive documentation. Many businesses are not yet equipped to collect and report that type of data. Businesses may need to replace their ERP (enterprise resource planning) systems to keep up with reporting standards. The ACA will require the following payroll data:
- The amount of hours each employee works.
- Full-time employees and anyone equivalent to full-time.
- Employee health care eligibility.
- Health coverage that the employer offers.
- Employees and their families that are enrolled.
- Amount the employer and employees pay for health care.
- Eligibility for health care tax credits.
While most ERP systems already collect this data, IRS standards will change the way that businesses report it. Employers should begin making changes now to stay ahead of the game.
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