This year, for the first time, the government is requiring that self-insured businesses prove that each of their employees had essential health plan coverage last year — every month of the year.
“It has truly been a nightmare,” said Shari Herrle, vice president and director of compliance at Henderson Brothers insurance brokers, Downtown, which has assisted more than 100 clients navigate the requirements, offering workshops and connecting employers with vendors to help them comply.
The process has been enough of a headache that the Internal Revenue Service decided toward the end of last year to extend the deadline, pushing it back from Feb. 1 to March 31.
Kathleen Green, human resources director for the General Carbide tungsten carbide tooling firm in Greensburg, Westmoreland County, wasn’t impressed by the extension. By then, Ms. Green said she was “well on my way” to finishing the task herself.
To illustrate what a pain this has been, General Carbide has 225 employees. But, said Ms. Green, 275 people worked there at one point during 2015. Therefore, she had to track work hours and benefits for each of them for each month.
In one case, a 25-year-old employee turned 26 last year so that individual was no longer covered by a parent’s health insurance. For a period, the employee wasn’t sure whether to take the company’s coverage, then decided to do so. But before year’s end, the worker married and switched to the new spouse’s insurance.
With each change, Ms. Green had to enter a new code that month for the employee.
The requirements were mandated under the federal Affordable Care Act, which required businesses with 50 or more employees that self-insure this year to distribute a Form 1095 to employees documenting that their health plan offerings include essential health benefit coverage for services such as hospitalizations, prescription drugs, laboratory work, and maternity and newborn care.
Employees do not have to include the form in their tax return.
But, to get the information together, employers must verify the status of each worker for each month, whether they’re full- or part-time, and whether they enrolled in the plan.
IRS spokeswoman Jennifer Jenkins said the agency has been conducting webinars for employers and software developers since December 2014, and that Power Point presentations are available at www.irs.gov.
While employers with 50 or more full-time employees must collect the information, this year only those with 100 or more face a $250 penalty per worker for not reporting, as well as a penalty for sending incorrect information.
According to the government’s website, companies will not be penalized this year if they show they’ve made good faith efforts to comply.
While the process may get easier in coming years, those having the biggest nightmares now are employers in sectors such as hospitality, health care and particularly contractors where there may be high turnover over the course of a year, Mrs. Herrle said.
“It has been a challenge,” said Eric Conti, human resources director for the Baptist Homes Society, which has 620 employees at its campuses in Scott and Castle Shannon. About 400 of those workers are full-time, he said, which leaves more than 200 whose work hours can change from month to month.
“We have so many employees that change their status, wanting to go part-time. We might have one employee do that five times a year.”
Also, he said, the IRS was refining “and in some cases developing” the reporting requirements throughout the year, making it hard to know how to proceed. He said the staff was working “late Christmas Eve” to finish the reports before the IRS decided to offer the deadline extension.
Charles Swalin, a CPA at Colleran & Company CPAs in New Eagle, Washington County, said helping clients get the necessary documentation piled up staffing hours. “It’s also created a lot of confusion among our clients.”
One client had 50 full-time employees, 40 part-time, and 21 full-time with five part-time at a second company. Mr. Colleran estimated it took 4-6 hours each month, plus another 40-60 hours total, to analyze the data and get it prepared.
Ms. Green, meanwhile, said the work took about four hours a week at General Carbide, plus another 40-60 hours total to analyze and prepare the data.
“That’s a big slice of time” for a company their size, she said.
“And it’s still a charge you didn’t budget for. What CEO is going to say, ‘Here’s some extra money for something we don’t even understand?’”
Steve Twedt: stwedt@post-gazette.com or 412-263-1963.
Correction, posted March 4, 2016: The new IRS deadline was incorrect in an earlier version of this story.
First Published: March 4, 2016, 5:00 a.m.
