ACA – Mid-size and Large Employer Changes in 2016

Under the Affordable Care Act, there are several changes for large employers (100+ full time equivalent employees) and mid-sized employers (50-99 full time equivalent employees). Here are the major ones to be aware of in 2016:

1. Employer Mandate Reporting Begins (Section 6056 Reporting) – Beginning in the 2015 tax year, all mid-sized and large employers are required to perform Section 6056 reporting. Just like W-2s, copies of the forms must be provided to employees by January 31st and filed with the IRS by February 28th (paper) or by March 31st (electronic). The first reporting will take place early in 2016.
2. Mid-Sized Employer Transitional Relief Expires – In 2015, there was some transitional relief that exempted most mid-sized employers from being subjected to employer mandate penalties. This transitional relief expires in 2016, so both mid-sized and large employers will be subject to employer mandate penalties attributable to 2016. Most mid-sized employers will enjoy reprieve until their plan renews in 2016.
3. Counting Employee Transitional Relief Expires – In 2015, employers were permitted to determine their total number of full-time equivalent employees by averaging any consecutive 6-month period in 2014. However, in 2016, the employer will be required to average their FTEs for all 12 months in 2015 to determine if they are required to comply with the mandate. (Note: It is possible that this transitional relief may be extended.)
4. Employer Mandate Margin of Error Shrinks – In 2015, large employers could fail to offer coverage to up to 30% of their full-time employees and still not face employer mandate penalties. In 2016, the margin of error shrinks to 5%. So in 2016 and beyond, both large and mid-sized employers will be required to offer coverage to 95% of their full-time employees or face a penalty.
5. Employer Mandate Penalty Calculation Changes – In 2015, when calculating the “A” or “no coverage” penalty, large employers could subtract out their first 80 full-time employees. In 2016 and beyond, both mid-sized and large employers may subtract out only their first 30 full-time employees when calculating the “A” penalty.