ACCORDING TO A SHRM HEALTH CARE SURVEY, 62 PERCENT OF HR PROFESSIONALS POLLED SAID REPORTING REQUIREMENTS WERE THEIR BIGGEST ACA CHALLENGE.
Creates a voluntary prospective reporting system
The Commonsense Reporting Act permits employers to voluntarily report upfront to the IRS general information about their health plan for the current plan year. This will help increase the accuracy of eligibility determinations for exchange tax credits, provide exchanges with access to information when determining individual eligibility for tax credits, and allow the IRS to use the information to more accurately issue employer 226-J tax-penalty letters.
Streamlines the reporting process
The Commonsense Reporting Act eases reporting burdens for employers that use the voluntary prospective reporting system by requiring reporting statements not for the entire workforce, but only for those employees for whom the employer has received notification that the employee or his or her dependents purchased coverage through an exchange.
The Commonsense Reporting Act provides clarification that the IRS can accept full names and dates of birth in lieu of dependents’ and spouses’ Social Security numbers and requires the Social Security Administration to assist in the data-matching process.
modernizes transmission of information to individuals
It allows for the electronic transmission of employee and enrolled statements rather than requiring this information to be provided only by paper statement sent through the mail. Thus, administrative costs and compliance burdens are reduced.
While employers diligently work to ensure compliance with the law, the annual reporting requirement is administratively and financially burdensome. According to a SHRM health care survey, 62 percent of HR professionals polled said reporting requirements were their biggest ACA challenge. Employers that do not file an annual report or file inaccurate forms to the IRS run the risk of incurring significant financial penalties. Furthermore, because this data is reported after a coverage year has ended, it cannot be used by state and federal exchanges to verify individual eligibility for a tax credit during open-enrollment season.
Under the Affordable Care Act (ACA), an individual is not eligible for a tax credit to purchase health care in a state or federal insurance exchange if he or she is a full-time employee and has an offer of coverage from the employer that meets the employer mandate. Individuals who incorrectly receive a tax credit to purchase health insurance on an exchange are required to repay the Internal Revenue Service (IRS). In order to verify compliance with the employer mandate and determine an individual’s eligibility for a tax credit, employers must file an annual report with the IRS and furnish statements to employees on health care plan coverage information.
Representatives Mike Thompson (D-CA) and Adrian Smith (R-NE) and Senators Mark Warner (D-VA) and Rob Portman (R-OH) have introduced H.R. 4070/S. 2366, the Commonsense Reporting Act. This bipartisan legislation would provide employers relief from burdensome reporting requirements, state and federal exchanges with additional data to verify tax-credit eligibility, and individual health consumers with accurate data when purchasing insurance.
SHRM strongly supports H.R. 4070/S. 2366, the Commonsense Reporting Act. Employer- sponsored plans are the largest providers of health insurance to individuals (66 percent of the workforce) in the United States. The Commonsense Reporting Act will provide much-needed relief to both employers and employees by modernizing and streamlining the reporting requirements. SHRM urges lawmakers to co-sponsor H.R. 4070 and S. 2366.