The biggest change in payroll since Social Security is about to hit your dealership. The new Employer Mandate under the national Affordable Care Act (ACA) goes into effect this year. That means in 2016 you must submit the first reports to the IRS proving that you’ve offered health coverage to all employees and their dependents working over 30 hours a week during the 2015 calendar year, or pay stiff penalties.
Yes, this is a huge change that could be costly for your dealership if not implemented correctly. And yes, it will require time and work on the part of your payroll staff. But you don’t have to go it alone. Read on for more information about the requirements, how we’re enhancing our dealer management system (DMS) to make compliance easier, and suggested best practices for a smoother year-end. Also, don’t miss our free ACA training webinar on Thursday, November 12 from 11 am - 12 pm MST. Click here to register.
The New Requirements
There are two new forms that will be required as part of 2015 year-end reporting. The 1094C and 1095C, which were optional forms in 2014, are both now required by the IRS for 2015. For the first time, the federal government is mandating that every employee receive a 1095C “Employer-Provided Health Insurance Offer and Coverage” form along with his or her W2. Employees will need both forms to complete their taxes. The form proves that a dealer provided insurance to an employee, as well as that employee’s dependents, even if all parties declined the insurance because of previous coverage (from a spouse’s employer, for example). To complete these forms, a dealer must collect the name, social security number, and birth date of every dependent for every full-time employee. The IRS is also mandating that all W2s and 1095C forms are postmarked no later than January, 31, 2016.
What’s At Stake
Dealers who fail to comply with the ACA reporting requirements face a fine of $250 per insurable individual who is reported incorrectly. “Insurable individual” includes dependents; so for example, an employee with two children reported incorrectly would cost a dealer $500. If all three are reported incorrectly (including the employee) the fine would be $750. Fines per business are capped at $3 million for 2015. Even if you don’t come close to that ceiling, fines could have a disastrous effect on your bottom line.
How Your DMS Can Help
As part of our commitment to true partnership, we’ve implemented new tools and functionality in our DMS to make complying with ACA requirements easier and less stressful. You can expect a new dependent reporting screen added at no extra cost to you within the Payroll master [insert screenshot]. We will also add electronic filing to the Payroll Application to make submitting the forms as easy as possible. While the ACA mandates that only employers with over 250 employees must file electronically, all of our customers will have this capability.
Suggested Best Practices
The IRS estimates that it will take payroll staff up to 30 extra minutes of prep time for each employee to gather and input the information required to meet the Employer Mandate. If your dealership waits until the middle of January to start this process, you’re not going to make the deadline. To ease your stress and help ensure the changes are made in time, follow these best practices:
1. Create a dependent form
I suggest creating a dependent form to be securely distributed to all employees. It should include space to write in all dependent names, social security numbers, and birth dates. Also a box to check if dependents have coverage through a different employer. It’s important to remember all private and personal information must remain secure and protected.
2. Try three times to gather dependent information
The IRS requires that you try three times to retrieve dependent information and keep a file of all attempts. I would suggest setting three dates to distribute the dependent form. Then create a log to track all attempts.
3. Input dependent information by December 31st
Make an effort to gather dependent information as soon as possible, and input it no later than December 31st. If you hit this date you should have no problem getting the forms in the mail by January 31, 2016.
The Employer Mandate is a huge change and will require extra effort on the part of your Payroll team. As part of our commitment to True Partnership, we will continue to do all we can to help you have a smooth year-end. That includes our free webinar on Thursday, November 12 from 11 am - 12 pm MST when we’ll walk through the changes in the DMS and discuss how to prepare for year-end reporting changes. We hope you will join us.