ILMA Compoundings November 2016 - 25

POWER PLAY

IRS Releases New Draft
Affordable Care Act
Instructions and Forms
Daniel T. Bryant

he Internal Revenue Service (IRS) has released revised
draft forms (1094-C and 1095-C) and instructions for
2016 employer reporting under the Affordable Care
Act (ACA). While these forms are potentially subject to further
revisions before they are finalized, it is likely that both the forms
and instructions will remain substantially similar to the current
drafts. However, ILMA members should wait until the IRS
releases the final documents before submission.
The draft forms and instructions are similar to those used last
year, but there are some important differences. ILMA members
should review the updated draft forms and instructions ahead
of the IRS filing deadline, which is Feb. 28, 2017, or March 31, 2017
(if filing electronically), and employers must provide employees
with Form 1095-C by Jan. 31, 2017.

What Companies Must Report?
"Applicable Large Employers" (ALEs) have reporting and other
obligations under the ACA. An ALE generally is an employer
that employed 50 or more full-time employees1 (FTEs) during
the preceding calendar year. However, the regulations also
require that businesses determine if there were periods that
the total number of employees fluctuated under and over the
50-employee threshold. A company is not an ALE if it had 50
or more employees for 120 days or fewer in the prior year and
those employees in excess of 50 during that 120-day period
were seasonal workers.

To determine the number of FTEs a business has, and if that
makes the company an ALE, a bit of math is required and an
illustration is helpful: Company ABC has 30 FTEs (defined
above) and 30 part-time employees. Let's say that those 30
part-time employees each work 20 hours per work for an entire
month. 30 x 20 (employees multiplied by hours) is 600 per
week, resulting in 2,400 hours per month. Then, 2,400 hours
are divided by 120 (the equivalent number of hours of work
per month for an FTE) and the result is 20. Those 20 full-timeequivalent employees are then added to the 30 FTEs, and the
result is that Company ABC has 50 employees.

Form 1094-C and Form 1095-C
If a business is considered an ALE, then it must complete form
1094-C and 1095-C. New for 2016, the draft instructions outline
when an employer must file corrections to either form if certain
errors were made. For example, if an employer misspelled an
employee's name or flipped digits in a Social Security number,
then a new form 1095-C must be prepared, an "X" must be
placed in the box at the top of the form, and a correct copy

It is also important to note that the ACA aggregates the total
number of part-time employee hours and treats them as
hours of "full-time equivalent employees." As a result, even
if a company only has 30 FTEs, if there are enough parttime employees working sufficient hours, this could cause a
company to be considered an ALE that triggers the reporting
requirements. However, companies should be aware that
seasonal workers (as defined by the Secretary of Labor) are not
included in the calculation of full-time equivalent employees.

Compoundings November 2016 * 25 * Vol. 66 No. 11

ILMA Compoundings November 2016

Table of Contents for the Digital Edition of ILMA Compoundings November 2016