Good Faith Effort For 2015 employers that file will have protection even if their filing is incorrect or incomplete, as long as they show they made good faith efforts to comply with the [ACA] reporting requirements. A “good-faith effort” is defined as employer simply attempting to complete the forms. Keep in mind that the good-faith effort for 2015 tax year will disappear in 2016, thus penalties will apply for incorrect information in subsequent years. Also, A and B Shared Responsibility penalties still apply here.
Transition Relief – A Bye for 2015 Transition relief is designed to shield employers from shared responsibility penalties for all or part of 2015, reducing the exposure of the (A) $2K or (B) $3K penalties. This relief is not granted automatically and only applies for the 2015 tax year. To take advantage of this relief, the employer needs to complete line 22 of the 1094-C form or line 16 of the 1095-C for non-calendar year plans. With HCM File we advise our clients to incorporate Transition Relief into their filing where appropriate. There are four flavors of Transition Relief, each essentially providing a bye for the months the relief is designated.
- Qualifying Offer Method -For employers who offer MEC which does not exceed 9.5% of the Federal Poverty Level to at least 95% of full-time employees.
- 4980H for Employers with 50-99 Employees – For employers who averaged between 50-99 employees
- 4980H for 100+ Employers – For employer offered coverage to at least 70% of full-time employees
- Non-Calendar Year Relief – For employers with health plans that renew February-December in 2015.
30-day Extension Mirroring the extension process for W2s and 1099s, the IRS will allow a 30-day extension as long as you can demonstrate certain hardship conditions and file Form 8809 by January 31st 2016. Getting the final health plan participation and completing 1095-C forms for each health eligible employees, Cobra and retirees (if self-funded) is a lot to accomplish in a short window. As many employers scramble to complete their end of year payroll and compile the information for 6055/56, a good number of employers are looking to take advantage of the extension especially in the first year. Unlike the Good-Faith Effort and Transition Relief, the 30-day extension can be utilized in any tax year assuming the employer qualifies.
While Good Faith Effort, Transition Relief, and 30-day extensions are tools that employers may take advantage of to shield them from potential penalties, they should not be viewed as a method to evade penalties in all situations. Employers should still strive for compliant, accurate, and penalty-free filing without the support of any safety nets.