ACA 1095 PITFALL:
WRONG EMPLOYEE STATUS CODES (Line 16)

ACA Audit Predictors:
Wrong Employee Status Codes (Line 16)

Relevant Blog Entries

Let’s face it, much like the issues outlined in our Wrong Offer of Coverage Codes (Line 14) blog there were many 1095-C software programs that were late to the 2015 ACA IRS reporting party. You may recall the IRS granted the industry an extension in the late Fall of 2015. Many industry experts suggested the extension was because 1) The IRS itself was not ready, 2) Employers were having a hard time collecting and preparing the data and 3) The software vendors needed more time. This “perfect storm” culminated in a mad rush to “get the forms out the door.”

Not surprisingly, there wasn’t very much QA.
Interestingly, the entire industry seemed to be more focused on publishing the form, than making the information was accurate.

As the expression goes “haste makes waste.” A few “real life” examples follow:

  1. 2D (limited non-assessment period) – The limited non-assessment period code is only used for mid-year hires that are either in their respective waiting period or in their Initial Measurement Period. Employers (and vendors) have been known to make coding mistakes simply by treating this period incorrectly as enrolled (2C). In other cases the root of the problem stemmed from erroneous Initial Measurement Period handling for either part-time or variable hour employees.
  2. 2E (multiemployer) – The multiemployer plan code is solely to be used when an employee is enrolled in an actual union plan. Employers (and vendors) have been known to make coding mistakes for union members whose benefits were actually managed by the employer, not a multi-employer plan.
  3. 2F-H (waiver) – The waiver codes should only be used when an employee has actually waived coverage. While this is fairly straightforward the primary issue is many employers track waivers outside of the core benefits administration system, and sometimes, even manually (if at all). As a result, when waivers are erroneously handled, additional risk is exposed.

Since 2015 is a “best efforts” year, it will be interesting to learn whether or not the IRS perceives similar scenarios as “best efforts” or if they’re going to issue penalties. Hopefully (last I checked, hope is not a strategy), the IRS will kindly turn a blind eye and the employer (and third party) worlds will wake up and get it right.

In order to mitigate future risks employers should 1) QA their 2015 forms, 2) QA their current 2016 data (BTW – our company offers both 1095 Audit and 1095 Diagnostic services).

Employers have the opportunity to ensure Line 16 Employee Status Codes are accurate and future penalties. As they say, “there’s no time like the present – do it now!”

- H. Gerver 7/27/16

howie-gerver

About The Author: Howard Gerver, of ACA Managed Services, is an authority on 1095 compliance. He and his team of ACA experts are the go-to specialists for companies who wish to avoid trouble with the IRS. They offer a range of ACA services, including ACA audits (also known as 1095 audits)