The deadline for employers to comply with the Affordable Care Act (“ACA”) reporting requirements is finally here, with reporting first due in 2016. In keeping with the ACA’s historical pattern of ever-changing regulations and requirements, on June 29, 2015, President Obama signed into law the Trade Preferences Extension Act of 2015 (“Trade Act”), which effectively doubled ACA fiscal penalties overnight. These increased penalties, which the Congressional Budget Office listed as the ACA’s largest funding source, will apply to the information returns most large employers will file for the first time under the ACA in 2016.
 
Beyond the ACA, there are increased penalties that also will apply to other information returns and payee statements that employers file and distribute annually, such as the 1099-series and Form W-2. Employers who fail to file a correct information return or payee statement will incur a penalty of $250 per return, increased from $100 per return, with the standard penalties capped at $3 million, which is doubled from $1.5 million. 
 
Background
 
Under the ACA, all applicable large employers are required to file a report with the IRS showing whether they offered minimum value and affordable coverage to full-time employees and their dependents in the prior calendar year in accordance with the Employer Mandate. An applicable large employer is one that employed an average of 50 or more full-time employees, including full-time equivalent, during the preceding calendar year. Beginning in January 2016, large employers are required to file a Form 1095-C for each employee who was full-time for one or more months during 2015, and a Form 1094-C, a transmittal report that summarizes the associated Forms 1095-C.
 
Self-insured large employers also are required to file reports with the IRS regarding additional reporting elements. The forms must be furnished to employees by January 31, 2016 and filed with the IRS in accordance with the existing deadlines for Form W-2 (by March 31, 2016 if electronically filed and February 29, 2016 if filed on paper). In addition to ACA reporting requirements, the Trade Act’s penalty increase applies to Forms W-2 and the 1099-series (such as reports for profit-sharing, pension, other retirement plan distributions and other various payments to employees). 
 
While the IRS has provided short-term relief from penalties for employers that can show they made “good faith efforts” to comply with ACA reporting requirement, such relief applies only to employers who activity report, but provide incorrect or incomplete information. Not surprisingly, the IRS has provided no guidance on what constitutes a “good faith effort,” so it likely will be a fact-specific determination for each employer. A large employer who fails to comply entirely with the reporting requirements does not get the benefit of the short-term relief. As shown below, the penalty for intentionally disregarding the filing obligation is $500 per filing. So a large employer with 100 full-time employees who makes no effort to comply with ACA reporting requirements is looking at a minimum $50,000 fine, before considering any penalty for failing to offer minimum essential or affordable coverage.  
 
Employers must ensure they understand which forms they must furnish to full-time and full-time equivalent employees and the substantive information they must report to the IRS in order to avoid the assessment of hefty administrative fines. If you have not conducted an ACA audit or consulted with counsel or your benefits broker, now is the time to do it.
 
Increased Penalty Amounts
 
            The Trade Act amends the ACA reporting requirement penalties as follows:
 

 
If you have any questions, please contact our Labor & Employment Practice Group.