By Jen­nifer Kupper
In-house Coun­sel for iaCONSULTING
a UBA Part­ner Firm

IRSPhotoThe Afford­able Care Act’s Employ­er-Shared Respon­si­bil­i­ty (ESR), oth­er­wise known as Play or Pay, is here! Not only are employ­ers strug­gling to apply the once-abstract-but-now-actu­al com­plex and con­vo­lut­ed rules and reg­u­la­tions, employ­ers are fac­ing yet anoth­er hur­dle – Afford­able Care Act (ACA) Infor­ma­tion Returns (AIR).

By now, employ­ers should have done and should be doing the following:

  1. Deter­mine if it is an Applic­a­ble Large Employ­er (ALE) sub­ject to Play or Pay.
  2. If an ALE, when does Play or Pay begin?
  3. Deter­mine “full-time” employ­ees using either the look-back mea­sure­ment method or month­ly mea­sure­ment method.
  4. Deter­mine whether the low­est cost of min­i­mum val­ue self-only cov­er­age is “afford­able” and which safe har­bor is being utilized.
  5. Deter­mine the date by which the offer of cov­er­age must be made to each full-time employee.
  6. For self-fund­ed groups, gath­er infor­ma­tion on all per­sons on the plan.

The Next Hurdle

Based on cal­en­dar year 2015, all ALEs and employ­ers that offer self-fund­ed cov­er­age will report on Forms 1094 and 1095 (B series or C series depend­ing on size and fund­ing source; here­after, “Forms”). For cal­en­dar year 2015, Forms are required to be filed by Feb­ru­ary 29, 2016, or March 31, 2016, if fil­ing elec­tron­i­cal­ly. Employ­ers fil­ing 250 or more 1095 Forms must file elec­tron­i­cal­ly using AIR. Nat­u­ral­ly, the IRS is encour­ag­ing elec­tron­ic fil­ing of all Forms.

As a side note, the ESR time­lines track the W‑2 fil­ing and dis­tri­b­u­tion time­lines. Employ­ees on the plan must receive Form 1095 by Jan­u­ary 31 (Feb­ru­ary 1, 2016, as Jan­u­ary 31, 2016 falls on a Sun­day). How­ev­er, it should be not­ed that AIR does not inter­face with FIRE, a sep­a­rate IRS elec­tron­ic system.

AIR

The issue at hand for employ­ers required to file elec­tron­i­cal­ly is whether to out­source to a third par­ty, known as a Trans­mit­ter, or com­plete the process inter­nal­ly. The rest of this arti­cle will assist employ­ers in ana­lyz­ing the issue. Keep in mind, this infor­ma­tion is gen­er­al, and it is writ­ten for employ­ers who may choose to or are required to file returns elec­tron­i­cal­ly on the ALE’s own behalf as the intend­ed audience.

There are a series of steps that must be under­tak­en to suc­cess­ful­ly set up and use AIR. Gen­er­al­ly, employ­ers trans­mit­ting their own ACA Forms are known as “Issuers.” A “Soft­ware Devel­op­er” is an orga­ni­za­tion that writes either orig­i­na­tion or trans­mis­sion soft­ware accord­ing to IRS specifications.

Step 1 – Get Informed.

Sign up for the IRS Quick Alerts to receive impor­tant, time­ly infor­ma­tion regard­ing AIR.

Step 2 – Iden­ti­fy Respon­si­ble Offi­cials and Contacts.

An employ­er who plans to report inter­nal­ly must iden­ti­fy a respon­si­ble offi­cer and con­tacts. The IRS defines a “Respon­si­ble Offi­cial” as an “indi­vid­ual with respon­si­bil­i­ty for the author­i­ty over the elec­tron­ic fil­ing of ACA Infor­ma­tion Returns oper­a­tion at the firm or orga­ni­za­tion loca­tion.” The Respon­si­ble Offi­cial is the first point of con­tact with the IRS, has author­i­ty to sign original/revised ACA Infor­ma­tion Return Appli­ca­tion for TCC Cre­den­tials, and is respon­si­ble for ensur­ing adher­ence to all require­ments. The IRS encour­ages more than one Respon­si­ble Official.

A “Con­tact” is an indi­vid­ual who is avail­able on a dai­ly basis, can assist the IRS with any inquiries, and who may be respon­si­ble for transmitting.

Respon­si­ble Offi­cials and Con­tacts who will be respon­si­ble for elec­tron­i­cal­ly fil­ing ACA infor­ma­tion returns and/or cre­at­ing or main­tain­ing the ACA Trans­mit­ter Con­trol Code (TCC) Appli­ca­tion must indi­vid­u­al­ly reg­is­ter with e‑Services

Step 3 – Reg­is­ter with the IRS.

Respon­si­ble Offi­cials and Con­tacts must reg­is­ter with the IRS and com­plete the e‑Services Reg­is­tra­tion to obtain login cre­den­tials, a PIN, and authen­ti­ca­tion. Authen­ti­ca­tion requires indi­vid­u­als to sup­ply per­son­al and tax­pay­er data to the IRS.

Once reg­is­tered and authen­ti­cat­ed, the IRS will phys­i­cal­ly send a con­fir­ma­tion code via the U.S. Postal Ser­vice to each reg­is­trant. Each indi­vid­ual must log in with­in 28 days to con­firm reg­is­tra­tion and acti­vate the IRS user account.

Step 4 – Sub­mit the ACA Infor­ma­tion Return Appli­ca­tion for Trans­mit­ter Con­trol Code (TCC)

As of June 29, a Respon­si­ble Offi­cial can apply for the company’s TCC. At least one Respon­si­ble Offi­cial must be list­ed on the appli­ca­tion; how­ev­er, the IRS encour­ages more than one designee. Addi­tion­al­ly, there must be at least two, but no more than 10, Con­tacts des­ig­nat­ed per appli­ca­tion. Per­son­al infor­ma­tion is also required for this step.

A Respon­si­ble Offi­cial can also be a Con­tact. All Respon­si­ble Offi­cials will be required to sign the appli­ca­tion using their e‑Services PIN before sub­mit­ting the application.

Dur­ing the Appli­ca­tion, the Respon­si­ble Offi­cial will need to iden­ti­fy the roles for which the com­pa­ny is apply­ing. An “Issuer” is a com­pa­ny that is fil­ing the Forms elec­tron­i­cal­ly. If the com­pa­ny is writ­ing either orig­i­na­tion or trans­mis­sion soft­ware, it is a “Soft­ware Devel­op­er.” A com­pa­ny can be both an Issuer and a Soft­ware Devel­op­er, in which case there will be more than one TCC.

The appli­ca­tion will also require the trans­mis­sion method for Issuers or the trans­mis­sion method(s) the soft­ware pack­ages will sup­port. The A2A Sys­tem Enroller involves a machine-to-machine process that allows Issuers or Soft­ware Devel­op­ers to cre­ate XML and send to the IRS as Sim­ple Object Access Pro­to­col (SOAP) mes­sage. An A2A Trans­mit­ter must com­plete the Auto­mat­ed Enroll­ment Process to obtain a cer­tifi­cate pri­or to trans­mit­ting returns to IRS. Alter­na­tive­ly, the AFA for ACA Inter­net Trans­mit­ter is a web user inter­face that allows Issuers or Soft­ware Devel­op­ers to file forms with the IRS and check sub­mis­sion status.

If you are devel­op­ing a soft­ware pack­age with­in your com­pa­ny and sole­ly for your company’s use, as a Soft­ware Devel­op­er, you should select the In-House Pack­age. Addi­tion­al infor­ma­tion about the soft­ware pack­age and trans­mis­sion method is required on the application.

For more infor­ma­tion and a tuto­r­i­al, see Draft Pub­li­ca­tion 5164, Draft Pub­li­ca­tion 5165, and the Tuto­r­i­al for ACA Appli­ca­tion for TCC.

Once the ACA Appli­ca­tion for TCC is processed and com­plet­ed, TCCs are sent via the U.S. Postal Ser­vice. You can also find the TCCs on the sum­ma­ry screen of the applicant’s online appli­ca­tion. Appli­cants will receive a TCC for each role select­ed on their application.

Step 5 – Testing.

The IRS will have test­ing avail­able some­time… soon, hope­ful­ly. The ACA Assur­ance Test­ing Sys­tem (AATS) is described in detail in Draft Pub­li­ca­tion 5164. Through the test­ing, the IRS can con­firm that: (1) Soft­ware Devel­op­ers and Issuers can send elec­tron­ic infor­ma­tion returns and retrieve Acknowl­edg­ments; (2) Soft­ware Devel­op­ers and Issuers use the cor­rect for­mat and elec­tron­ic fil­ing spec­i­fi­ca­tions for AIR; and (3) the IRS can receive and process the elec­tron­ic infor­ma­tion returns.

Issuers must use approved soft­ware to pre­pare and trans­mit AIR returns and are required to com­plete an error-free com­mu­ni­ca­tion test to trans­mit elec­tron­ic infor­ma­tion returns to the IRS. Dur­ing the test­ing phase, the com­pa­ny will receive a Receipt ID and acknowl­edg­ment iden­ti­fy­ing errors, if any.

Fin­ish Line. Maybe.

The IRS has not released the AATS (Step 6). Will there be a delay, or a false start? At this point, nobody knows. How­ev­er, by now, you have a gen­er­al under­stand­ing of the work involved and the con­sid­er­a­tions nec­es­sary for fil­ing Forms in-house. Before div­ing into this mas­sive under­tak­ing, it would be wise for employ­ers to run a time ver­sus cost analy­sis, con­sid­er­ing “time” fac­tors such as time ded­i­cat­ed to the AIR under­tak­ing, time need­ed for track­ing full-time employ­ees, and time required for famil­iar­iz­ing one­self with the many codes on the Forms ver­sus the cost of out­sourc­ing to a third-par­ty Trans­mit­ter. To save your­self the headaches of keep­ing up-to-date with ever chang­ing reg­u­la­tions, a con­sul­ta­tion with your trust­ed employ­ee ben­e­fit advi­sor is rec­om­mend­ed, as they can help assess your needs and rec­om­mend a pre­ferred third-par­ty Trans­mit­ter, if this is the best solu­tion for the needs of your business.

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