The reporting requirements of the Affordable Care Act ("ACA") are now in effect, with mandatory reporting required for all applicable large employers as well as certain other employers.
The draft instructions for the forms to be filed in early 2016 run about 14 dense pages. The information required to complete the forms is extensive and not resident with any one department within your organization. You should already be working with your payroll and HR departments, as well as your health insurance provider and outside payroll service (as applicable), to make sure the required information is being collected now and monthly through the end of the year to facilitate compliance with these new reporting requirements.
If you are an applicable large employer ("ALE") - meaning that you had an average of at least 50 full-time employees during 2014 - then you are subject to the employer shared-responsibility provisions of the ACA and must report information about your health plan to the government and to your covered employees.
The IRS will use the information to determine whether a penalty will be assessed against you under the ACA's employer shared-responsibility (also known as "play or pay") provision because you either: 1) didn't offer "minimum essential" health care coverage to full-time employees (and their dependents), or 2) offered coverage that wasn't "affordable" or didn't provide at least "minimum value" - and at least one full-time employee received a premium tax credit for purchasing coverage on a Health Insurance Marketplace.
ALEs are also required to furnish statements to employees that the employees can use to determine whether, for each month of the calendar year, they can claim a premium tax credit. The statements must be provided by January 31.
An ALE can be a single employer or a group of related entities under common control. The employers that compose such a controlled-group ALE are referred to as "ALE members" and the reporting requirements apply separately to each member.
Every self-insured employer must report information about all employees, their spouses and dependents who enroll in coverage under the reporting requirements for insurers. This reporting is required even for self-insured employers not subject to the ACA's employer shared-responsibility provisions or the ALE reporting requirements.
The due dates are as follows:
- Form 1095-C must be filed for each employee who was a full-time employee for any month of the calendar year by February 29, 2016 (March 31, 2016 if filed electronically). A copy of the form must also be furnished to the employee by February 1, 2016 (since January 31 is a Sunday). Employers that will file 250 or more information returns must file electronically through the ACA Information Returns (AIR) system. This requirement applies separately to each type of return and separately to each type of corrected return.
- Form 1095-C is transmitted with Form 1094-C, which requires more information than a normal transmittal form, including, among other things, whether health insurance was offered to at least 95% of full-time employees and their dependents and whether such insurance was considered affordable and met the minimum value requirement.
- If you offer health insurance to non-employees (such as those availing themselves of COBRA), you can elect to report that coverage on either Form 1095-C/1094-C or Form 1095-B/1094-B. The latter merely verifies that individuals have minimum essential coverage that complies with the individual coverage requirements.
There are two alternative simplified reporting methods designed to minimize the cost and administrative tasks for employers in certain situations. The simplified methods require less detailed information from employers.
If the employer has made a "qualifying offer" for all 12 months to one or more full-time employees, it can use the "Reporting Based on Certification of Qualifying Offers" method for those employees. A qualifying offer satisfies three criteria:
- There is an offer of "minimum essential coverage" that provides at least "minimum value;"
- The employee cost for employee-only coverage for each month doesn't exceed 9.5% of the federal poverty line divided by 12; and,
- There is an offer of minimum essential coverage made to the employee's spouse and dependents.
Eligible employers can furnish a simplified statement to the employee, rather than a copy of Form 1095-C. However, the alternative statement is not available for an employer that sponsors a self-insured plan with respect to any employee who has enrolled in self-insured coverage under the plan because the employer is required to report that coverage on Form 1095-C.
The other alternative is known as the "98 percent offer" method. Here, an employer may qualify for simplified reporting procedures if it certifies that it has: 1) offered, for all months of the calendar year, affordable coverage providing at least minimum value to at least 98% of its employees for whom it's filing a Form 1095-C, and 2) offered minimum essential coverage to those employees' dependents.
The IRS announced recently that the filing deadline for Forms 1094-C, 1095-C, 1094-B and 1095-B may be extended for 30 days by filing Form 8809 (Application for Extension of Time To File Information Returns), which is being revised to include check boxes for these forms. An additional 30-day extension is also available if the first automatic 30-day extension was granted by the IRS and the additional extension is requested before the first extension expires. Extension of the deadline to provide ACA forms to employees may be obtained by submitting a letter to the IRS that contains information to be specified in an upcoming revision to IRS Publication 1220 (Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G). Such extensions are not automatic.
Failure to comply with the information reporting requirements may subject you to the general reporting penalty provisions. Those penalties will increase for information returns and payee (employee) statements filed after December 31, 2015, as follows:
- The penalty for failure to file an information return generally will be $250 for each return (up from $100), not to exceed a calendar-year total of $3 million (up from $1.5 million)
- The penalty for failure to provide a correct payee statement will be $250 for each statement (up from $100), with a calendar-year maximum of $3 million (up from $1.5 million)
Special rules apply to increase the per-statement and total penalties in the case of intentional disregard of the requirement to furnish a payee statement. Also, taxpayers with average annual gross receipts of no more than $5 million for the three preceding tax years are subject to lower maximum penalty amounts.
As always, we are here to help, so please reach out to your Friedman LLP professional with any questions you may have as you gear up for this new, year-end responsibility.