IRS Issues Final Forms and Instructions for ACA Employer Reporting

The Internal Revenue Service (IRS) issued final regulations implementing the Affordable Care Act’s (ACA’s) employer reporting requirements.

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March 11, 2014

The Internal Revenue Service (IRS) issued final regulations implementing the Affordable Care Act’s (ACA’s) employer reporting requirements. This reporting, among other things, will allow the IRS to verify employers’ liability for employer shared responsibility payments and individuals’ eligibility for premium tax credits. We summarize below the provisions that will most affect self-insured plan sponsors.

Filing & Distribution of New Form 1095-C Begins 2016

The ACA created two separate reporting requirements that apply to self-insured group health plans: one related to employer-sponsored coverage provided to full-time employees and one related to employer-sponsored minimum essential coverage. However, because these reporting requirements involve overlapping or related information, the final regulations provide that employers can fulfill both reporting requirements by filing a single, combined return to the IRS consisting of the new Form 1095-C. We expect that a draft of this new form will become available in the coming weeks. If employers are part of a controlled group, one member of that group can file on behalf of other members. However, each member of the controlled group remains separately liable for reporting and must have a separate filing, even if one member files on behalf of all controlled group members.

Employers also can use Form 1095-C to fulfill the requirement that employers provide statements to employees notifying them of the information reported on Form 1095-C. Employers will fulfill this requirement if they send the statement to an individual’s last known permanent address by first class mail, even if the statement is returned. Employers can send these statements with Forms W-2. The regulations also allow an employer to provide the statements electronically, provided the employer obtains consent in advance and follows rules for notice, updating, and withdrawal of consent. The IRS plans to issue guidance for employers who want flexibility to customize statements.

The final regulations confirm that the employer reporting requirements will be effective beginning with the 2015 calendar year. Employers must furnish statements to employees on or before January 31 following each calendar year and file Form 1095-C with the IRS on or before February 28 (March 31 if filed electronically) following each calendar year.

No Penalties for 1st Year with Good Faith Compliance Effort

The IRS will not impose penalties for the first year’s reporting and statements to employees if employers can show that they have made good faith efforts to comply.

Alternative IRS Reporting Methods

The final regulations allow alternative reporting methods designed to minimize the burden on employers and eliminate reporting to the IRS of some of the data elements enumerated in the regulations (detailed below in “Information to Be Reported: General Method”). These alternative methods are optional and can apply to some or all of an employer’s employees.

Reporting without Separate Identification of Full-Time Employees If Certain Conditions Related to Offers of Coverage Are Satisfied (98% Offers)

Under this alternative method, an employer can report without identifying full-time employees or specifying the number of full-time employees. To qualify for this method, the employer must certify that it offered minimum value, affordable coverage to at least 98% of the employees for which the employer is reporting to the IRS.

Reporting Based on Certification of Qualifying Offers

This alternative method is available with respect to reporting to the IRS on full-time employees if an employer certifies that for all months of the year during which the employee was full-time: (1) the employer offered minimum value coverage, (2) the employee cost for employee-only coverage was no more than 9.5% of the federal poverty level ($1,108.65 for 2015), and (3) the employer offered minimum essential coverage (not necessarily minimum value) to the employee’s spouse and dependents.

If an employer satisfies the above requirements, it will be able to report simplified information with respect to those employees and provide a simplified statement to employees in lieu of Form 1095-C. The IRS will issue further guidance on this alternative reporting method and the simplified statement.

2015 Alternative Reporting Based on Certification of Qualifying Offers

Solely for 2015, if an employer satisfies the requirements below, it will satisfy the requirements for reporting to the IRS related to full-time employees as long as the employer files Form 1095-C with the employee’s name, Social Security number, address, and a code indicating that either (a) the employer made an offer as described below for all 12 months or (b) or the specific months of the year the employer did not make the offer.

This alternative method is available if an employer certifies that it has offered coverage to at least 95% of its full-time employees and their spouses and dependents and: (1) the employer offered minimum value coverage to the full-time employees, (2) the employee cost for employee-only coverage was no more than 9.5% of the federal poverty level ($1,108.65 for 2015), and (3) the employer offered minimum essential coverage (not necessarily minimum value) to the employee’s spouse and dependents. The employer also must furnish a statement to employees (in lieu of Form 1095-C) notifying employees of the offer of coverage. The IRS will issue further guidance on the format of this statement.

Information to Be Reported: General Method

Under the regulations, employers must report all of the following information on Form 1095-C if one of the above alternative methods does not apply:

  • The name, address, and EIN of the entity required to file the return;
  • The name and telephone number of the employer’s contact person;
  • The calendar year for which the employer is reporting the information;
  • The name, address, and taxpayer identification number, usually the Social Security number (or date of birth if TIN is not available), of each individual covered by the policy or plan;
  • For each covered individual, the months for which, for at least 1 day, the individual was enrolled and entitled to receive benefits;
  • In the case of insured coverage, the name, address, and EIN of the employer sponsoring the plan and whether the coverage is through the Small Business Health Options Program (SHOP) and the SHOP’s unique identifier; and
  • Certification as to whether the employer offered full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an employer-sponsored plan, by calendar month;
  • The number of full-time employees for each month during the calendar year;
  • For each full-time employee, the months during the calendar year for which coverage under the plan was available;
  • Each full-time employee’s share of the lowest cost monthly premium for self-only coverage providing minimum value offered to that employee, by calendar month;
  • The name, address, and taxpayer identification number of each full-time employee during the calendar year and the months (if any) during which the full-time employee was covered under the plan;
  • Information as to whether the coverage offered to employees and dependents meets minimum value and whether the employee had the opportunity to enroll his/her spouse;
  • The total number of employees, by calendar month;
  • Whether an employee’s effective date of coverage was affected by a waiting period, by calendar month;
  • Whether the employer had no employees or otherwise credited any hours of service, by calendar month;
  • Whether the employer is a member of an aggregated group of employers and, if applicable, the name and EIN of each employer member of the aggregated group;
  • Information related to whether the employer is a governmental entity;
  • If the employer is contributing to a multiemployer plan, whether, with respect to full-time employees, the employer is not subject to employer shared responsibility payments because of those contributions;
  • If a third party is reporting on behalf of the employer, the third party’s name, address and EIN;
  • Whether minimum essential coverage meeting minimum value was offered to the employee only; the employee and dependents only; the employee and spouse only; or the employee, spouse, and dependents;
  • If coverage was not offered to an employee because the employee was in a limited non-assessment period, resulting in the employer not owing employer shared responsibility payments;
  • Whether coverage was not offered to the employee because the employee was not a full-time employee or was not employed during a particular month;
  • Whether coverage was offered to the employee for the month although the employee was not full-time;
  • Whether the employee met an affordability safe harbor; and
  • Any other information that the IRS requires.

Reporting Not Required for Certain Types of Coverage

The regulations confirm that employers do not have to report for certain types of coverage, including:

  • Health savings accounts (HSAs);
  • On-site medical clinics;
  • Wellness programs that are part of a group health plan;
  • Medicare Part B;
  • Coverage that supplements a primary plan or supplements government-sponsored coverage; and
  • Coverage that is not minimum essential coverage.

Other Rules

The regulations and Preamble also include:

  • Clarification that employers can use third parties to complete reporting (but plans will retain liability for correct and timely filing);
  • Clarification that plan administrators of multiemployer plans can complete reporting and provide statements to employees on behalf of contributing employers (but contributing employers retain liability for correct and timely filing);
  • Details on solicitations for Social Security numbers;
  • A requirement that employers filing 250 or more returns file electronically;
  • Rules for notice, updating, and withdrawal of consent to receive statements electronically;
  • Rules of extensions of time to provide employee statements;
  • Rules for correcting reported information;
  • Transition relief for employers with 50-99 full-time employees; and
  • Special reporting rules for government-sponsored health coverage and government employers.

Links to regulations:

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TABLE OF CONTENTS

  1. Filing & Distribution of New Form 1095-C Begins 2016
  2. No Penalties for 1st Year with Good Faith Compliance Effort
  3. Alternative IRS Reporting Methods
  4. Reporting without Separate Identification of Full-Time Employees If Certain Conditions Related to Offers of Coverage Are Satisfied (98% Offers)
  5. Reporting Based on Certification of Qualifying Offers
  6. 2015 Alternative Reporting Based on Certification of Qualifying Offers
  7. Information to Be Reported: General Method
  8. Reporting Not Required for Certain Types of Coverage
  9. Other Rules
  10. Links to Regulations