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May 28, 2014

Final Rules on the Affordable Care Act's Reporting Requirements

Update: On July 24, 2014, the Internal Revenue Service (IRS) released draft forms for information reporting under IRC §§6055 and 6056. §6055 requires health plans to report information regarding an individual’s health coverage during the preceding taxable year, in order to determine whether that individual had health coverage. §6056 requires large employers (50 or more employees) to report information concerning whether they offered affordable and minimum value coverage to full-time employees. This information will assist in the implementation of the employer penalty and the premium assistance subsidies. The forms are available for public comment and may be downloaded from http://www.irs.gov/draftforms. These forms include:

  • The form that group health plans may use to report to plan participants’ information about their coverage under the plan (Form 1095-B), and a transmittal form that transmits all of these forms to the IRS (Form 1094-B)
  • The form that employers may use to report to full-time employees whether they were offered minimum value and affordable health coverage (Form 1095-C) and a transmittal form that transmits all of these forms to the IRS (Form 1094-C)
  • A form used by health insurance Exchanges to report to the IRS concerning coverage purchased on the Exchange (Form 1094-A)

The forms must be completed by plan sponsors and employers in early 2016 using data from 2015. The IRS solicits comments on these forms, but has not established a comment deadline. In addition, the instructions for completing the forms have not yet been published. Plan sponsors and employers should continue to monitor IRS releases for final forms and instructions, and should determine whether their information collection processes need to be adjusted to be able to collect all relevant information for reporting.

The Treasury Department and Internal Revenue Service (IRS) have published final rules on the reporting requirements for group health plans and certain employers that were introduced by the Affordable Care Act.1 Both reporting requirements were originally scheduled to take effect in 2015, but were delayed by one year.2 Now, reporting information to the IRS and giving individual statements to plan participants and/or employees will be effective in 2016 for 2015 data.

This Capital Checkup summarizes the reporting requirements and the guidance in the final rules, which generally follow proposed rules issued last fall. It includes checklists for information that plans must report and detailed information that employers must report. Special rules apply to employers that contribute to multiemployer plans. Employers with self-insured plans will welcome the news that the final rules permit combined reporting. The Capital Checkup concludes with some notes about action items for plan sponsors.

The reporting forms and instructions, when they are released by the IRS, will provide additional details about how the reporting must be done.

Reporting Requirements for Group Health Plans

The Affordable Care Act’s plan reporting requirements were added to the Internal Revenue Code (IRC) as Section 6055. Section 6055 requires all providers of “minimum essential coverage”3 to report certain, detailed information (noted in the text box below) to the IRS regarding the individual’s coverage during the preceding taxable year. The purpose of this reporting is to determine whether an individual has satisfied the individual mandate to have minimum essential coverage or pay a penalty.

Section 6055 reporting must be filed with the IRS by February 28, if filed on paper, and by March 31, if filed electronically,4 of the year following the calendar year in which the plan provided minimum essential coverage beginning with the 2015 plan year. The due dates do not differ for plans that are not calendar-year plans. Insurers will meet the §6055 reporting requirement using IRS Form 1094-B and 1095-B (or other forms the IRS deems acceptable). Self-insured group health plans sponsored by employers that are also subject to the employer reporting requirements file different forms discussed in the employer reporting section.

Each employee and retiree listed in the report to the IRS must receive a written statement with the “policy number” and the name, address, and a contact number for the plan sponsor, as well as the information required to be reported to the IRS, by January 31 of the year succeeding the calendar year to which the return relates. The first statement must be furnished no later than February 1, 2016 (because January 31, 2016 is a Sunday). The statement must be provided on paper unless an employee consents to electronic delivery.5

For insured plans, the insurers are responsible for complying with these reporting requirements. For self-insured plans, the responsibility lies with the plan sponsor.

The final rules on the reporting requirements for group health plans6 clarify the following:

  • Scope of Reporting  The report must include information on all covered individuals. An individual who has coverage on any day in a month is treated as having minimum essential coverage for the entire month and would be reported as having coverage for that month. Supplemental coverage, such as a Health Reimbursement Arrangement, offered by the same plan sponsor that sponsors the underlying coverage is not subject to reporting. In addition, the following also do not have to be reported: Health Savings Accounts, non-minimum essential coverage, on-site medical clinics and Medicare supplemental coverage.
  • Reporting Taxpayer Identification Numbers (TINs) By law, the report to the IRS must include a TIN (e.g., a Social Security number) for each covered individual. (As a protection against identity theft, reporting entities may use truncated TINs on the statements provided to individuals.) A date of birth may be used instead of a TIN if a plan sponsor is unable to obtain a TIN, but the plan sponsor must attempt to obtain one. This means asking for the TIN upon enrollment and making at least two attempts to collect the TIN in the first and second years of coverage.
  • Reporting by Members of Controlled Groups  One member of a controlled group may assist the other members by filing returns and furnishing statements on behalf of all members. However, each employer is treated as a plan sponsor separately liable for accurate and timely reporting.
Checklist of Information that Plans Must Report to the IRS

Name, address, and employer identification number (EIN) of the reporting entity (e.g., insurer or self-insured
     group health plan)

Name, address, and TIN (or date of birth if a TIN is not available) of the responsible individual (unless they are
     not enrolled). Responsible individuals include employees and retirees

Name and TIN (or date of birth if a TIN is not available) of each individual (member, spouse, dependent child)
     covered under the policy or program

For each covered individual, the months for which the individual was enrolled in coverage and entitled to receive
     benefits for at least one day

Any other information specified in yet-to-be-released forms, instructions or published guidance

Reporting Requirements for Employers

The Affordable Care Act’s employer reporting requirements were added to the IRC as §6056. Section 6056 requires “large” employers (defined as those with at least 50 full-time employee equivalents7) to report certain information (noted in the text box below) concerning whether they offered affordable and minimum value coverage to full-time employees. One of the purposes of the employer reporting requirements is to assist the IRS in administering the employer shared responsibility penalty. The employer reporting requirements will also assist the IRS in determining whether individuals with access to employment-based coverage are eligible for the premium assistance tax credit.

Like the plan reporting, employer reporting is due February 28, if filed on paper, and by March 31, if filed electronically, of the year following the calendar year in which the employer offered coverage. The due dates do not differ for employers with plans that are not calendar-year plans. Employers will report on IRS Form 1094-C (transmittal) and 1095-C (employee statement). Self-insured employers will combine their §6055 and §6056 reporting on Form 1095-C, completing both sections to report the information required under both §6055 and §6056. An insured employer will also report on Form 1095-C, but will complete only the §6056 information.

Employers must also provide information on whether they offered affordable and minimum value coverage to each full-time employee identified on the report. These statements, which can be a copy of the employer’s report to the IRS, are due by January 31 of the year succeeding the calendar year to which the return relates. The first statement must be provided by February 1, 2016 (because January 31, 2016 is a Sunday).

Employers with fewer than 100 full-time employees (including full-time equivalent employees) that qualify for transition relief under the employer penalty rule must certify on their §6056 transmittal form that they meet the conditions for being exempt from the employer penalty for 2015. However, these employers are not exempt from the reporting requirements.

Employers may use third parties to facilitate filing returns and delivering employee statements, but the employer remains the responsible entity.

                  
Detailed Information that Employers Must Report to the IRS

The employer’s name, address and EIN

The name and telephone number of the employer’s contact person

The calendar year for which the information is reported

  Certification of whether the employer offered to its full-time employees (and their dependents) the opportunity to
     enroll in minimum essential coverage under an eligible employer-sponsored plan, by calendar month

The months during the calendar year for which plan coverage was available

Each full-time employee’s share of the lowest cost monthly premium (self-only) for coverage providing minimum
     value offered to that full-time employee under an eligible employer-sponsored plan, by calendar month

The number of full-time employees for each month during the calendar year*

The name, address, and TIN of each full-time employee (but not dependents) during the calendar year and the
     months, if any, during which the employee was covered under the plan*

Any other information specified in yet-to-be-released forms, instructions or published guidance

* Not required if the employer qualifies for certain alternate reporting methods

In addition to having to report the detailed information noted in the checklist above, employers must report certain other information using what the IRS calls “indicator codes” for that reporting. Complete details about the list of reportable items will be available when forms and instructions are published.

Under certain conditions, employers may use simplified, optional methods for §6056 reporting. While complete details about the optional reporting methods will not be available until the forms and instructions are published, the alternative methods essentially reward employers that cover more employees than required by allowing them to provide less employee-specific data.

Special Rules for Employers that Contribute to Multiemployer Plans

Employers that contribute to multiemployer plans will not have some of the information that is needed to do the §6056 reporting. As a result, the final rule outlines generally how the §6056 reporting would be done in these situations, and notes that further instructions will be forthcoming.

Under the final rule, contributing employers may fulfill the §6056 reporting requirement with respect to the employees for whom contributions were made if the multiemployer plan administrator prepares returns pertaining to the full-time employees covered by the collective bargaining agreement eligible to participate in the multiemployer plan. The contributing employer would prepare returns pertaining to its remaining full-time employees (those who are not eligible to participate in the multiemployer plan). The plan administrator would file a separate §6056 return for each contributing employer, providing the name, address and TIN for the plan and the employer. The IRS requires a single §6056 transmittal for all full-time employees of the employer, including those covered by the collective bargaining agreement and not covered. Employers that contribute to multiemployer plans must provide one §6056 employee statement for each employee. The plan administrator may assist the employer in furnishing statements to its employees.

Combined Reporting Permitted for Employers with Self-Insured Plans

In general, the IRS reports required by the Affordable Care Act must be filed separately for plans and for employers. However, self-insured employers may file a consolidated return, Form 1095-C, completing both sections to report the information required under both §6055 and §6056.

Penalties

Generally, reporting entities that fail to comply with §6055 and §6056 are subject to the penalty provisions in §6721 and §6722 (penalties for failure to file correct information returns and to furnish correct payee statements). However, the IRS will not impose penalties on entities that can show they made good-faith efforts to comply with the information reporting requirements. Relief from penalties is provided for returns and statements filed and furnished in 2016 to report coverage in 2015, but only for incorrect or incomplete information. No relief is provided for failure to file a return or statement by the deadlines.

Action Items

Although the actual forms and instructions are not yet available from the IRS, employers and plan sponsors should begin to familiarize themselves with the reporting requirements and initiate conversations with their payroll providers and software vendors who may be able to assist in meeting these requirements.

• • •

As with all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for authoritative advice on the interpretation and application of the Affordable Care Act and related guidance, including the guidance summarized in this Capital Checkup. Sibson Consulting can be retained to work with plan sponsors and their attorneys on compliance issues.

 

1 The Affordable Care Act is the shorthand name for the Patient Protection and Affordable Care Act (PPACA), Public Law No. 111-48, as modified by the subsequently enacted Health Care and Education Reconciliation Act (HCERA), Public Law No. 111-152. (Return to the Capital Checkup.)

2 The delay was announced on July 9, 2013 in Notice 2013-45, which is available on the IRS website. (Return to the Capital Checkup.)

3 As a reminder, in this context “minimum essential coverage” is group coverage of any actuarial value that consists of more than “excepted benefits” under the Health Insurance Portability and Accountability Act (HIPAA). For more information, see Sibson Consulting’s March 12, 2013 Capital Checkup, “New Rules Define Minimum Essential Coverage and Affordability Under the Affordable Care Act.” (Return to the Capital Checkup.)

4 Reporting entities that must file at least 250 Form 1095-Bs must file electronically. (Return to the Capital Checkup.)

5 Various conditions for electronic delivery of statements to participants and/or employees apply. Notice must be provided if the required hardware or software changes. Certain required disclosures must be provided in advance of receiving consent. The format must meet IRS standards. If the statement is furnished on a website, certain notice requirements must be met and the statements must be available through October 15 of the year following the year to which the statements relate. (Return to the Capital Checkup.)

6 These final rules were published in the March 10, 2014 Federal Register. (Return to the Capital Checkup.)

7 This is the same size threshold for purposes of the employer shared responsibility penalty. Employers must count the number of their full-time employees and then aggregate the hours of part-time employees to determine the total number of full-time employees. (Return to the Capital Checkup.)