The Internal Revenue Service (IRS) recently published draft instructions for employer information reporting requirements under the Affordable Care Act.1 The Treasury Department (Treasury) and IRS welcome comments on the draft instructions. However, there is no formal comment deadline.
This Update summarizes the draft instructions, notes action items for employers and outlines factors to consider when implementing the reporting rules.
The new draft instructions contain information about reporting supplemental coverage that is different from previous guidance. The final regulations published in 2014 provide that supplemental coverage does not have to be reported if it is either (1) coverage that supplements a government-sponsored program, such as Medicare or TRICARE (military health coverage) or (2) coverage of an individual in more than one plan or program by the same plan sponsor. Consequently, a retiree plan that supplements Medicare would not have to be reported. Similarly, under the regulations, an HRA sponsored by the same plan sponsor that sponsors a medical benefit plan would not have to be reported.
However, the draft instructions would change the manner in which some HRAs are reported. These instructions state that for the plan sponsor of a health plan and an HRA to be the same, the coverages must be reported by the same reporting entity. Consequently, under the new instructions a plan sponsor that provides a self-insured HRA and an insured group health plan would have to report the HRA coverage despite the fact that the insured coverage is reported by the health insurance carrier. Plan sponsors have raised concern about this clarification to the IRS.
The 2015 draft instructions for both the employer and plan reporting forms contain additional clarifications, many of which were covered previously in answers to frequently asked questions (FAQs).2
The additional clarifications are summarized below:
Although there is no formal comment deadline, the Treasury and IRS are encouraging interested parties to comment on the draft instructions as soon as possible.
Employers need to decide how to comply with the employer reporting requirements. In many cases, compliance will require choosing a service provider that will complete, deliver and file the Forms 1095-C. The text box below addresses that process.
Self-insured employers will need to also provide health coverage information on the Form 1095-C. However, employers with insured coverage will not have to provide that information because the carrier will report it on the Form 1095-B, which is used by health insurers, multiemployer plans and other providers of minimum essential coverage to report plan enrollment.
Choosing a Service Provider to Assist with Forms
Choosing a service provider will be a challenge because of several factors, including that the IRS has created a brand-new technical interface for reporting; the regulatory guidance is complicated and ever-changing; and the service providers have no proven track record because this is the first year the rules have been implemented. Sibson has evaluated many service providers. Based on that experience, Sibson has identified several factors to consider when implementing the reporting rules:
* For information about those criteria, see Sibson’s January 15, 2015 Update, “Identifying Full-Time Employees Under the Affordable Care Act's Employer Shared Responsibility Penalty.”
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.
2 These FAQs, Questions and Answers on Reporting of Offers of Health Insurance Coverage by Employers (Section 6056), Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C and Questions and Answers on Information Reporting by Health Coverage Providers (Section 6055), which are updated periodically, are on the IRS website.
3 Previously, the IRS had informally stated that multiemployer plans would be required to provide detailed information to contributing employers concerning whether each participant had become eligible/enrolled in the fund. Many plan sponsors raised questions with the Treasury and the IRS about this process. Some concerns were practical, in terms of timing and volume of information to be exchanged. Other concerns were legal/ regulatory ones, including whether the transfer of information and resources necessary to do so was consistent with the Health Insurance Portability and Accountability Act (HIPAA) privacy rules and fiduciary obligations under the Employee Retirement Income Security Act (ERISA).
4 Large employers with more than 50 full-time employees, or equivalents, must furnish a copy of IRS Form 1095-C to full-time employees no later than February 1, 2016. In addition, they must file the Forms 1094-C and 1095-C with the IRS by February 29, 2016 — or March 31, 2016, if filing electronically.
6 For information about the multiemployer interim guidance under the employer penalty rules see Segal Consulting’s January 15, 2015 Capital Checkup, “How Contributing to a Multiemployer Plan Protects an Employer from the Affordable Care Act's Employer Shared Responsibility Penalty.” Like Sibson, Segal Consulting is a member of The Segal Group.
8 There are additional issues that require clarification from Treasury/IRS, including whether rules concerning the priority order of certain codes would affect contributing employers. We understand that this issue is being reviewed. The IRS also has not addressed what coding would be used if the plan’s coverage is not affordable or not minimum value.
9 For information about that new structure, see Sibson’s July 15, 2015 Update, “Penalties Increased for Noncompliance with Reporting Requirements Under the Affordable Care Act.”
Update is Sibson Consulting’s electronic newsletter summarizing compliance news. Update is for informational purposes only and should not be construed as legal advice. It is not intended to provide guidance on current laws or pending legislation. On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their attorneys for legal advice.
If you would like additional information about this news, please contact your Sibson consultant or the Sibson office nearest you. Sibson can be retained to work with plan sponsors and their legal counsel on compliance issues.
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