Employers with a calendar year health plan who have completed open enrollment and tackled many of the significant compliance hurdles toward Affordable Care Act (ACA) compliance may feel they are entitled to a breather. But there is no rest for the weary. Many more challenges lie ahead. In 2016, “applicable large employers” (ALE) (determined without regard to any special transition rules) will need to satisfy the ACA’s information reporting requirements for 2015 (using IRS Forms 1094 and 1095), which must be filed and furnished early in 2016. Employers must take steps now in order to be prepared.
For openers, they should review the final regulations, reporting forms, employee statements, and other guidance issued by the Internal Revenue Service. In February, the IRS published Instructions for completing and filing the required forms. While the forms are for 2014 reporting (which is voluntary), the forms and instructions clearly intend to provide guidance regarding 2015 reporting as they refer to transition guidance applicable in 2015. These materials can be accessed at the links below:
Section 6056 Applicable Large Employer Reporting
- Section 6056 Final Regulations (Reporting by Applicable Large Employers)
- Forms 1094-C and 1095-C
- Instructions 1094-C and 1095-C
- IRS Frequently Asked Questions For Code Section 6056
- IRS Brochure
Section 6055 Minimum Essential Coverage Reporting
- Section 6055 Final Regulations
- Forms 1094-B and 1095-B
- Instructions 1094-B and 1095-B
- IRS Frequently Asked Questions For Code Section 6055
What are the information reporting requirements?
Under the ACA, providers of “minimum essential coverage” (MEC) during a calendar year must report certain information to the IRS about that coverage, as well as to persons receiving that MEC. This requirement generally applies to insurance companies, as well as to employers that sponsor self-insured group health plans. This reporting is required for enforcement of the individual mandate — with this reporting, individuals will be able to verify they had appropriate coverage to avoid a tax penalty.
Note: If employees ask you for a statement reporting MEC in connection with 2014 coverage, you are NOT required to report such information. The IRS has published guidance concerning how employees can confirm MEC in 2014.
A separate, but related, requirement applies to certain employers who must submit returns to the IRS to report about the coverage, if any, they offered or provided to full-time employees, along with certain other information. In some cases, employers also may have to report about coverage for employees who are not full-time, as well as for the covered spouses and dependents of employees. Employers must furnish written statements to their employees in a time and manner similar to Form W-2, as well. This reporting will facilitate the enforcement of the employer shared responsibility (ESR) requirement, as well as the administration of the premium tax credits for individuals.
What are the deadlines for reporting to the IRS and furnishing statements to employees for 2015?
The returns are due February 28, 2016, or March 31, 2016, if filed electronically. The statements generally must be furnished to employees by January 31 of the following year. For 2015, the deadline is February 1, 2016, as January 31 falls on a Sunday.
What Forms do you have to file?
Most employers will need to file IRS Forms 1094-C and 1095-C, rather than IRS Forms 1094-B and 1095-B. Employers will use Form 1094-C to report summary information about the employer to the IRS, but also as a transmittal form for Form 1095-C. Employers are permitted to file multiple Forms 1094-C (such as to cover different divisions), but must designate one authoritative form that includes complete information for the reporting ALE member. Form 1095-C is used to report certain information about employees. In February, the IRS finalized Instructions for these 2014 Forms. Links to the Instructions and the Forms are provided above.
In the final instructions, the IRS simplified the reporting for employers with self-insured plans as to certain non-employees, such as persons covered under COBRA and retirees. The same instructions offer employers the choice of reporting enrollment for these non-employees either on Forms 1094/1095-B or Form 1095-C, Part III. The option to use Form 1095-C applies only for persons who were not employees during any month during the calendar year.
Which employers need to carry out the ACA information reporting requirements?
In general, employers that are “applicable large employers” (ALEs) under the ACA have to comply with the reporting requirements. Employers should already be familiar with this term — as it is the same term used to describe employers that are subject to the employer shared responsibility assessable payment provisions under Code § 4980H. The term includes employers that employed 50 or more full-time employees or full-time equivalent employees on average during the prior calendar year. If an employer had between 50 and 99 full-time employees or full-time equivalent employees on average in 2014 and intends to avail itself of the special transition rule for determining ALE status in 2015 for penalty purposes, it still must report as an ALE for 2015 to take advantage of this transition rule.
In counting employees for ALE determination purposes, an employer must remember to take into account all of the entities (and their full-time employees and equivalents) within its controlled group of corporations or trades or businesses under common control. There are detailed IRS rules for determining which organizations are members of the same “controlled group.”
ALE members each have independent obligations to report to the IRS and furnish the requirement statements to employees. In addition, an ALE member has to report to the IRS the names and EINs of the other members of its controlled group (generally, up to the thirty largest members). Thus, if you have not identified or track all of the members of your group, you should start doing that now.
What steps should you be taking now to prepare to report to the IRS and furnish statements to employees?
These steps include, among others:
- Identify your controlled group. As noted above, if your company is in a group of entities under common control, be sure to identify all of those companies and their EINs.
- Review and evaluate your information collection efforts. A significant amount of information needs to be captured and analyzed during the year in order to complete these reporting requirements, such as: (i) number of full-time employees and total employees by month; (ii) whether minimum essential coverage was available for each full-time employee; (iii) hours of service of employees; (iv) reasons employees are ineligible for coverage; and (v) whether an employee’s premium contribution is affordable.
- Identify third party service providers who can assist. If you plan on using advisors or counsel to prepare, file and furnish these reports and statement, it is recommended that you establish working relationships now.
- Determine how you plan to furnish statements to employees. Statements could be mailed to employees, but they also could be sent electronically. However, affirmative consent from employees is required before the statements may be furnished electronically. Employer will need to plan accordingly.
- Collect SSNs from spouses and dependents (self-insured plans). Employers sponsoring self-insured plans may have to transmit to the IRS the Social Security numbers (SSNs) of spouses and dependents of employees covered under the plan. The reporting rules permit employers to use a date of birth in lieu of the SSN, but only if the employer was not able to obtain the SSN after reasonable efforts, i.e., the employer was not able to obtain the SSN after an initial attempt, and two subsequent attempts. Employers should start complying with this requirement. They should also consider the privacy and data security issues related to the collection of this information. Read more about that here.
January 2016 is not so far away. While many employers will have the assistance of third party vendors to collect and report the information needed, preparations should begin sooner rather than later.