On March 10, 2014, the IRS published final Treasury regulations for two separate information reporting requirements added to the Internal Revenue Code by the Patient Protection and Affordable Care Act of 2010, as amended ("PPACA"). Both require certain employers to file information returns with the IRS and furnish statements to certain employees or other individuals. The first requirement applies to each person who provides minimum essential coverage to an individual during a calendar year, including employers who sponsor self-insured plans. The second requirement applies only to applicable large employers. In this client alert, we describe each requirement as it applies to employers and the opportunities provided by the final regulations for combined and streamlined reporting.
The Minimum Essential Coverage Provider Reporting Requirement
The first requirement obligates each person who provides "minimum essential coverage" ("MEC") to an individual during a calendar year to file an information return (Form 1095-B or 1095-C) with the IRS and furnish a statement to any "responsible individuals." A "responsible individual" includes a primary insured or other person who enrolls one or more individuals, including him or herself, in MEC. Employer-provided coverage will generally constitute MEC unless it is an excepted benefit under the Health Insurance Portability and Accountability Act of 1996. (Reporting is not required with respect to MEC that supplements other MEC offered by the employer or that supplements government-sponsored coverage, such as Medicare.) Thus, for a self-insured plan that constitutes MEC, the MEC provider reporting requirement applies to the employer sponsoring the plan, regardless of the size of the employer. For fully-insured plans that constitute MEC, the MEC provider reporting requirement applies to the insurance provider.
Employers who sponsor self-insured plans and are not subject to the employer shared responsibility provisions must file Form 1095-B. Employers also subject to PPACA's employer shared responsibility provisions that are reporting as employers (i.e., not as insurance issuers, sponsors of multiemployer plans, or providers of government-sponsored coverage) must file Form 1095-C with the IRS. Such employers must also use this form to satisfy the applicable large employer member reporting requirement described below. These forms, which have yet to be published by the IRS, must be filed for each responsible individual and must be accompanied by a single transmittal form for each employer. The forms, or a substitute statement, must also be furnished to each responsible individual. Substitute statements must provide the information required to be listed on the forms and comply with any additional IRS guidance.
The final regulations require an employer that sponsors self-insured MEC to report the following information:
- The name, address, and employer identification number ("EIN") of the person required to file.
- The name, address, and tax identification number ("TIN"), or date of birth if a TIN is not available, of the "responsible individual." Providing a TIN is optional with respect to responsible individuals who are not enrolled in MEC.
- Name and TIN, or date of birth if a TIN is not available, of each individual covered under the policy or program.
- For each covered individual, the months for which, for at least one day, the individual was enrolled in coverage and entitled to receive benefits.
- Any other information specified in forms, instructions, or published guidance.
The Applicable Large Employer Member Reporting Requirement
The second requirement applies only to "applicable large employers" ("ALEs"). An ALE is an employer who employs 50 or more full-time employees (including full-time equivalents, based on the hours of non-full-time employees) during the preceding calendar year. (See our February 2014 client alert "Final IRS Regulations on Employer Shared Responsibility" for more information on employer shared responsibility penalties for failure to offer affordable MEC that provides minimum value.) Although ALE status is determined at the controlled group level, this information reporting requirement applies on an employer-by-employer basis. Each related employer that makes up an ALE is an "ALE member." ALE members must file a Form 1095-C with the IRS with respect to each full-time employee. The Form 1095-C or a substitute statement also must be furnished to each full-time employee.
With certain exceptions noted below, the final regulations require an ALE member to report the following information:
- The name, address, and EIN of the ALE member.
- The name and telephone number of the ALE member's contact person.
- The calendar year for which the information is reported.
- A certification as to whether the ALE member offered to its full-time employees (and their dependents) the opportunity to enroll in MEC under an eligible employer-sponsored plan, for each calendar month.
- 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 full-time employee under an eligible employer-sponsored plan, for each 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 during the calendar year and the months, if any, during which the employee was covered under the plan.
- Any other information specified in forms, instructions, or published guidance.
Simplified Reporting for Qualifying Offers
An ALE member is permitted to use a simplified alternative reporting method that does not require reporting monthly information for a full-time employee to whom it makes a "qualifying offer" for all months during which such employee was a full-time employee. A "qualifying offer" has two components: 1) an offer of MEC to an employee providing minimum value, for which the employee-only coverage option meets a specific affordability threshold, and 2) an offer of MEC to the employee's spouse and dependents. The information that an employer must provide depends on whether a qualifying offer is made for all 12 months of a calendar year or for fewer than 12 months of the calendar year.
For a full-time employee who receives a qualifying offer for all 12 months of a calendar year, the Form 1095-C will only be required to indicate that a qualifying offer was made for all 12 months and to report certain identifying information with respect to the employee. For such an employee, an employer may satisfy the requirement to furnish a statement to such employee by providing him or her with a copy of the Form 1095-C filed with the IRS. Alternatively, an employer may provide such employee with a general statement in a format to be prescribed by the IRS informing the employee that the employee, the employee's spouse (if any), and the employee's dependents (if any) received a qualifying offer for all 12 months of the calendar year for which the ALE member is reporting, and therefore the employee and the employee's spouse (if any) and dependents (if any) are generally ineligible for a premium tax credit for all of those 12 months.
For a full-time employee who receives a qualifying offer for fewer than 12 months of a calendar year, an employer must complete a Form 1095-C using the general reporting method but will be able to use an indicator code to report months for which the employee received a qualifying offer. The general requirement to furnish a Form 1095-C or substitute statement applies with respect to such employees.
For 2015 only, an ALE member may use the simplified alternative reporting method for all employees if it certifies that it made a qualifying offer to at least 95 percent of its full-time employees and furnishes a simplified statement to each of its full-time employees in a format to be prescribed by the IRS.
Simplified Reporting for 98 Percent Offers
If an ALE member certifies on its transmittal form that it offers MEC meeting the affordability and minimum value requirements of the employer shared responsibility penalty provisions to at least 98 percent of its employees (and their dependents) for whom it files a report under the ALE member reporting requirement, then that ALE member will not have to identify whether a particular employee is a full-time employee with respect to a particular month or report the total number of its full-time employees for the reporting year.
Even medium-sized ALE members eligible for transition relief under the preamble to final regulations on employer shared responsibility penalties must comply with the ALE member reporting requirement.
Due Dates and Penalties
Forms 1095-B and 1095-C (and related transmittal forms) generally must be filed with the IRS on or before February 28 of the year following the year to which they relate. This due date is extended to March 31 for electronic filing. Electronic filing is required for entities filing 250 or more Forms 1095-B or 1095-C. A penalty of $100 per return may be assessed for failure to timely file complete Forms 1095-B and 1095-C.
A copy of the Form 1095-B or 1095-C or a substitute statement must be furnished to the responsible individuals and/or full-time employees listed on the form by January 31 of the year following the year to which the forms relate. A penalty of $100 per return may be assessed for failure to timely furnish complete Forms 1095-B and 1095-C.
Pursuant to IRS Notice 2013-45, the employer shared responsibility penalties and the associated information reporting requirements will not take effect until the 2015 calendar year. (See our July 2013 client alert "PPACA 2014: The Implications for Employers" for more information on Notice 2013-45.) Thus, the first returns required to be filed and statements required to be furnished will be due in early 2016 with respect to MEC provided and/or offered in 2015. The IRS will not impose penalties with respect to returns filed or statements furnished in 2016 on employers who make a good faith effort to comply with the reporting requirements but report incorrect or incomplete information.
Although the first returns and statements are not due until early 2016, employers subject to these requirements should have systems in place to collect the required information in 2015. The IRS continues to encourage voluntary compliance with the information reporting requirements in 2014 in order to ease the transition to mandatory compliance in 2015. However, this is a decision for each employer to make and such compliance is purely voluntary.