Employers already issue W-2s and 1099s. Now they need to get ready to issue 1094s and 1095s. Under new information reporting provisions of the Patient Protection and Affordable Care Act (ACA), beginning in 2016 (for reporting on the calendar year 2015) and annually thereafter, certain employers will be required to file annual information returns with the Internal Revenue Service (IRS) and furnish annual statements to employees on health plan coverage information.
Compliance is mandatory. Failure to file required informational returns, or filing returns that are incomplete or inaccurate, may result in the imposition of reporting penalties and also could lead to the erroneous assessment of penalties against an employer under the ACA's employer shared responsibility provisions, commonly referred to as the "play or pay mandate."
This Bulletin summarizes the new information reporting requirements and provides employers with suggested next steps for compliance purposes.
Employer Reporting under Section 6055 (Individual Mandate)
Under the ACA's individual mandate, individuals are required to maintain "minimum essential coverage" or pay an annual tax penalty. The first penalties are to be paid in connection with individual income tax returns for 2014. To facilitate IRS enforcement of the individual mandate, and to assist individuals in reporting on whether they maintained minimum essential coverage, certain employers sponsoring health plans for their employees are required to report on the coverage provided each year by filing an information return with the IRS and furnishing a statement to each employee covered under the plan.
Who Must Report: Employers that sponsor self-funded health plans must file an annual informational return under Internal Revenue Code (Code) Section 6055. Employers that sponsor insured health plans (i.e., health plans that provide coverage by purchasing insurance) are not required to report under Section 6055. For insured health plans, the insurance issuer or carrier is responsible for reporting to the IRS and furnishing coverage statements to covered individuals.
What Is Reported to the IRS:
For each employee enrolled in the self-funded health plan, the employer must report:
- The name, address and employer identification number (EIN) of the employer.
- The name, address, and taxpayer identification number (TIN), or date of birth if a TIN is not available, of the employee. The TIN is typically the employee's social security number.
- The name and TIN, or date of birth if a TIN is not available, of each covered dependent of the employee. If the TIN of a covered dependent is not provided at the time of the dependent's initial enrollment, follow-up requests must be made.
- The months for which each covered individual was enrolled in coverage and entitled to receive benefits. Coverage of only one day in a month counts as a full month of coverage.
- Any other information required on the filing form.
What Is Reported to Employees: Generally, the same information is reported to a covered employee as is reported to the IRS.
How Reported: Information is reported to employees using Form 1095-B or, if the employer is also subject to the employer shared responsibility provisions due to its status as an applicable large employer (described below), Form 1095-C. The employer must also transmit all Forms 1095-B or 1095-C, as applicable, to the IRS in a single package using the appropriate transmittal form.
Timing of Annual Return to IRS: The forms must be filed with the IRS on or before February 28, or March 31 if filed electronically, of the year following the calendar year in which the employer provided minimum essential coverage. The return for 2015 must be filed no later than March 1, 2016 (because February 28, 2016 is a Sunday), or March 31, 2016, if filed electronically.
Timing of Annual Statements to Employees: Form 1095-B or Form 1095-C, as applicable, must be provided to employees by January 31, the same timing as for W-2s. This means that statements for 2015 must be provided no later than February 1, 2016 (because January 31, 2016 is a Sunday).
Employer Reporting under Section 6056 (Employer Shared Responsibility)
To facilitate IRS administration of the employer shared responsibility and premium tax credit provisions of the ACA, employers with 50 or more full-time equivalent employees must file annual returns with the IRS and provide annual coverage statements to their full-time employees.
Who Must Report: Applicable large employers. An applicable large employer is one that employed an average of 50 or more full-time equivalent employees on business days during the preceding calendar year. Full-time employees generally include employees who were employed on average at least 30 hours per week and any full-time equivalents. For a discussion of full-time equivalent employees, see our prior Employee Benefits Briefing. Employers that employed fewer than 50 full-time equivalents during the prior year do not need to report. Employers treated as a single employer under IRS controlled group rules are treated as one employer for purposes of determining whether or not the employer has 50 or more full-time equivalents.
What Is Reported to the IRS: Through Forms 1095-C and 1094-C, the employer will generally report:
- The name, address and EIN of the employer.
- The name, address and telephone number of the employer's contact person.
- Calendar year for reported information.
- Certification as to whether the employer offered its full-time employees and their dependents (children to age 26) minimum essential coverage, by calendar month.
- Months during the calendar year in which minimum essential coverage was available.
- Number of full-time employees and employees for each month during the calendar year.
- Name, address and TIN of each full-time employee during the calendar year and the months during which the minimum essential coverage was available to the employee.
- 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, by calendar month.
The employer will report additional information through indicator codes, including, for example, whether coverage provides minimum value and controlled group information.
What Is Reported to Employees:
- The name, address and EIN of the employer.
- The information required to be shown on Form 1095-C for a full-time employee.
How Reported: Each full-time employee must be provided a copy of Form 1095-C with his or her pertinent information. The employer must transmit all Forms 1095-C to the IRS in a single package using Form 1094-C as an accompanying transmittal form.
Timing of Annual Return to IRS: The return must be filed with the IRS on or before February 28, or March 31 if filed electronically, of the year following the calendar year in which the employer provided minimum essential coverage. The return for 2015 must be filed no later than March 1, 2016 (because February 28, 2016 is a Sunday), or March 31, 2016, if filed electronically.
Timing of Annual Statement to Employee: The Form 1095-C must be furnished to each full-time employee on or before January 31 of the year immediately following the calendar year to which the information relates. This means that statements for 2015 must be provided no later than February 1, 2016 (because January 31, 2016 is a Sunday).
Although no reporting is required until 2016, employers should take steps now to prepare for the new reporting requirements, including:
- Reviewing the draft filing forms and instructions issued by the IRS to identify data elements, such as TINs and coverage months, required for the new reporting. The IRS has stated that it expects to issue final forms and instructions later this year.
- Reviewing recordkeeping systems to ensure that necessary data elements are able to be captured. Reporting may require the use of several recordkeeping systems, such as payroll and HRIS, and may require data aggregation across systems.
- Modifying the open enrollment forms used this fall to include collection of TINs.
- Implementing procedures to perform follow up requests, as needed, for TINs.
- Working with the payroll or tax department personnel (and/or outside vendors) to establish procedures for filing returns with the IRS and furnishing statements to employees.