The Affordable Care Act (“ACA”) requires that large employers (generally, those with 50 or more full-time employees, including full-time equivalents) report certain information regarding their employees’ health care coverage to both the IRS and their employees. These Code Section 6056 reporting requirements are designed to aid the IRS in its enforcement of the employer play-or-pay mandate (see our February 19, 2014, article for more information regarding that mandate). The reports also help the IRS administer the premium-assistance tax credit available to help individuals purchase coverage through an Exchange.
As explained in our earlier article, employers with 50 to 99 full-time employees may qualify for an additional one-year delay of the play-or-pay penalties (to 2016). Nonetheless, these employers must still report under Section 6056 for 2015. They will be able to certify on their Section 6056 transmittal forms that they meet the requirements for the special transition relief under the play-or-pay mandate.
Under Code Section 6055, an entity – including an employer of any size that sponsors a self-funded health plan – must report certain information regarding that health coverage to both the IRS and the covered individuals. These Section 6055 reporting requirements are designed to aid the IRS in its enforcement of the ACA’s individual coverage mandate.
Similar to the play-or-pay mandate, these reporting requirements were to be effective for 2014. The IRS delayed the requirements until 2015, however, with the issuance of Notice 2013-45. Final reporting regulations under Section 6056 and Section 6055 of the Code generally confirm the proposed Section 6056 and Section 6055 regulations from September of 2013. The final Section 6056 regulations do, however, include a special transition rule for 2015 reporting.
REPORTING REQUIREMENTS UNDER CODE SECTION 6056
Pursuant to Code Section 6056, large employers must report certain information to the IRS regarding the health coverage they offer their full-time employees, as a way of assisting the IRS in its enforcement of the play-or-pay mandate. Those employers must also furnish statements to their employees so that they may determine whether they are eligible for the premium tax credit under Code Section 36B. Employees are not eligible for this tax credit if either (a) their employer offers them “affordable” health coverage that provides “minimum value,” or (b) they actually enroll in an employer-sponsored plan that provides “minimum essential coverage.”
Coverage under an employer-sponsored plan is “affordable” if the employee’s required contribution for the lowest-cost, self-only coverage does not exceed 9.5% of the employee’s household income. See our January 7, 2013, article for information describing three “affordability” safe harbors. For more information on “minimum essential coverage” and “minimum value,” see our May 1, 2012, article.
Standard Section 6056 Reporting Method
Unless an employer chooses to use one of the alternative reporting methods described below (and is eligible to do so), the final Section 6056 regulations require a large employer to report the following information:
- the name, address, and employer identification number of the employer, and the calendar year for which the information is being reported;
- the name and telephone number of the employer’s contact person;
- a certification as to whether the employer offered its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, by calendar month;
- the number of full-time employees during the calendar year, by calendar month;
- for each full-time employee, the months during the calendar year for which minimum essential coverage was available;
- for each full-time employee, the employee’s share of the lowest-cost monthly premium for self-only coverage providing minimum value that was offered to that employee, by calendar month; and
- the name, address, and Social Security number of each full-time employee (not dependents) during the calendar year and the months, if any, during which the employee was covered under an employer-sponsored plan.
This information is to be reported to employees on a new Form 1095-C, and then transmitted to the IRS on a Form 1094-C. Self-funded, multiemployer plans will also report on Form 1095-C. The IRS may allow for the use of appropriate substitute forms.
For health coverage provided during calendar-year 2015 (regardless of plan year), a large employer must file its information returns with the IRS by either (a) March 1, 2016, for paper filings (the general deadline is February 28, but that date falls on a Sunday in 2016), or (b) March 31, 2016, for electronic filings. If the employer will file 250 or more returns under Section 6056, it must file them electronically.
Employers must furnish individual statements to employees by February 1, 2016 (the general deadline is January 31, but that date also falls on a Sunday in 2016). Employers may furnish these employee statements electronically if notice, consent, and hardware and software requirements – similar to those in place for the electronic furnishing of Forms W-2 – are satisfied. From a practical perspective, employers may want to provide these statements to employees along with their Forms W-2.
Alternative Section 6056 Reporting Methods
The final regulations include two alternative methods by which a large employer may satisfy its Section 6056 reporting obligation. These alternative methods are designed to minimize the costs and administrative burdens for employers by not requiring monthly, employee-specific reporting.
- Reporting Based on Certification of a “Qualifying Offer”. A large employer meeting specific requirements may be able to complete a simpler, more streamlined reporting form with respect to certain of its employees. The employer must certify that it made a qualifying offer of health coverage to a full-time employee for all months during the year in which the employee was considered full-time. A “qualifying offer” is an offer to the employee of 60% minimum-value coverage at a self-only premium of no more than 9.5% of the federal poverty level (or a monthly premium of no more than $92.39), combined with an offer of minimum essential coverage to the employee’s spouse and dependents, if any.
For any employee who receives a qualifying offer for all 12 months of the year, employers need only report the employee’s name, address, and Social Security number, along with the proper indicator code. If an employee received a qualifying offer for fewer than 12 months, an employer may use this alternative method to report for the months during which a qualifying offer was received, but will need to use the standard reporting method (outlined above) for all other months.
Transition Relief for 2015. The final Section 6056 regulations include a transition rule applicable only to 2015. Under this special rule, if an employer certifies that it made a qualifying offer to at least 95% of its full-time employees (plus the corresponding offer to each such employee’s spouse and dependents), the employer may use the “qualifying offer” alternative method for its entire workforce, including any employees who did not receive a qualifying offer for all 12 months of the year.
- Reporting Without Separate Identification of Full-Time Employees. Some employers offer affordable, minimum-value coverage to all or nearly all of their employees (including part-time employees), and are able to accurately represent that the only employees who were not offered such coverage were also not full-time. The final regulations include a second alternative reporting method for employers such as these.
Under this alternative, employers need not identify which of their employees are full-time. However, the employer must certify that it offered health coverage to at least 98% of its full-time employees. Moreover, that coverage must have met both the affordability and minimum-value requirements.
The plan administrator of a multiemployer plan may prepare the returns under Section 6056 that pertain to the full-time employees who are covered by an applicable collective bargaining agreement and who are eligible to participate in the multiemployer plan. The contributing employer would then prepare the returns pertaining to its remaining full-time employees (i.e., those who are not eligible to participate in the multiemployer plan).
Under this approach, the administrator of the multiemployer plan would file a separate Section 6056 return for each contributing employer – who is also a large employer – by providing the name, address, and identification number for both the plan and the employer on behalf of whom it files. In addition, the multiemployer plan may assist the employer in furnishing the required statements to its employees.
The contributing employer would remain the responsible person under Section 6056 with respect to all of its full-time employees. Accordingly, it would be subject to any potential liability for failure to properly file returns or furnish statements. To the extent the plan administrator prepares returns or statements required under Section 6056, it will be a “tax return preparer,” subject to the requirements generally applicable to return preparers. The final regulations note that further details will be provided in forms and instructions to assist multiemployer plan administrators in Section 6056 reporting on behalf of their contributing employers.
REPORTING REQUIREMENTS UNDER CODE SECTION 6055
Code Section 6055 requires information reporting by any person who provides minimum essential coverage to an individual during a calendar year, including coverage provided under an employer-sponsored plan. It also requires certainemployers (i.e., sponsors of self-funded health plans, regardless of “large employer” status) to provide employees with a related information statement. The information reported under Section 6055 may be used by both individualsand the IRS to verify the months (if any) during which the individuals had minimum essential coverage ‒ thereby satisfying the ACA’s individual mandate.
Under Section 6055, employers must report both employee and dependent Social Security numbers. If an employer cannot obtain a dependent’s Social Security number after reasonable efforts, however, it may instead provide the dependent’s date of birth. Due to this requirement, employers who sponsor self-funded health plans will need to implement a process for obtaining dependent Social Security numbers.
COMBINED REPORTING UNDER CODE SECTIONS 6056 and 6055
The final regulations also allow employers that sponsor self-funded health plans to combine their reporting under Sections 6056 and 6055 onto a single Form 1094-C. Employers with insured plans will use the same Form 1094-C, but they will complete only the Section 6056 portion. The insurer will then report the Section 6055 information on a separate form.
As noted above, the plan administrator of a self-funded, multiemployer planmay prepare the Section 6056 returns on behalf of contributing large employers, but the plan sponsor – typically a joint board of trustees, acting through a plan administrator – must provide the Section 6055 information for all employees participating in the plan, regardless of whether the participant is employed by a large employer. Thus, if such a plan administrator prepares the information required under both Section 6056 and Section 6055, it may use a single form.
PENALTIES FOR FAILURE TO COMPLY
An employer or other reporting entity that fails to comply with the Section 6056 or 6055 reporting requirements may be subject to the general reporting penalties under Code Sections 6721 (failure to file correct information return) and 6722 (failure to furnish correct payee statement). The final regulations provide, however, that the waiver-of-penalty and other special rules under Code Section 6724 also apply – including the abatement of information return penalties for reasonable cause.
The IRS will grant temporary relief from these penalties for returns and statements filed and furnished in 2016 with respect to offers of coverage made in 2015, but only for incorrect or incomplete information reported on the return or statement – including Social Security numbers or dates of birth. The IRS will notgrant relief to employers who do not make a good-faith effort to comply with the regulations, or who do not even file an information return or statement.
Employers should begin preparing now to comply with these new information reporting obligations. Among other steps, they should evaluate whether any of the alternative reporting methods – including the special transition rule for 2015 – may ease their compliance burdens.