Employee Benefits Compliance, Penalties, Reporting Requirements

ACA Reporting: New Procedures to Request Social Security Numbers

social security
WHATInformation reporting entities must make reasonable efforts to obtain Social Security numbers of all individuals enrolled in group health plans and health insurance policies. IRS Notice 2015-68 updates the procedures defining what constitutes a “reasonable effort.”
WHEN1) Upon initial enrollment or by first open enrollment after September 17, 2015, if later; 2) a reasonable time thereafter; and   3) by December 31 of the year following the initial request.
WHOProviders of “minimum essential coverage” (MEC), which includes employers who sponsor self-insured group health plans and also health insurance carriers who offer MEC.
WHYThe information is needed on the 1095-C that large employers must furnish to full-time employees and on the 1095-B that health insurance issuers and sponsors of self-insured plans must furnish to all enrollees.   Additionally, there are penalties for not obtaining Social Security numbers or at least making reasonable efforts to obtain them.
CITESCode sections 6055, 6056, IRS Notice 2015-68.

ACA Information Reporting requires:

  • “Applicable large employers” (ALEs) that sponsor insured group health plans to report the names and Social Security numbers of all full-time employees, whether or not they are offered or enroll in the employer’s group health plan.
  • Self-insured employers of any size to report the names and Security numbers of all individuals who are enrolled in the employer’s group health plan.

Employers subject to these reporting requirements generally will be subject to penalties for failing to comply, except if they are unable to obtain Social Security numbers of non-employees, after making reasonable efforts to do so, they will not be subject to penalties if they report dates of birth rather than Social Security numbers.

This article explains what the IRS considers to be a reasonable effort to obtain a Social Security number.

Why Are Social Security Numbers Required?

All entities providing “minimum essential coverage” (MEC) must file annual information returns with the IRS (Form 1094-B) and furnish a statement to the taxpayer (1095-B). This is required under Code section 6055. In section III of the 1095-B or C, the employer or insurer provides month by month information on coverage status for each individual in the group health plan, and must provide each person’s name and either Social Security number of date of birth.

“Applicable Large Employers” (ALEs) are subject to similar requirements under section 6056 and must file Forms 1094-C and 1095-C. These annual filings must include information about the coverage offered and which months each full-time employee was enrolled or not, including each full-time employee’s TIN (Social Security number) and months of coverage. For ALEs, the requirements apply for all full-time employees whether or not they are enrolled in the employer’s group health plan.

The reason these annual filings and statements are required is to allow taxpayers and ALEs to establish—and the IRS to verify—that individuals have or were offered minimum essential coverage. This in turn affects whether the individual is subject to the individual mandate tax and/or is eligible for a subsidy to buy health insurance in the Health Insurance Marketplace, and whether the ALE may be subject to a potential “employer mandate” penalty under Code section 4980H.

Relief from Penalties for Reasonable Cause

A plan sponsor or health insurer that fails to file a correct information return (§ 6721) or to furnish a correct payee statement (§ 6722) may be subject to penalties. The preamble to the § 6055 regulations  provides that—for 2015 coverage only—the IRS will not impose penalties on reporting entities that can show they made good faith efforts to comply with the information reporting requirements. This relief applies to incorrect or incomplete information, including Social Security numbers or dates of birth, reported on a return or statement.

The preamble to the § 6055 regulations also notes the general rule under § 6724 regulations, that the §§ 6721 and 6722 penalties may be waived if a failure is due to reasonable cause, that is, the reporting entity demonstrates that it acted in a responsible manner and the failure is due to significant mitigating factors or events beyond the reporting entity’s control. The section 6724 regulations (at § 301.6724-1(e)) specify the procedures a reporting entity must follow in requesting Social Security numbers to establish that the entity acted in a responsible manner even if it was unable to obtain the information.

What is a Reasonable Effort to Obtain a Social Security Number?

On September 17, 2015, the IRS issued Notice 2015-68, which amends the definition of reasonable effort from what is in the 6724 regulations.  Pending the issuance of additional guidance, the following “solicitations” (requests) will be considered reasonable effort and reporting entities will not be subject to penalties for failure to report a Social Security number if:

  • the initial solicitation is made at an individual’s first enrollment or, if already enrolled on September 17, 2015, the next open enrollment season,
  • the second solicitation is made at a reasonable time thereafter, and
  • the third solicitation is made by December 31 of the year following the initial solicitation.

Additionally, a reporting entity is not required to solicit a Social Security number from an individual whose coverage is terminated.  Thus, if a family member had coverage under an employer’s self-funded plan from January 1 – July 31, 2015 but the employer did not obtain the individual’s Social Security number before the end of July, the employer can report the individual’s date of birth on the 1095-B or 1095-C, and the employer will not be subject to a penalty.

Next Steps for Employers

  • If you have a self-funded plan on which you are subject to information reporting requirements and you have not yet requested Social Security numbers from all individuals enrolled in the plan, you should do so immediately or with your open enrollment after September 17, 2015. You should already have employees’ Social Security numbers, so you should just have to request those from enrolled spouses and dependents. You do not have to report Social Security numbers of family members who are not enrolled in the plan.
  • If you have already made an initial request for Social Security numbers from all individuals enrolled in the plan, you must send a second request within a “reasonable time thereafter” to those who have not yet provided the information.  Depending on when you sent the initial request, this may be before the end of 2015, in January 2016, or some later date in 2016.
  • If your initial request for Social Security numbers was in 2015, then by December 31, 2016 you must make a third request for the information to individuals who still did not provide the information after your first or second request.
  • If you want to submit comments to the IRS on this subject, written comments are due on or before November 16, 2015, and may be submitted electronically to Notice.Comments@irscounsel.treas.gov. Please include “Notice 2015-68” in the subject line of any electronic communications. Alternatively, written comments may be mailed to Internal Revenue Service, CC:PA:LPD:PR (Notice 2015-68), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
  • If you want additional information from the IRS on notice 2015-68, contact Andrew Braden at (202) 317-7006 (not a toll-free number).