In September the IRS released final Forms 1094 and 1095 for 2015 and accompanying instructions. The final forms are substantively identical to the 2015 draft versions the IRS released in June. The final instructions are mostly the same as the draft versions the IRS released in August, but include some important modifications:
- Extensions of due dates
- Process to obtain waiver from electronic filing requirement,
- Employers not required to file information returns for HRAs in most cases
The IRS also issued Notice 2015-68, which includes proposals on Section 6055.
The 1094 and 1095 forms will be used for information reporting required by the ACA (under new Code §§ 6055 and 6056). Information reporting is required so the IRS can enforce employer shared responsibility penalties (under Code section 4980H), and also the individual mandate and tax credit eligibility rules.
Applicable large employers (ALEs) will file the “C” series forms (1094-C and 1095-C); and health coverage providers (such as health insurers and some employer-sponsored self-funded plans) will file the “B” series forms. The forms must be furnished to full-time employees and enrollees by February 1, 2016 and filed with the IRS by March 1 (paper filings) or March 31 (electronic filings).
Key Changes in the Final Instructions
Extensions of Filing and Furnishing Deadlines
Extensions of time to file returnswith the IRS and furnish statements to individuals (finalized from draft Instructions). Generally, entities filing informational reports with the IRS (e.g., Forms 1094 and 1095) may apply for an automatic 30-day extension of time to file by completing Form 8809, Application for Extension of Time To File Information Returns, by the due date of the returns. Additionally, they may apply for an additional 30-day extension under certain hardship situations.
Reporting entities also may send a letter to the IRS requesting an extension of time to furnishthe 1095s (or alternative statements) to recipients. This request must be postmarked on or before the date by which the statements are due to recipients. (E.g., by February 1, 2016).
Waiver from Electronic Filing Requirement if Employer Files more than 250 Reports
ALEs may receive a waiver from the requirement to file returns electronically by submitting Form 8508, Request for Waiver From Filing Information Returns Electronically. The form must be filed at least 45 days before the due date of the information reporting returns. E.g., by February 15, 2016.
Clarification that Separate Reporting Usually is not Required for HRAs
The draft instructions would have required employers with insured plans and Health Reimbursement Accounts (HRAs) to file separate information reports on the HRAs, despite prior guidance suggesting the contrary. The final instructions clarify (on page 11) the reporting rules for HRAs:
- An ALE member with a self-insured major medical plan and a health reimbursement arrangement (HRA) is required to report the coverage of an individual enrolled in both types of MEC coverage under only one of the arrangements (which will no doubt be under the self-insured major medical plan).
- An ALE member with an insured major medical plan and an HRA is not required to report HRA coverage of an individual if the individual is eligible for the HRA because he or she enrolled in the insured major medical plan. (Since the health insurer is required to file a Form 1095-B to report enrollment in the insured major medical coverage, it would have been redundant to require the employer to separately report HRA coverage.
- An ALE member with an HRA must report coverage under the HRA for any individual who is not enrolled in a major medical plan of the ALE member (e.g., the individual enrolled in a spouse’s employer’s group health plan).
Additional Changes and Clarifications in the Final Instructions
The 2015 instructions for Forms 1094-C and 1095-C also:
- Include an example to illustrate the Qualifying Offer Method, in which a full-time employee receives a qualifying offer for fewer than 12 months in the calendar year. A qualifying offer is an offer of affordable, minimum value coverage to the employee and MEC to family members, and it disqualifies the employee and family members from eligibility for premium tax credits. The example illustrates that an ALE cannot furnish an alternative statement (instead of a 1095-C) unless the employee received a qualifying offer for all 12 months in the calendar year. An ALE can use the qualifying offer code (1A) on Form 1095-C so long as the employee received a qualifying offer for all months in which the employee was full-time (and not in a limited non-assessment period).
Add an additional day (the 12th day of each month) that employers may use to determine the number of employees per month. This means ALEs now can choose which of five permissible days each month to count total employees. An ALE must use the same day for all months in the year; it cannot choose a different day each month.
- Clarified what indicator codes should be used in lines 14 and 16 of the 1095-C for an offer of COBRA continuation coverage that is made to a former employee. 1) Upon termination of employment, an offer of COBRA should not be reported as an offer of coverage, whether or not the employee enrolls in that coverage. Instead, in line 14 Code 1H (No offer of coverage) should be entered for any month in which the offer of COBRA continuation coverage applies. 2) For any month in which a terminated employee is enrolled in COBRA coverage, enter Code 2A(Individual not employed) in line 16. This protects the ALE from potential penalties under Code § 4980H. Do not use Code 2C (Employee enrolled in coverage offered) for a terminated employee.
- Clarified that Code 2E (Multiemployer interim rule relief) should be used in line 16 for any month in which the multiemployer arrangement interim guidance applies for that employee, even if another code in Series 2 code might also apply (including Code 2C).
- Clarified that, for purposes of determining an employer’s average number of employees, employers may disregard an employee for any month in which the employee has coverage under TRICARE or Veterans Administration coverage. This change reflects recent legislation.
The IRS also issued Notice 2015-68 on Sept. 17, 2015, to indicate that it plans to issue proposed regulations related to Section 6055 reporting.
These proposed regulations are expected to:
- Require health insurance issuers to report coverage in catastrophic health insurance plans that were enrolled in through an Exchange;
- Allow electronic delivery of statements reporting coverage under expatriate health plans, unless the recipient explicitly refuses consent or requests a paper statement;
- Allow filers reporting on insured group health plans to use a truncated taxpayer identification number (TTIN) to identify the employer on the statement furnished to a taxpayer; and
- Specify when a provider of minimum essential coverage (MEC) is not required to report coverage of an individual who has other MEC.
Notice 2015-68 also:
- Invites comments on issues relating to the solicitation of covered individuals’ taxpayer identification numbers (TINs);
- Clarifies that the governments of U.S. possessions or territories (namely American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands) are not required to report coverage under Medicaid and the Children’s Health Insurance Program (CHIP); and
- Provides that the state government agency sponsoring coverage under the Basic Health Program (BHP) is required to report that coverage.
The IRS previously released final 2014 versions of Forms 1094-B and 1095-B (and related instructions), and Forms 1094-C and 1095-C (and related instructions) on Feb. 8, 2015. These forms are not required to be filed for 2014, but reporting entities may voluntarily file them in 2015 for 2014 coverage.
The IRS also released Q&As on Section 6055 and Q&As on Section 6056, as well as a separate set of Q&As on Employer Reporting using Form 1094-C and Form 1095-C.