Late in the day on March 5, 2014, the IRS and Treasury issued final regulations implementing the information reporting requirements under Internal Revenue Code sections 6055 (insurer reporting) and 6056 (large employer reporting). These requirements were added by the Affordable Care Act (ACA) and take effect in 2015. First reports must be filed by March 1, 2016 (March 31 if reporting electronically). The final rules streamline and simplify reporting requirements, particularly for employers that offer affordable coverage (under the “100% of federal-poverty-line” safe harbor) to at least 95% of their full-time employees and dependents (and even more streamlined for employers who offer such coverage to at least 98% of full-time employees).
The reporting requirements apply only to “applicable large employers” – defined as those who employed on average at least 50 full-time employees and full-time equivalents on business days during the prior calendar year. Employers with fewer than 50 full-time employees are exempt.
This article focuses on the 6056 reporting requirements on large employers. IRS also issued Final Rules on the 6055 reporting requirements on insurers and other providers of health coverage, and a Fact Sheet on both sets of regulations.
The ACA added IRC section 6056, which requires that “applicable large employers” (“ALEs”) file annual reports detailing the terms and conditions of health coverage provided to full-time employees. The ACA also added section 6055 to require similar annual reporting by insurers, self-insured plans (plan sponsors) and other entities that provide “minimum essential coverage” (“MEC providers”). The reason this information is needed is so the IRS can verify employer-sponsored coverage to administer the employer shared responsibility provisions (ESR or “pay-or-play”) under Code section 4980H(a) and (b), and to determine which employees may be eligible for a premium tax credit if they purchase health insurance in an Exchange/Marketplace. Under the ESR provisions, large employers that do not offer affordable coverage (that provides at least minimum value) to full-time employees and dependents face potential penalties if any full-time employee buys coverage in an individual Exchange and receives a premium tax credit.
Quick Summary of the Final Rules (Details are Below)
- Large employers must file an information return annually with the IRS and also must provide annual statements to their full-time employees. Both filings provide information regarding available employer-sponsored coverage.
- IRS return: The general reporting requirement is that, in the annual filing, the employer must provide detailed information, for each calendar month, on the number of full-time employees, and the name, address and Social Security number of each; whether the employer coverage offered provided minimum essential coverage, minimum value, met the 9.5% affordability test, was offered to full-time employees and their dependents ,and the employee’s share of the cost for the lowest-cost employee-only coverage offered, A lot of additional information is required, which the final regulations allow employers to report using indicator codes.
- Simplified alternative reporting methods: The final regulations allow an employer to report on an annual basis (rather than monthly) if the employer makes a “qualifying offer” to any full-time employee for all 12 months of the year. A qualifying offer cannot cost an employee more than about $1,100 for the year for employee-only coverage, and must also include an offer of coverage to the employee’s spouse and dependents. An employer who certifies that it made a qualifying offer to at least 95% of its full-time employees can take advantage of the simplified filing, and one who offers to at least 98% qualifies for even more streamlined reporting.
- Annual statements to employees: These are similar to the W-2 forms that employers already must provide to employees, but they only include information about the health benefits offered to the employee. An employer can just provide eligible employees with a copy of the 6056 information return.
- Due dates for reporting: The IRS return is due by the last day of February of the year following the reporting year, and by March 31 if the report is filed electronically. The annual statements to employees are due by January 31 of the year following the reporting year.
Single, Combined Form for Information Reporting by Employers
The final rules provide for a single, consolidated form that employers will use to report to the IRS and employees, under IRC section 6056. The combined form will have two sections: the top half includes the information needed for section 6056 reporting, while the bottom half includes the information needed for section 6055.
- Large employers that sponsor insured group health plans will complete only the top section of the combined form (reporting for section 6056).
- Large employers that that self-insure will complete both parts of the combined form for information reporting.
Insurers and other providers of health coverage will report only under section 6055, using a separate form for that purpose. Insurers do not have to report on enrollees in the Health Insurance Marketplace, since the Marketplace will already be providing information on individuals’ coverage there.
Simplified Option for Employer Reporting
Generally, large employers must report employee-specific information on a monthly basis. However, the final regulations allow an employer to provide a simplified annual statement if the employer provides a “qualifying offer” to any of it full time employees for all 12 months of the year. A “qualifying offer” is an offer of minimum value coverage that provides employee-only coverage at a cost to the employee of no more than about $1,100 in 2015 (9.5 percent of the Federal Poverty Level), combined with an offer of coverage for the employee’s family.
- For employees who received a qualifying offer for all 12 months, the employer is required to report only the names, addresses, and Social Security numbers of those employees and the fact that they received a full-year qualifying offer. The employer also must give such employees a copy of that simplified report or a standard statement indicating that the employee received a full-year qualifying offer.
- For employees who receive a qualifying offer for fewer than all 12 months of the year, employers can enter a code for those months indicating that the qualifying offer was made.
For 2015, even simpler alternative reporting methods are allowed for employers who make a offer qualifying offer to at least 95% or 98% of their full-time employees.
- Employers who certify that they have made a qualifying offer to at least 95% of their full-time employees and families will be able to use the simplified reporting method described above for their entire workforce, including for any employees who did not receive a qualifying offer for the full year. Those employers will provide employees with standard statements relating to their possible eligibility for premium tax credits.
- Employers who certify that they offered affordable, minimum value coverage to at least 98% of the employees on whom they are reporting can avoid identifying in the report which employees are full-time, and instead can just include in the report those employees who may be full-time.
What Information is Required
For section 6056 – Employer Reporting
- Information about the employer offering coverage (including contact information and the number of full-time employees).
- For each full-time employee, information about the coverage (if any) offered to the employee, by month, including the lowest employee cost of self-only coverage offered.
- Under the simplified alternative described above, information can be provided on an annual basis (rather than monthly) if the employer certifies it made a “qualifying offer” of coverage to employees for all 12 months of the year.
For section 6055 – Insurers and other Coverage Providers
- Information about the entity providing coverage, including contact information.
- Which individuals are enrolled in coverage, with identifying information and the months for which they were covered.
Streamlined Information Required by Final Rules
The ACA itself requires employers and other coverage providers to report additional data elements, but the final rules omit some of the data elements that are not necessary to understanding what coverage an employer offers and provides, for purposes of administering ESR compliance and premium tax credit eligibility. These include (but are not limited to):
- The length of any waiting period
- Employer’s share of the total allowed costs of benefits provided under the plan
- The amount of advance payments of the premium tax credit and cost-sharing reductions.
Proposed Regulations: On September 6, 2013, the IRS issued proposed regulations on information reporting requirements under Internal Revenue Code (IRC) sections 6055 and 6056. Click here for Section 6056 proposed regulations (72 pages).
Prior IRS Notices: IRS Notices 2012-32 & 2012-33 were issued in 2012.