(On Sept. 16, 2014, a correction was made to the paragraph on the Special 2015 Transition Relief.)
On August 28, 2014, the IRS issued draft Instructions to the draft information reporting forms it previously issued on July 24th. We posted an article about those forms here. The forms and instructions are for “applicable large employers” (ALEs), health insurers and employers who sponsor self-funded health plans. The draft forms and instructions are at http://apps.irs.gov/app/picklist/list/draftTaxForms.html. Final versions will be posted at a later date when they are issued. The draft forms are for information only.
WHAT are the Information Reporting Requirements?
The Affordable Care Act (ACA) added new Internal Revenue Code sections 6055 and 6056, which require health plans and large employers who sponsor group health plans to:
- Report certain health insurance coverage information to the IRS annually and
- Furnish related annual statements to full-time employees.
IRC section 6056 applies to large employers who sponsor insured plans, and section 6055 applies to health plans themselves and to employers who sponsor self-funded plans.
WHY is Information Reporting Required?
Regulators need this information from large employers in order to administer the Individual Mandate and the Employer Mandate. Specifically, to determine:
- Which employees may be (or will not be) eligible for subsidies (Premium Tax Credits and Cost Sharing Reductions) if they purchase health insurance in the Individual Exchange/Marketplace
- Which large employers are not subject to penalties (because they offer affordable coverage that provides at least minimum value to full-time employees and dependents) and which employers may be subject to penalties (because they do not)
- Which individuals are not subject to the Individual mandate tax, because they are enrolled in minimum essential coverage from their employers
WHO is Required to Report?
Large employers (defined as those who have at least 50 full-time employees or full-time equivalents) are subject to this requirement. (Full-time is defined as working on average at least 30 hours per week or 130 per month during the prior calendar year.) Small employers (those with fewer than 50 employees) are not subject to the reporting requirements.
Important Note: For 2015, large employers with 50-99 employees are still required to report even if they qualify for the one-year delay of the employer mandate penalty.
WHEN are the Reporting Requirements Effective? And WHEN are these Reports due?
The reporting requirements are effective for the 2015 calendar year, and the first reports and annual statements will be due during the first quarter of 2016. The information reports to the IRS are due by February 28 (actually March 1, since the 28th is a Sunday), or by March 31st if the reports are filed electronically. Additionally, annual statements must be furnished to employees by January 31, 2016 (actually February 1, since the 31st is a Sunday).
Electronic filing is required for all large employers filing at least 250 returns. Smaller employers may file electronically or in paper form, but are encouraged to file electronically.
The reporting requirements originally were to be effective in 2014. Employers may voluntarily report for 2014 but are not required to do so.
WHAT Forms Must an Employer File?
The information return is comprised of two IRS Forms: The Form 1095-C and the 1094-C.
- Form 1095-C is the separate return for each employee. It is somewhat akin to the Form W-2 that employers currently must give to employees to provide annual payroll and tax information. Each large employer must furnish the 1095-Cs to each full-time employee.
- Form 1094-C is a transmittal form. The employer submits one 1094-C to the IRS and also attaches copies of all the 1095-Cs that it furnished to employees.
Copies of these draft forms are at http://apps.irs.gov/app/picklist/list/draftTaxForms.html
HOW does an Employer Report the Required Information?
An employer may use any of the following four reporting methods:
1- The General Reporting Method
2- The Qualifying Offers Method
3- The Special 2015 Transition Relief
4- The 98% Offers Method
Under the general rule, the annual reports must include fairly detailed information on health coverage offered and enrolled in for all full-time employees, on a month-by-month basis.
Under the qualifying offers method, for all those employees who were given a qualifying offer for all 12 months of the year, the employer can check the “all 12 months” box rather than report on a month-by-month basis. A qualifying offer is an offer of “minimum essential coverage” (MEC) that provides at least minimum value and that costs each employee not more than 9.5% of the mainland Federal Poverty Line for one (which is $92.39 per month for 2014), plus an offer of at least MEC to the employee’s spouse and dependents.
Under the special 2015 transition method, an employer must certify that it made a qualifying offer to at least 95% of all full-time employees, for each month in 2015. If the employer qualifies to use the 2015 transition method, full/general reporting is not required for any full-time employees. That is, the employer can do the simplified “qualifying offers” method of reporting both for employees who did receive a qualifying offer for all 12 calendar months in 2015 and for those employees who did not.
Under the 98% offers method, an employer must certify that it offered minimum essential coverage (MEC) providing minimum value that was affordable (using any affordability safe harbor definition) to at least 98% of the employees (and their dependents) on whom it is reporting. The employer may include employees who do not work full-time in this reporting, but they must offer coverage to those employees. The big advantage to the employer is that it does not have to track hours each month for those employees but it still must furnish a statement to them and must file with the IRS.
Leavitt has a separate (long) article that explains each of the four reporting methods. Ask your Leavitt advisor for a copy of the long article.
Are there Special Rules?
Yes, there are special rules for governmental entities and for multiemployer plans.