Penalties were recently increased for information reporting failures under the Affordable Care Act (ACA). The Trade Preferences Extension Act of 2015 was passed by Congress and on June 29, 2015 , signed by President Obama. The Act has little to do with the ACA, but a minor provision within it increases penalties for failures related to Information Reporting (1094 and 1095 reporting under IRC sections 6055 and 6056).
The information reporting requirements first apply in 2016 for the 2015 calendar year, and the new higher penalties apply then as well.
Despite the increase in penalty amounts, it appears that the current one-year transition rule is still available. The one-year transition rule provides that employers and insurers will not be subject to penalties for the first year of reporting if they made a good faith effort to comply but filed incorrect or incomplete information. However, there is no relief for failure to timely file.
- “Applicable large employers” (ALEs) are required under IRC section 6056 to file reports with the IRS (using Form 1094-C) showing whether they offered minimum value and affordable coverage to full-time employees and their dependents in the prior calendar year, to meet the Employer Mandate. These employers are also required to provide information to certain employees about the health coverage they offered using From 1095-C.
- Insurers and self-funded group health plans are required under IRC section 6055 to file reports with the IRS to verify whether particular individuals had “minimum essential coverage” (MEC) during the prior calendar year, to satisfy the Individual Mandate.
Increased Penalty Amounts
|Penalty||New Amount||Old Amount|
|Failure to file/furnish an annual IRS return (1094-B or C) or to provide individual statements to all full-time employees (1095-C) -penalty is per return/statement)||$250||$100|
|Annual cap on penalties||$3,000,000||$1,500,000|
|Lower cap for entities with gross receipts of not more than $5,000,000||$1,000,000||$500,000|
|Failure to file return or furnish statement when corrected within 30 days of required filing date (penalty per return/statement)||$50||$30|
|Annual cap on penalties when corrected within 30 days of required filing date||$500,000||$250,000|
|Lower cap for entities with gross receipts of not more than $5,000,000, when corrected within 30 days of required filing date||$175,000||$75,000|
|Failure to file/furnish by August 1 of the year in which the required filing date occurs||$100||$60|
|Cap on penalties when corrected by August 1 of the year in which the required filing date occurs||$1,500,000||$500,000|
|Lower cap for entities with gross receipts of not more than $5,000,000 when corrected by August 1 of the year in which the required filing date occurs||$500,000||$200,000|
|Penalty per filing in case of intentional disregard. No cap applies in this case.||$500||$250|