Employee Benefits Compliance, Large Employers, Penalties

ACA Information Reporting: Increased Penalties for Reporting Failures

US Capitol Building

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.

Background

  • “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

PenaltyNew AmountOld 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

2 Comments

  1. Our company has 500 employees. We started offering offering medical benefits March 1, 2015. Question: will we be penalized for January and Feb? Is there a safe harbor or transitional relief for our group in order to avoid any IRS penalties?

    1. Unfortunately, you probably do not meet any of the transition relief categories, nor does it sound like Jan and Feb would be a “limited non-assessment period” for most employees.

      1- If you had 50-99 FT EEs and FT Equivalents in 2014, you might qualify for relief until 2016. Sounds like you had way more EEs than that in 2014.
      2- If you had over 100 FT EEs and FT Equivalents in 2014, you will qualify for some penalty relief. In calculating the penalty due under IRC section 4980H(a), you can offset the first 80, rather than only the first 30 FT EEs. So the monthly penalty for not offering minimum essential coverage to at least 70% of your FT EEs would be: $167 x (total # of FT EEs minus 80).
      3- For individual FT EEs who were offered coverage as of March 1, you will not have to pay a penalty for those (if any) who were in a “limited non-assessment period” (LNP), which includes:
      a. –Waiting Period under the Monthly Measurement Method
      b. –Waiting Period under the Look-Back Measurement Method.
      c. –Initial Measurement Period and Associated Administrative
      Period under the Look-Back Measurement Method
      d. –Period Following Change in Status that Occurs During Initial
      Measurement Period Under the Look-Back Measurement
      Method.
      e. –First Calendar Month of Employment. If the employee’s first
      day of employment is a day other than the first day of the
      calendar month, then the employee’s first calendar month of
      employment is a Limited Non-Assessment Period.