The IRS has just released the final forms and instructions for Information Reporting under Internal Revenue Code sections 6055 and 6056.
Employers who are deemed applicable large employers as well as employers of any size who offer self-funded health coverage must carefully review and study these instructions, which set forth numerous details, definitions and indicator codes which must be used to complete the requisite forms. The instructions set forth the “when, where and how” to file, explain extensions and waivers that may be available, how to file corrected returns, and potential relief from penalties imposed for incorrect or incomplete filing.
The IRS will use information from these returns to determine which individuals were offered minimum essential coverage, whether individuals are eligible for premium tax credits in the Marketplace, as well as to determine penalties to be imposed on employers under Pay or Play (Code section 4890H; Shared Responsibility for Employers Regarding Health Coverage, 26 CFR Parts 1, 54, and 301, 79 Fed. Reg. 8543 (Feb. 12, 2014)). Due to the impact of proper reporting, a clear understanding of these forms and instructions is essential.
By way of background, the IRS requires applicable large employers and sponsors of self-insured health plans to report on the health coverage offered and/or provided to individuals beginning calendar year 2015. Although the reporting requirements extend to other entities that provide “minimum essential coverage” (such as health insurance issuers), this Client Alert focuses on the requirements imposed on employers.
Code section 6056 applies to applicable large employers (generally employers with at least 50 full-time employees, including full-time equivalent employees). Information with respect to each full-time employee (whether or not offered coverage) must be reported on Form 1095-C. Transmittal Form 1094-C must accompany the Forms 1095-C; all the Forms 1095-C together with the Transmittal Form 1094-C constitute the Code section 6056 information return that is required to be filed with the IRS. If the applicable large employer also self-insures, there is a separate box to complete which incorporates the information required under Code section 6055.
Code section 6055 applies to employers of any size who self-insure. Non-applicable large employers with self-funded plans must report their information on Form 1095-B, as well as on transmittal Form 1094-B. All the Forms 1095-B together with the Transmittal Form 1094-B constitute the Code section 6055 information return that is required to be filed with the IRS. Again, if the employer who self-insures is also an applicable large employer, the employer will instead use Forms 1095-C and 1094-C, which include a section for self-insured plans.
Employers subject to these requirements must report in early 2016 for the entire 2015 calendar year, regardless of any transition relief available under Pay or Play.
Additionally, employers must provide informational statements to the individuals for whom they are reporting. Form 1095-C or Form 1095-B (as applicable) may be used as this informational statement.
The links to the Final Forms and Instructions are below:
Applicable Large Employers (Code Section 6056)
2015 Instructions for Forms 1094-C and 1095-C
Form 1095-C, Employer Provided Health Insurance Offer and Coverage
Form 1094-C, Transmittal of Employer Provided Health Insurance Offer and Coverage Information Returns
Additionally, the IRS has posted numerous Questions and Answers regarding Code section 6056 on its website. Click HERE to learn more.
Employers who Self-Fund (Code Section 6055)
2015 Instructions for Forms 1094-B and 1095-B
Form 1095-B, Health Coverage
Form 1094-B, Transmittal of Health Coverage Information Returns
The IRS’ Questions and Answers regarding Code section 6055 can be found HERE.
What / When / Who
The IRS Returns discussed above are due to the IRS by February 28th of each year, or by March 31st in cases of electronic filing. Employers who are required to file 250 or more Forms must file electronically.
Moreover, employers must furnish a written statement to each responsible individual setting forth the information report to the IRS. These individual / employee statements must be provided by January 31st. Forms 1095-C / 1095-B may be used as the required statement. The instructions set forth further details.
By way of example, the respect to an applicable large employer, the basic “what, when and who” under Code section 6056 is demonstrated below. [Keep in mind that numerous terms are defined in the instructions and underlying regulations. In general, an applicable large employer under Code section 4980H (pay or play mandate) employs 50 or more full-time and full-time equivalent employees (all employers aggregated under Code section 414(b), (c), (m) and (o) must be considered). A full-time employee under Code section 4980H (pay or play mandate) is generally an employee averaging 30 hours of service per week]:
- IRS Return for Applicable Large Employers
- What: Separate Annual IRS Return Forms 1095-C for each full-time employee, accompanied by Transmittal Form 1094-C
- When: Due February 28 (March 31 if electronic filing, which is required for filings of 250 or more returns) of the year following the year for which the employer is reporting (i.e., first return due February 29, 2016 for 2015 calendar year (because February 28 is a Sunday))
- Who to Report:
- Under Code section 6055 (self-funded plan), employer must report on ALL covered individuals (regardless of employee status, including spouses and dependents)
- Under Code section 6056 (applicable large employers), employer must report on all full-time employees, regardless of whether they were offered or elected coverage
- Statement to Full-Time Employee (and Responsible Individual if Self-Funded)
- What: Form 1095-C or Similar Statement
- When: Due January 31st of year following year for which you are reporting (i.e., first statement due February 1, 2016 for 2015 calendar year (because January 31st is a Sunday)).
- Under Code section 6055 (self-funded plan), employer must send statement to the “responsible individual,” typically the covered employee
- Under Code section 6056 (large employers), employer must send statement to each full-time employee (regardless of whether they were offered or elected coverage)
As far as what must be included in the Forms, the information required to be reported on behalf of full-time employees (and individuals covered under self-funded health plans) is extensive. In most circumstances, applicable large employers must report on employee status each month, what type of coverage was offered each month, lowest cost monthly premium for coverage, minimum value and affordability, number of full-time employees each month, total number of employees each month, whether coverage is offered to dependents and spouses, whether employees were in a limited non-assessment period for a particular month, whether a qualifying offer (or another type of offer) was made each month, an employee’s full-time status each month, whether the employer meets a safe-harbor or certain transition relief (such as multiemployer or non-calendar year or smaller employer relief), as well as numerous other factors required to be reported. Employers must review the instructions and forms very carefully as they will apply differently with respect to individual employees and circumstances.
Both sets of Instructions (for Forms 1094/1095-B as well as for Forms 1094/1095-C) set forth the following penalty information for failure to comply with the information reporting requirements:
“The penalty for failure to file an information return generally is $250 for each return for which such failure occurs. The total penalty imposed for all failures during a calendar year can’t exceed $3,000,000.
“The penalty for failure to provide a correct payee statement is $250 for each statement for which the failure occurs, with the total penalty for a calendar year not to exceed $3,000,000.
“Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to furnish a payee statement.”
These instructions clarify that penalties are imposed not only on missing, late, and incorrect IRS Returns, but penalties are separately imposed on missing, late and incorrect Statements to individuals and employees.
Other Helpful Government Links
The IRS has set forth numerous other information with regard to employer reporting. Please see the below links for more information; however, please note that the Final Forms and Instructions will supersede any inconsistent information in the below links:
- Information Reporting by Applicable Large Employers: http://www.irs.gov/Affordable-Care-Act/Employers/Information-Reporting-by-Applicable-Large-Employers
- Basic Information
- Coordination with Employer Shared Responsibility & Premium Tax Credit Provisions
- Affect Employers
- Controlled Group / Common Ownership
- When to Report
- Information to be Reported to the IRS
- Information to be Furnished to Full-Time Employees
- How to Report
- Self-Insured Employers
- How to File Electronically (required for employers filing 250 or more returns)
- Information Reporting Penalties (up to $250 for each return filed incorrectly, up to a maximum penalty of $3,000,000; up to $250 for each statement furnished incorrectly, up to a maximum penalty of $3,000,000)
- More Information
- Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C: http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-about-Information-Reporting-by-Employers-on-Form-1094-C-and-Form-1095-C
- Basics of Employer Reporting: Questions 1-5
- Reporting Offers of Coverage and other Enrollment Information: Questions 6-13
- Reporting for Governmental Units : Questions 14-15
- Reporting Offers of COBRA Coverage: Questions 16-18
- Employers Providing Self-Insured Health Coverage Must Report on Information Returns: http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Self-Insured-Employers-Must-File-Health-Coverage-Information-Returns
- Health Care Tax Tips – The IRS has released a number of Tax Tips, many of which address Information Reporting. Please see the following link (you are able to reach numerous other Health Care Tax Tips from that page as well organized by month): http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-to-Help-Your-Organization-Understand-ACA-Reporting-Requirements
- IRS Official Guidance on Substitute Employer Reporting Statements: http://www.irs.gov/pub/irs-dft/p5223–dft.pdf#08112015
- IRS Website for Submitting Returns Electronically: http://www.irs.gov/for-Tax-Pros/Software-Developers/Information-Returns/Affordable-Care-Act-Information-Return-AIR-Program
- Required steps include:
- Registering with the IRS’s e-service website
- Obtaining an AIR Transmitter Control Code
- Passing certain system tests
- Additional information and links regarding electronic filing are included in above site
- Required steps include:
Due to the incredibly detailed reporting requirements, as well as the heightened penalties, now is the time for employers to carefully review these rules to ensure they are properly tracking and reporting the required information.
This alert just serves as a general summary of the lengthy and comprehensive Information Reporting instructions and forms. For more information on this issue, please contact Fraser Trebilcock attorney Elizabeth H. Latchana at 517.377.0826 or firstname.lastname@example.org.