On February 8, 2015, the IRS issued the much-anticipated final Forms 1094-B, 1095-B, 1094-C and 1095-C and related instructions (which can be accessed here and here) for the new information reporting requirements under Code Sections 6055 and 6056. These final forms and instructions are for 2014 (optional reporting year) and there may be additional changes in the 2015 (mandatory reporting year) forms and instructions when they are released.
Additionally, the IRS issued Publication 5196, which provides a quick reference guide for applicable large employers (ALE) (i.e. employer that employed at least 50 full-time employees, including full-time equivalent employees, during the prior calendar year) regarding these new reporting requirements. The IRS also published Publication 5200, which provides very general information notifying both non-ALE and ALEs of their reporting obligations. These information returns will be completed by employers and/or insurance carriers to report information to the IRS and individuals about the group health coverage offered by the employer for purposes of administering the Affordable Care Act’s individual mandate, the employer mandate and the availability of a premium tax credit.
These new reporting requirements are mandatory for 2015 (with filings due in early 2016). If employers were waiting to start implementing systems or holding off discussions regarding these reporting requirements with their advisors until the final forms and instructions were issued, now is the time for employers to make sure that they have the systems and/or arrangements in place to satisfy these new and complicated reporting requirements.
Background
In 2014, the IRS issued final regulations under Code Section 6055 and 6056, setting the framework for what would be reported on the Forms 1094-B, 1095-B, 1094-C and 1095-C. Section 6055 reporting (or the individual mandate reporting) requires that every provider of minimum essential coverage (e.g. coverage under an employer sponsored plan, certain government-sponsored programs and individual coverage) report coverage information to the IRS and individuals for purposes of administering the individual mandate under Code Section 5000A. Section 6056 reporting (or employer mandate reporting) requires an ALE to file information returns with the IRS and provide statements to full-time employees about health insurance coverage offered to the employee (if any) for purposes of administering the employer mandate provisions under Code Section 4980H and for purposes of determining whether an employee is eligible for the premium tax credit under Code Section 36B.
The Forms 1094-B, 1095-B, 1094-C and 1095-C facilitate the reporting of the required information under 6055 and 6056. The 1094-B (transmittal form sent to the IRS only) and 1095-B (information return sent to both the IRS and the individual) reports 6055 information and the 1094-C (transmittal form sent to the IRS only) and 1095-C (information return sent to both the IRS and the individual) reports 6056 information. For ALE members that sponsor self-insured plans, the 1095-C permits the combined reporting of 6056 (Part II of the 1095-C) and 6055 information (Part III of the 1095-C) on one single form. Note that, if an employee enrolls in self-insured coverage but is not a full-time employee, the employer must still prepare a 1095-C for this individual for purposes of 6055 reporting. If the ALE sponsors fully insured coverage, the ALE will only complete Parts I and II of the 1095-C and the insurer will prepare the 1094-B and 1095-B to report the 6055 information.
Updates under the Final Forms and Instructions
While the final forms and instructions are similar to the draft forms issued in 2014, the instructions include some important clarifications. These include clarifications as to how to report certain information and what forms need to be completed in certain circumstances. One important update is how to report non-employees. After the draft forms were issued, there were many questions surrounding how to report non-employees (e.g. non-employee directors, an individual who was a retired employee during the entire year, or a non-employee COBRA beneficiary). The final instructions provide that employers that offer self-insured coverage to non-employees who enroll in the coverage may use either the 1094-B and 1095-B or 1095-C to report coverage for non-employees enrolled in the self-insured coverage. The instructions include specifics on how the non-employees should be reported, including clarification that all family members that are covered due to the non-employee’s enrollment must also be included on the form.
Employers should be reviewing these final instructions and forms to see if any of the updates and clarifications affect their particular reporting situation. In some instances, these updates might provide additional detail that will assist in completing these forms.
Action Items
ALEs must furnish the Form 1095-B and Form 1095-C to applicable individuals by January 31 of the year following the year to which reporting relates (or if the due date falls on a Saturday, Sunday, or legal holiday, file by the next business day). Statements to employees must be furnished on paper by mail, unless the recipient consents to receive the statement in an electronic format. The 1094-B, 1095-B, 1094-C and 1095-C must be filed with the IRS by February 28 if filed on paper (or March 31 if filing electronically) of the year following the calendar year to which the return relates (if the due date falls on a Saturday, Sunday, or legal holiday, file by the next business day). If filing 250 or more information returns, the returns must be filed electronically with the IRS. Although reporting is required for 2015, the IRS has provided relief from the penalties under Sections 6721 and 6722 if the employers or other reporting entities can show that they made good faith efforts to comply with these 6055 and 6056 information reporting requirements. This relief is provided specifically for incorrect or incomplete information reported for 2015. No relief is provided in the case of an employer or other reporting entity that cannot show a good faith effort to comply the information reporting requirements or that fails to timely file an information return or furnish a statement. With this limited relief for 2015, employers should be diligently reviewing these instructions and forms to determine what data will need to be collected and determining what responsibilities it will have to report in early 2016, including:
- Determining whether the employer’s third-party administrator(s) or payroll providers will be preparing the Forms 1094-B, 1095-B, 1094-C and 1095-C on their behalf. Note: although an employer may rely on third-party administrations and payroll providers to prepare and file these information returns, the employer is ultimately responsible for making sure that these reports are timely and accurately filed with the IRS and furnished to individuals.
- If a payroll provider or third-party administrator will be preparing the information reporting for 6055 and 6056 reporting purposes, employers should determine what information they will need to collect to send to the third-party administrator or payroll provider. Also, employers should also ensure that the systems that the payroll or third-party administrator are implementing will accurately report this information.
- Identify full-time employees for each month and track health coverage information in 2015 to help complete the information reporting required under 6055 and 6056.
- Employers, third-party administrators and payroll providers may want to revisit their services agreements to determine if these new reporting requirements are accurately described and if any protections or assurances (including indemnities) need to be made regarding these obligations.
- Employers that were hovering around the 50-employee threshold in 2014 should confirm whether or not they are an ALE.
- Employers should work closely with their advisors to determine their obligations under these new reporting requirements, including reviewing different sample scenarios based on their specific employee workforce.
The new reporting requirements under 6055 and 6056 are complex and will take time for employers to fully implement. If you have any questions about these new reporting requirements, please contact the attorneys listed below or your contact at Smith Haughey.
Upcoming Seminar to Learn More
Smith Haughey Rice & Roegge will be hosting another free ACA seminar in April, 2015 focused on the employer mandate and these new reporting requirements. Should you have any questions about the ACA, including these new reporting requirements, please do not hesitate to contact Gabriel S. Marinaro, Kate E. Flewelling, Janis L. Adams, or any member of Smith Haughey Rice & Roegge’s Labor and Employment practice group.