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ADP Eye on Washington-2015 ACA Reporting Forms

IRS Releases Draft 2015 ACA Reporting Forms and Instructions
 
On August 7, 2015, the Internal Revenue Service (IRS) issued drafts of forms and instructions for 2015 Forms 1094-B and 1095-B; and Forms 1094-C and 1095-C. Employers will use the Forms 1094-C and 1095-C to report health insurance coverage offered under employer-sponsored plans in accordance with Section 6056 of the Internal Revenue Code (IRC). Although Forms 1094-C and 1095-C are largely unchanged from prior versions, the instructions included some noteworthy revisions.

Employers should keep in mind that the IRS will issue final versions of the 2015 Forms and Instructions in the upcoming months. In the meantime, employers should rely on the 2015 draft Forms and Instructions in planning how to comply with these new IRS reporting requirements. 

Background
IRC Code Section 6056 under the Affordable Care Act (ACA) requires applicable large employers (ALEs) to report to the IRS whether they offer their full-time employees and their employees' qualified dependents the opportunity to enroll in minimum essential coverage (MEC) under an eligible employer-sponsored plan. An ALE is an employer that employed (any combination of workers within a controlled group) an average of at least 50 full-time employees (including full-time equivalent employees) during the preceding calendar year. Employees are considered full-time in any month that they are credited with at least 30 hours of service per week, on average, or 130 hours of service in the month.

Form 1094-C is the transmittal report which accompanies and summarizes the Forms 1095-C.

Form 1095-C will identify each employee who was full-time for one or more months, and report for each month the details of any health care coverage offered. The first Forms 1095-C must be furnished to employees by January 31, 2016 (covering 2015), and must be filed with the IRS in accordance with existing deadlines for Forms W-2. Electronic filing is required if at least 250 forms are filed.

Form 1095-B generally identifies each covered individual (including any spouse and qualified dependents) and their respective months of coverage. Insurers and other providers of health care coverage will file and furnish Forms 1095-B to report details of all individuals with insured health coverage to the IRS, as required by IRC Section 6055. Self-insured ALEs will issue and file a combined Section 6055/6056 report using Form 1095-C, Part III.

The ACA information on Form 1095-C is arranged in three rows of coded information, by month, for each full-time employee.
  • The first row (Line 14) on the form identifies whether the ALE offered minimum essential coverage (MEC) to the employee and any spouse and qualified dependents, and whether such coverage provided minimum value.
  • The second row (Line 15) reports the employee’s share of the lowest-cost monthly premium for self-only minimum value coverage.
  • The third row (Line 16) includes any information needed to determine whether the employer may be liable for a shared responsibility payment. For example, codes are entered to identify employees who were not employed or who were not full-time during a month, or who enrolled in coverage offered. Other codes identify transitional or “safe-harbor” relief (e.g., employees in limited, non-assessment periods or coverage meeting affordability safe-harbor tests).
For additional background and explanation of what is reported on these forms, see the earlier Eye on Washington, IRS Releases Draft Instructions for 2014 Forms 1095-C, Employer-Provided Health Insurance Offer and Coverage.

Noteworthy Changes to Forms and Instructions
New Form 1095-C Element: Plan Start Month
Form 1095-C was revised to indicate the first month of the plan year (Plan Start Month) in Part II. Plan Start Month is optional for the 2015 Form 1095-C and may be left blank, but is expected to be mandatory for 2016. ALEs will enter the two-digit number (01 through 12) corresponding to the calendar month during which the plan year begins of the health plan in which the employee is offered coverage (or would be offered coverage if the employee were eligible). For example, if a non-calendar plan year begins in July, the ALE would enter ”07.” If no coverage is offered to an employee, the ALE would enter ”00.”

Form 1095-C Line 15 May Report Average Amounts
The instructions clarify Form 1095-C Line 15, which reports the employee’s share of the lowest-cost monthly premium for self-only coverage that is offered to the employee. To determine the monthly employee contribution, an employer may divide the total employee share of the premium for the plan year by the number of months in the plan year to determine the monthly employee contribution for the plan year. This provision is helpful for employers that administer weekly or biweekly payroll periods, because more than four weekly payrolls or more than two biweekly payrolls occasionally fall within a calendar month. Line 15 should only be completed if Code 1B, 1C, 1D, or 1E is entered on Line 14.

Procedures to Correct Forms 1094-C/1095-C Outlined
The 2015 draft instructions explain how to report corrections and specify the circumstances in which forms must be corrected. For example, if correcting a Form 1095-C that was previously filed with the IRS, the ALE should file a fully completed revised Form 1095-C (i.e., not just the corrected information) and enter an “X” in the CORRECTED checkbox. Corrected Forms 1095-C are then filed with a Form 1094-C Transmittal (NOT marked CORRECTED).

The IRS cautions that employers should ONLY correct a Form 1094-C that is the Authoritative Transmittal. If an Authoritative Transmittal that was previously filed with the IRS must be corrected, the ALE should file a fully completed revised Form 1094-C and enter an “X” in the CORRECTED checkbox.

Employees must be furnished with a copy of any corrected Form 1095-C. To correct a Form 1095-C that was previously furnished to an employee but not filed with the IRS, the ALE should write CORRECTED on the new Form 1095-C furnished to the recipient.

Form 1095-C Multiemployer Plan Reporting Simplified for 2015
For 2015 only, ALEs with employees that are generally offered coverage through a multiemployer plan (such as a union) should enter Code 1H on Line 14, and Code 2E on Line 16, for any month for which the employer was required to contribute to a multiemployer plan on behalf of the employee.   For 2015, Code 1H may be entered without regard to whether the employee was eligible to enroll in coverage under the multiemployer plan. Line 15, which reports the employee’s cost of the lowest-cost monthly premium for self-only minimum essential coverage that is offered to the employee, should be left blank.

For 2016 and future years, reporting for offers of coverage made through a multiemployer plan may be reported in a different manner. For additional information, see the recent Eye on Washington concerning Multiemployer Plan Reporting.
  
Exclude Employees in Limited Non-Assessment Periods in Determining Qualification for the “98% Offer Method”
The instructions clarify that in determining whether the ALE qualifies for the “98% Offer Method,” an ALE may exclude employees in a Limited Non-Assessment Period (generally waiting periods; a period following change in status during an initial measurement period; first month of employment, etc.).

An ALE that qualifies and elects the “98% Offer Method” is not required to identify which of its employees for whom it is filing Forms 1095-C are full-time employees, or to report the total number of full-time employees in Part III of Form 1094-C.  However, the IRS may later ask the employer for the monthly full-time status of any employee that receives Marketplace coverage with a Premium Tax Credit.

Additionally, in completing Forms 1094-C Part IV (which identifies other ALE members of an Aggregated ALE Group), the instructions note that “If any member of (an) Aggregated ALE Group uses the 98% Offer Method and thus is not required to identify which employees are full-time employees, all Aggregated ALE Group members should use the monthly average number of total employees rather than the monthly average number of full-time employees for this purpose.

Form 1095-C Reporting of COBRA Coverage Clarified
The instructions provide that an offer of COBRA continuation coverage that is made to a former employee upon termination of employment is reported as an offer of coverage using the appropriate Indicator Code on Line 14 only if the former employee enrolls in the coverage. If the former employee does not enroll in the coverage (even if a spouse or dependent of the former employee independently enrolls in the coverage), Code 1H (No offer of coverage) should be entered for any month for which the offer of COBRA continuation coverage applies.

Further, “an offer of COBRA continuation coverage that is made to an active employee (for instance, an offer of COBRA continuation coverage that is made due to a reduction in the employee’s hours that resulted in the employee no longer being eligible for coverage under a plan) is reported in the same manner and using the same code as an offer of that type of coverage to any other active employee.”

Extensions of Time to File and/or to Furnish Statements to Employees
ALEs can get an automatic, 30-day extension of time to file by completing Form 8809, Application for Extension of Time to File Information Returns, by the due date of the returns. The form may be submitted on paper to the IRS or electronically through the IRS FIRE system. No signature or explanation is required, but Form 8809 must be filed before the filing deadline to get a 30-day extension. Under certain hardship conditions an additional 30-day extension may be requested.

However, extensions of time to furnish statements to recipients are not automatic, and require an explanation of extenuating circumstances (i.e., by writing to the IRS). Generally a maximum of 30 additional days will be granted to furnish Forms 1095-C to employees.

Penalties Increased
The Trade Preferences Extension Act of 2015 (P.L. No 114-27, enacted June 29, 2015) increased the penalty amounts applicable to information reporting for 2015 Forms 1094-C/1095-C and Forms W-2, among other information returns. Penalties apply for failure to file correct and timely information returns, and/or failure to furnish correct and timely payee statements.
  • The penalty for failure to file an information return (under Section 6721) is now $250 per statement (previously $100).
  • The penalty for failure to furnish a correct payee statement (under Section 6722) is $250 per statement (previously $100).
  • The maximum penalty for failure to file and failure to furnish required information returns (including Forms 1095-C) has now doubled to $6 million ($3 million under each of Sections 6721 and 6722) for any year.
  • Increased per-statement and total penalties may apply for circumstances in which the reporting requirements are intentionally disregarded.
For 2015 reporting, the IRS will not impose penalties for incorrect or incomplete information if the filer can show that it made good faith efforts to comply with the information reporting requirements for 2015. No relief is provided for ALEs that fail to timely file or to furnish Forms 1095-C.  However, employers may be eligible for penalty relief if the employer can demonstrate reasonable cause under Section 6724.

For details, see ADP’s recent Eye on Washington, Trade Preferences Extension Act of 2015 Significantly Increases Penalties for Failure to Properly File or Provide Affordable Care Act (ACA) Forms, Forms W-2 and 1099, and Other Information Returns.

For more information
For information concerning Substitute Statements to Recipients, see Draft IRS Publication 5223, General Rules & Specifications for Substitute Affordable Care Act Forms 1094-B, 1095-B, 1094-C, and 1095-C, which explains the requirements for format and content of substitute statements.

FAQs for Forms 1094-C and 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.

Draft 2015 Form 1094-C “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns”:  www.irs.gov/pub/irs-dft/f1094c--dft.pdf
Draft 2015 Form 1095-C “Employer-Provided Health Insurance Offer and Coverage”: www.irs.gov/pub/irs-dft/f1095c--dft.pdf

Draft 2015 Instructions for Forms 1094-C and 1095-C: www.irs.gov/pub/irs-dft/i109495c--dft.pdf

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Updated August 21, 2015