Beginning in early 2016, many employers will be required to file annual information returns with the Internal Revenue Service (IRS) and provide annual statements to employees containing health plan coverage information.
The first of these reports, covering 2015, will be due on January 31, 2016 (February 1, 2016 because January 31, 2016 is a Sunday). Applicable large employers (ALEs), defined as those with 50 or more full-time equivalent employees, are required to report information to the IRS and full-time employees regarding an employer’s offer of health insurance coverage, if any. Employers should be actively collecting the necessary data to fulfill this requirement now.
These actions should include:
• Reviewing IRS Forms 1094-C and 1095-C which detail offers of health coverage to full-time employees (FTEs).
• Reviewing recordkeeping systems to ensure that the necessary information is captured. This includes number of hours worked, cost of coverage, etc.
• Coordinating with internal payroll or tax department personnel, along with outside vendors, as necessary, to establish procedures for furnishing copies of the forms to employees and filing the forms with the IRS.
Funding arrangements should be changed to adequately handle the likely impact of the change on required reporting.
The Forms Most employers will use Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, and the accompanying transmittal and Form 1094-C, Transmittal of Employer-Provided Health. Form 1095-C is used to report information about offers of coverage to each FTE of the employer. Each employer who was a FTE for at least one month (130 or more hours worked during one month) during the calendar year must receive a Form 1095-C by January 31 (February 1, 2016 because January 31, 2016 is a Sunday). Each ALE with a separate employer identification number will be required to transmit copies of the Forms 1095-C for its employees to the IRS by February 28, 2016 or, if applicable, March 31, 2016 if filed electronically. Any employer with more than 250 employees will be required to transmit the forms electronically.
The IRS uses the forms to help determine whether:
• An employer owes a penalty payment under the employer mandate.
• An employee is eligible for subsidies to purchase coverage in the marketplace.
• An individual has Minimum Essential Coverage (MEC) in order to avoid a penalty tax under the individual mandate.
Self-Insured Plans Employers offering self-insured health plan coverage will need to report to the IRS all members (employees plus spouse and/or dependents) who have health plan coverage through the self-insured plan for at least one month during the calendar year. Employers may use Form 1095-C to report information regarding MEC to the IRS and to covered individuals. Since many smaller employers have moved to a self-insured health plan and many are Non-ALEs (employers with fewer than 50 full-time employees), the required filing is different. Such an employer is subject to the reporting obligations under section 6055. An employer that is not an ALE member that sponsors a self-insured health plan in which any individual has enrolled is not subject to the reporting requirements of section 6056. Such an employer will generally satisfy its reporting obligations under section 6055 by filing Form 1094-B and Form 1095. The same filing timelines described above apply. Fully insured plans will only need to report the coverage of the employee only on the Form 1095-C.
Penalties ALEs who fail to file the required informational returns, including those who file incomplete or inaccurate forms, could face penalties under the ACA’s shared responsibility provisions. Self-insured ALEs should note they are not exempt and need to report information on those covered under the health plan.
Penalties may apply for failure to file these forms or furnishing incorrect or incomplete forms. The penalties range from $100 to $250 per form up to an annual maximum amount of $3 million. For the 2015 calendar year, employers acting in good faith to comply with the reporting requirements will not be subject to penalties for errors. The IRS, however, will not provide any relief for failure to timely file or furnish the statements. These penalties are separate for any assessments under the employer mandate. ALEs may be subject to a penalty if any FTE receives a premium tax-credit or cost-sharing subsidy to purchase health insurance through the marketplace.
Employers should note these important details as they work towards the deadline:
• For 2015 only, medium-sized employers (50-99 FTEs) eligible for relief from the employer mandate will need to complete these reporting requirements for CY 2015 and certify eligibility for the relief.
• Regardless of an employer’s plan year, reporting is done based on the calendar year (January–December).
• Required data is reported for each month of the calendar year, with some opportunities to report on a 12-month basis.
The employer is ultimately responsible for the accuracy and timeliness of filings and must be the one to produce the information that must be collected during the calendar year to satisfy this requirement.
Frank Garrison is Vice President, Employee Benefits Practice, at USI Insurance Services, a leader in insurance brokerage and consulting in property-casualty, employee benefits, personal risk services, retirement, program and specialty solutions. Garrison can be reached at 912-436-0747 or firstname.lastname@example.org