Tax Alert: Final ACA Large Employer Information Reporting Regulations

IRS releases final rules on large employer ACA reporting

The IRS has released final regulations implementing the Affordable Care Act’s (ACA’s) information reporting provision for large employers. The new rules — which begin to phase in in 2015 — significantly streamline the required reporting and should make it easier for covered employers to comply with these ACA requirements.

ACA’s reporting requirements

The ACA enacted Section 6055 of the Internal Revenue Code (IRC), which requires health care insurers, including self-insured employers, to report to the IRS about the type and period of coverage provided and to furnish this information to covered employees in statements. The information must be reported by Jan. 31 (March 31, if filed electronically) of the year following the calendar year in which the coverage is provided. Employee statements must be provided by Jan. 31.

The ACA also enacted IRC Sec. 6056, which requires applicable large employers (generally those with at least 50 full-time employees, including full-time equivalent employees) to report to the IRS information about what health care coverage, if any, they offered to full-time employees. Employers must report this information no later than Feb. 28 (March 31, if filed electronically) of the year following the calendar year to which the Sec. 6056 reporting relates.

The IRS will use this information to determine whether a penalty will be assessed under the ACA’s employer shared-responsibility (also known as “play or pay”) provision because a large employer either 1) didn’t offer “minimum essential” health care coverage to its full-time employees (and their dependents), or 2) the coverage offered wasn’t “affordable” or didn’t provide “minimum value” — and at least one full-time employee received a premium tax credit for purchasing coverage on an insurance exchange.

Sec. 6056 also requires large employers to furnish related statements to employees that the employees can use to determine whether, for each month of the calendar year, they can claim a premium tax credit. The statements must be provided by Jan. 31 of the calendar year following the calendar year to which the Sec. 6056 reporting relates.

New reporting form

The final regs provide for a single, combined form (Form 1095-C) for the information reporting to the IRS. Employers that have fewer than 50 full-time employees (or the equivalent), and thus are exempt from the employer shared-responsibility provision, also are exempt from the Sec. 6056 employer reporting provision. (If these “small” employers are self-insured, they will, however, still be subject to Sec. 6055 reporting. This will be done on a different form.)

Form 1095-C will have two sections. The top half will collect the information needed for Sec. 6056 reporting, and the bottom half will collect the information for Sec. 6055. Self-insured employers subject to the shared-responsibility provision will complete both parts of the form. Employers that are subject to the shared-responsibility provision but don’t self-insure will complete only the top section. Electronic filing is required for employers filing 250 or more reports.

The ACA requires the reporting of some information that isn’t relevant to individual taxpayers or the IRS for purposes of administering the premium tax credit and the play-or-pay penalty. The final rules omit these requirements, as well as requirements for providing certain information that is already provided through other means. The omitted information includes:

  • The length of any waiting periods for coverage,
  • The employer’s share of the total allowed cost of benefits provided under the plan,
  • The monthly premium for the lowest-cost option in each of the enrollment categories (for example, self-only coverage or family coverage) under the plan, and
  • The reporting of months, if any, during which any of the employee’s dependents were covered under the plan. (The rules require reporting only regarding whether the employee was covered under a plan.)

These omissions are intended to minimize the cost and administrative steps associated with the reporting requirements.

The simplified alternative

The final rules also include a simplified reporting option for employers that provide a “qualifying offer” to any of their full-time employees. A “qualifying offer” is an offer of minimum-value coverage that provides employee-only coverage at a cost to the employee of no more than 9.5% of the federal poverty level (about $1,100 in 2015), combined with an offer of coverage for the employee’s dependents.

If an employer provides a qualifying offer, it need only report the names, addresses and taxpayer identification numbers of those employees who receive qualifying offers for all 12 months of the year, as well as the fact that they received a full-year qualifying offer. The employer also must provide the employees a copy of that simplified report or a standard statement indicating that the employees received a full-year qualifying offer. For employees who receive a qualifying offer for fewer than all 12 months of the year, employers can report to the IRS and employees for each of those months by simply entering a code indicating that the offer was made.

In additional welcome news for employers, the final rules provide a phase-in for the simplified option. Employers that certify that they’ve made a qualifying offer to at least 95% of their full-time employees (plus an offer to their dependents) can use an even simpler alternative reporting method for 2015. Specifically, they can use the simplified reporting method for their entire workforce — including any employees who don’t receive a qualifying offer for the full year. Such employers will provide employees with standard statements relating to their possible eligibility for premium tax credits.

The final regulations also give employers the option to avoid identifying in the report which of its employees are full-time and instead include in the report only those employees who may be full-time. This option, however, is available only to employers that certify that they offered affordable, minimum-value coverage to at least 98% of the employees on whom they’re reporting.

Transitional relief

Although the final regulations apply to calendar years beginning with 2015, they also provide some short-term relief from penalties for employers that can show they have made good-faith efforts to comply with the information reporting requirements. Please let us know if you have any questions about information reporting compliance or other questions related to the ACA.

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