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IRS Issues Draft Forms for 2015 ACA Reporting
New reporting and disclosure requirement may catch some employers off-guard

By Stephen Miller, CEBS  7/29/2014
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updated 9/2/2014

Update: On Aug. 28, 2014, the IRS re-released the draft forms that will be used by employers to report compliance with the Affordable Care Act beginning in 2015, along with draft instructions for forms 1094-C and 1095-C. The IRS also released draft instructions for forms 1094-B and 1095-B, intended to verify compliance with the individual coverage mandate.

Forms 1094-C and 1095-C will be used by employers with 50 or more full-time employees or full-time equivalents to determine whether they are liable for penalties under the employer shared responsibility requirements of the ACA. These forms will also be used to determine whether employees have received an affordable and adequate offer of coverage, rendering them ineligible for premium tax credits. Employers are required to provide each full-time employee with a form 1095-C and to file each of these together with a transmittal form 1095-B with the IRS.

“The instructions for the 1094-C and 1095-C are by far the most complex of the instructions released on August 28, filling 13 pages with dense, two column, print,” noted Timothy Jost, J.D., a professor at the Washington and Lee University School of Law, in a commentary posted on the Health Affairs Blog. “Most of the complexity derives from the options for complying with the employer mandate and the transition exceptions to that mandate that the administration has created,” he explained.

Additional analysis of the instructions was posted by law firm Littler Mendelson PC, and "unanswered questions" are addressed in a Benefits Brief from Groom Law Group.

On July 24, 2014, the Internal Revenue Service released drafts of the forms that large employers will be required to file in order to show that the health coverage they offer to their employees complies with the Affordable Care Act (ACA) “shared responsiblity” mandate, sometimes referred to as “play or pay.”

On the same day, an administration official told Politico that the White House has no plans to further delay the ACA’s employer mandate timeline announced earlier this year. Companies with 100 or more full-time equivalent employees must begin complying with the ACA coverage requirements in 2015, although they will have two years to phase up to the requirement that they cover 95 percent of their workers. Companies with 50 to 99 full-time equivalent employees will have another year—until 2016—to start complying. Smaller businesses are exempt.

The IRS announced that the draft forms are being provided to help employers, tax professionals and other stakeholders prepare for the new reporting provisions under tax code sections 6055 and 6056. Under these requirements, employers must compile monthly and report annually numerous data points to the IRS and their own employees. This data will be used to verify the individual and employer mandates under the law

“Although required reporting under sections 6055 and 6056 will not occur until January 2016 to employees and March 2016 to the IRS, the data being reported is based on what happened during 2015,” according to an August 2014 article in HR Magazine. “Therefore, employers should have the necessary infrastructure in place to gather that information by January 2015 or very soon after.”

Employers should have infrastructure
in place to gather information by
January 2015 or soon thereafter.


Instructions Subsequently Issued

The IRS invited comments on the forms and anticipated that draft instructions relating to the forms would be posted on the website in August [as they were on Aug. 28, 2014; see box above]. Both the forms and instructions are expected to be finalized later this year.

The draft forms issued by the IRS include:

Form 1094-B: Transmittal of Health Coverage Information Returns.

Form 1095-B: Health Coverage.

Form 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Return.

Form 1095-C: Employer-Provided Health Insurance Offer and Coverage.

“Insurers and self-insured health plans will provide a Form 1095-B to each of their enrollees and members, and file these forms, together with a transmittal Form 1094-B with the IRS,” explained Timothy Jost, J.D., a professor at the Washington and Lee University School of Law, in a July 25 post on the Health Affairs Blog. “Large employers must provide a Form 1095-C to each employee, and transmit these, together with a transmittal [Form 1094-C] to the IRS.”

Reporting Requirement Still Applies to Mid-Size Employers

Although mid-size employers (between 50 and 99 full-time employees or equivalents) can take advantage of one year of transitional relief from the employer mandate requirements, delaying compliance until the first day of the employer's 2016 plan year, “these employers are still required to comply with the pay or play reporting requirement and the individual mandate reporting requirement, if the mid-size employer sponsors a self-funded group health plan,” advises law firm Miller Johnson. “In order to qualify for the transitional relief, mid-size employers must certify to the IRS that it meets the necessary requirements. Form 1094-C is used to certify that the mid-size employer meets these requirements.”

The firm adds, “The good news is that these forms appear relatively simple to complete. The bad news, however, is that compiling the information necessary to complete these forms will likely impose significant administrative burdens.”

2015 Monthly Information

“This reporting and disclosure requirement is new for employers and may catch some employers off-guard,” warned an alert by benefits consultancy Hill, Chesson & Woody, which adds that the reporting requirements include collecting and disclosing:

Social Security numbers of employees, spouses and dependents.

  Names and employer ID numbers (EINs) of other employers within the reporting employer’s controlled group of corporations for each month of the calendar year.

Number of full-time employees for each calendar month.

Total number of employees (full-time equivalents) for each calendar month.

Section 4980H transition relief indicators for each calendar month.

Employees’ share of the lowest-cost monthly premium for self-only, minimum value coverage for each calendar month.

Applicable Section 4980H safe harbor for each calendar month.

“The first transmittal and returns will not be filed until January 2016, but much of the information must be reported for each calendar month of 2015,” the firm points out. “Ensuring internal time and attendance systems, record management, and payroll systems are capable of producing the required information is critical. Although there is much information left to be released by the IRS concerning the Code 6056 reporting requirement, employers subject to this requirement should begin preparing now.”

“Even though there may be differences between the draft and final versions of these forms, employers should carefully review these draft versions,” advises Miller Johnson. “This is because the significant amount of information that is required to be reported to both employees and the IRS on these forms may factor in to an employer’s overall strategy for compliance with health care reform’s pay or play penalty requirement.”

Too Little, Too Late?

Some business groups commented that the information released by the IRS was too incomplete to let them prepare for new obligations under the health law. “The IRS only released draft forms, with no instructions or technical specifications,” said Christine Pollack, vice president of government affairs at the Retail Industry Leaders Association, in a statement. “Our immense frustrations with the IRS continue,” she added.

Steps to Take

In light of the complexity of the new information reporting requirements, employers should take the following actions, advised McGladrey LLP in an alert:

Learn about the new information reporting requirements and review the draft IRS forms.

Develop procedures for determining and documenting each employee's full-time or part-time status by month.

Develop procedures to collect information about offers of health coverage and health plan enrollment by month.

Review ownership structures of related companies and engage professionals to perform a controlled/affiliated service group analysis.

Discuss the reporting requirements with the health plan's insurer/third-party administrator and the company's payroll vendor to determine responsibility for data collection and form preparation.

Ensure that systems are in place by Dec. 31, 2014 to collect the needed data for the reports.

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller

Webcasts Discuss Employer Reporting Under ACA

A SHRM member webcast, produced in July 2014, is now available for viewing. Affordable Care Act Reporting Requirements is presented by Raymond Grove of Convey Compliance, which sponsored the webcast. He addresses how to meet the Affordable Care Act’s sweeping set of new regulations and reporting requirements.

In addition, on Aug 14, 2014, the IRS hosted a webcast about employer reporting requirements under the Affordable Care Act. More information is available here.

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