Reporting Information on Individual and Employer Mandates
With the implementation of the Individual and Employer Mandates, new IRS annual reporting is required. Sections 6055 and 6056 were implemented as part of the Patient Protection and Affordable Care Act (ACA). Section 6055 requires annual information reporting by health insurance issuers, self-insuring employers, government agencies, and other providers of health coverage. Section 6056 requires annual information reporting by Applicable Large Employers (ALE) relating to the health insurance that the employer offers (or does not offer) to its full-time employees.
In general, Section 4980H states that Applicable Large Employers (ALE), generally defined as an employer with 50 or more full-time, or full-time equivalent employees working 30 hours or more per week, are to offer Minimum Essential Coverage (MEC) to all or substantially all of its full-time employees (and their dependents) and that the coverage must be Affordable and meet Minimum Value (MV). If coverage is not offered, or, is not affordable or does not meet minimum value, the employer is potentially subject to a penalty if at least one employee enrolls in a Qualified Health Plan (QHP) in the Marketplace and receives a premium tax credit. Coverage is deemed affordable if it does not exceed 9.5% of the household income for the lowest-cost, self-only coverage. Minimum Value is defined as the plan’s share of the total allowed costs paying at least 60%.
Notice 2014-45 from the Internal Revenue Service (IRS) announced that the Employee Shared Responsibility, or “ESR”, also known as “Pay or Play” or the “employer mandate,” would be delayed until 2015. This meant that no penalties would apply to non-compliance for the 2014 calendar year (although voluntary reporting was encouraged). These new rules take effect January 1st, 2015 and subsequent reporting will be required in early 2016 based on the 2015 tax year.
Section 6055 requires information reporting by any person that provides Minimum Essential Coverage (MEC) to an individual during a calendar year, including information about the type and period of coverage provided under an eligible employer-sponsored plan, and the furnishing to taxpayers of a related statement covering each individual listed on the section 6055 return. The likely respondents are health insurance issuers and carriers, self-insured employers or other sponsors of self-insured group health plans, and governments that provide MEC. The collection of information will be used to determine whether an individual has satisfied the individual mandate and verify that they have MEC, and also enable the IRS to cross check that information with insurers or self-insured plans. This also allows individuals to report that coverage when filing their tax returns. The reporting to both individuals and the IRS for 2015 is due in early 2016.
Information required to be reported to the IRS for Section 6055 reporting of persons providing MEC:
• Name, address, and Employer Identification Number (EIN) of the employer maintaining the plan and responsible entity required to file the return.
• Name, last known address, and Taxpayer Identification Number/Social Security Number (TIN/SSN), (or date of birth if a TIN/SSN are not available and “reasonable effort” was made to obtain it) of the responsible person/employee.
• The name and TIN/SSN (or date of birth if a TIN/SSN are not available and “reasonable effort” was made to obtain it), of each individual covered under the responsible person or policy.
• Months the individual had MEC during the calendar year, or, was eligible to receive benefits. (1 day of coverage in any particular month = coverage for the entire month)
• Whether the coverage is a Qualified Health Plan (QHP) provided through the Small Business Health Options Program (SHOP) and the SHOP’s unique identifier.
Individuals have strong incentive to provide a TIN/SSN to the reporting entity if one is available to establish that they have coverage qualifying under section 5000A. Without a TIN/SSN, the IRS will send correspondence to the individual in order to validate and match coverage.
For fully insured plans, the insurance carrier is responsible for reporting. For self-funded plans, the Plan Sponsor is responsible for reporting. ALL employers who provide MEC, regardless of size, are required to report.
Section 6056 requires Applicable Large Employers (ALE) to report to the IRS information about the health care coverage, if any, they offered to full-time employees (and their dependents). The IRS will use this information to determine if the ALE satisfied the employer mandate and if penalties are owed. Section 6056 also requires those employers to furnish statements regarding that coverage to employees, primarily so those employees can file their tax returns, show that they had coverage (to satisfy the individual mandate), and also determine if they are eligible for a premium tax credit for coverage through the Marketplace. The reporting to both individuals and the IRS for 2015 is due in early 2016.
Information required to be reported to the IRS Section 6056 reporting for Applicable Large Employers (ALE):
• Name, address, and EIN of ALE member/employer.
• Name and telephone number of the ALE’s contact person (may be a third party).
• The calendar year for which the information is reported.
• Certification whether MEC was offered to full-time employees (with dependent coverage) for each month.
• The number of full-time employees each month during the year.
• The full-time employee’s share of the cost of the lowest MEC that provided Minimum Value (generally self-only coverage), by calendar month.
• Name, address, and TIN/SSN of each full-time employee during the calendar year and the months covered.
Additional information will be required through the use of “indicator codes.” This would include information as to whether the coverage offered to full-time employees and their dependents under an employer-sponsored plan provides Minimum Value. It also includes the total number of employees by calendar month in addition to whether an employee’s effective date of coverage was affected by a permissible waiting period. Additional requirements can be found in the final rule.
When is filing/furnishing required?
Reporting will start in 2016 for the 2015 tax year. Reporting is required to be filed with the IRS by February 28th if by paper or March 31st if electronic of each year. Statements regarding coverage are to be furnished to the responsible person/employee by January 31st of each year. Electronic filing will be required for employers over 250 employees.
Reporting for non-ALE’s for Section 6055 is to be completed using Form 1094-B and Form 1095-B.
Reporting for Section 6056 for Applicable Large Employers (ALE) that sponsor self-insured plans will complete combined reporting on Form 1095-C (along with the 1094-C transmittal), completing both sections to report the information required under Sections 6055/6056. ALE’s that provide insured coverage will complete only the section of Form 1095-C related to Section 6056.
If you’d like to become familiar with each form, you can search the Draft Forms on the IRS website HERE.