IRS Issues Final ACA Reporting Forms

IRS Issues Final ACA Reporting Forms

On February 8, 2015, the Internal Revenue Service (IRS) released the much anticipated final versions of the forms certain employers will use to report information about their employee health insurance plans to both the IRS and employees. The reporting requirements—contained in IRS Code Sections 6055 and 6056—will be used by the IRS to 1.) assess individual mandate penalties, and 2.) assess Employer Shared Responsibility (“Pay-or-Play”) penalties. For calendar year 2015, the deadline for filing the forms with the IRS is Feb. 29, 2016, or if filed electronically, March 31, 2016. The deadline for furnishing employee statements is January 31, 2016.

Section 6055 Reporting

Under section 6055, employers sponsoring self-insured health plans (including level self funded or modified self-funded health plans) must report information about each individual enrolled in minimum essential coverage throughout the year. Generally, employers sponsoring a self-insured plan must identify each individual enrolled in minimum essential coverage and indicate the months the employee was enrolled in the coverage for at least one day.

Small employers (e.g. employers with less than 50 full-time employees including full-time equivalents) sponsoring self-insured health plans will use IRS Forms 1094-B (a transmittal form) and 1095-B (an employee-specific information return). The Forms 1094-B and 1095-B will generally be used by small employers that implemented a level/modified self-funded plan for plan years beginning in 2015.

Self-insured plan sponsors that are also Applicable Large Employers (e.g. employers with 50 or more full-time employees including full-time equivalents) subject to Pay-or-Play will report the information required for 6055 on Part III of IRS Form 1095-C, instead of on Form 1095-B.

For employers sponsoring fully-insured plans, the health insurance carrier will file the 6055 forms with the IRS and issue the required statements to their employees. Only self-insured plan sponsors are required to comply with the 6055 reporting requirements.

Section 6056 Reporting

All Applicable Large Employers subject to Pay-or-Play must file IRS Form 1094-C (a transmittal form) and Form 1095-C (an information return) for each full-time employee. Form 1094-C is used to report summary information for each employer to the IRS and to transmit Forms 1095-C to the IRS.

Form 1095-C will generally be used by Applicable Large Employers to satisfy both the Section 6055 and 6056 reporting requirements, as applicable. Applicable Large Employers will use 1095- C to report the terms and conditions of the health insurance coverage offered to full-time employees, including the cost to the employee and the months the employee was eligible for coverage. The IRS will use this information to marshal compliance with the Pay-or-Play regulations.

IRS Summary Pamphlet

The IRS published a pamphlet outlining the reporting requirements, and steps that employers should take to prepare for the 2016 compliance deadline. To review the IRS pamphlet, please click here.

Simply stated, the 6055 and 6056 reporting requirements are complex. In order to effectively comply with the reporting mandates, employers will need to have a thorough understanding of how the Affordable Care Act’s (ACA) regulations apply to their specific organization. Perhaps the most important aspect of complying with the reporting obligations is having access to payroll data that is framed in the context of the ACA. For Applicable Large Employers, payroll data will be necessary to easily identify their full-time workforce (e.g. employees averaging 30 hours per week or more) for each month of the year so they can report the required plan information. The methods for identifying full-time employees can be complicated, therefore, the more automated this process can be, the easier it will be to comply with the law.