Affordable Care ActThe Basic Facts
The IRS recently released two sets of proposed regulations on information reporting requirements under Internal Revenue Code (IRC) sections 6055 and 6056, added by the ACA. Section 6055 requires providers of MEC, including insurers, self-insuring employers, and certain other health insurance providers that provide MEC, to file an annual report detailing the coverage to the IRS. Section 6055 also requires providers of MEC to distribute a statement to individuals listed on the report to the IRS.
Section 6056 requires employers subject to the Employer Mandate, also known as applicable large employers, to file annual reports detailing the terms and conditions of the coverage provided to Full-time employees, and also requires distribution of a statement to individuals listed on the report to the IRS.
These reporting requirements are intended to facilitate eligibility determinations for the advanced premium tax credit by the marketplace, as well as allow the IRS to verify that taxpayers are complying with the individual mandate. The reporting requirements were originally effective in 2014, but were delayed in conjunction with the play or pay delay outlined in IRS Notice 2013-45. The reporting required under sections 6055 and 6056 is now effective for calendar years beginning on or after January 1, 2015. The IRS, however, encourages voluntary compliance in 2014. These actions do not affect any other provisions of ACA including premium tax credits. Such other provisions presumably include the individual mandate and the related penalties. However, it is not clear how certain premium tax credits would be determined in the absence of information reporting from employers. Formal guidance describing the transition relief is expected soon.
Section 6055 Reporting
Section 6055 requires information reporting by any person that provides MEC to an individual (known as “reporting entities”), which can include employers of any size that provide MEC to their employees.
Information to be Reported
Providers of MEC must report:
- The name, address, and taxpayer identification number (TIN) of the primary insured.
- The name, dates of coverage, and TIN of each individual covered under a policy.
- Whether health insurance coverage is a qualified health plan offered through an exchange or marketplace.
- For a qualified health plan the amount of any advance payments of the premium tax credit and cost-sharing reductions.
- Other information the Secretary requires.
Employer group health plan reporting must also include the following information:
- The name, address, and employer identification number (EIN) of the employer maintaining the plan.
- The portion of the premium (if any) paid by the employer.
- Any other information the Secretary requires for administering the credit under 45R (the tax credit for employee health insurance expenses of small employers).
Time and Manner of Reporting
The proposed regulations provide that the section 6055 return may be made on IRS Forms 1095–B and 1094–B. These forms are not yet available. The return must be filed on or before February 28 (or March 31 if filed electronically) of the year following the calendar year in which MEC was provided. The proposed regulations require electronic reporting for reporting entities that file 250 or more returns during the calendar year.
Statements Furnished to Individuals
Reporting entities must also furnish a statement to each individual listed on the section 6055 return that shows the name, address, and contact phone number of the reporting entity and information reported to the IRS for that individual. The statements must be furnished on or before January 31 of the year following the calendar year in which MEC is provided. If mailed, the statement must be sent to the individual’s last known permanent address. A reporting entity may furnish the statement electronically if it meets the requirements set forth in the proposed regulations, including affirmative consent from the recipient in an electronic format. The first annual statements to individuals must be furnished no later than February 1, 2016 because January 31, 2016 is a Sunday.
The proposed regulations provide that insurance issuers are the reporting entity for all insured coverage, including employer provided insured group health plans. Sponsors of self-insured coverage (generally the employer for a self-funded plan established by a single employer) are responsible for reporting under Section 6055. Note that this reporting does not apply on a controlled group basis. Each member of a controlled group that provides MEC is responsible for reporting under section 6055, although one member employer may file on behalf of the other members of the controlled group. For multi-employer plans (commonly referred to as union plans or collectively bargained plans), the responsible reporting entity is the association, committee, or joint board of trustees of the parties who establish or maintain the plan.
Section 6056 Reporting
Section 6056 reporting requirements apply to employers that are subject to the Employer Mandate. Although employer size for purposes of the Employer Mandate is determined on a controlled group basis, the reporting requirements apply separately to each employer member of a large employer controlled group. Each controlled group member with FTEs is responsible for reporting under section 6056, even though one employer within a controlled group may file on behalf of other group members.
Information to be Reported
Those reports must include:
- The name, address, and employer identification number of the controlled group member, the name and telephone number of the employer’s contact person, and the calendar year for which the information is reported.
- A certification as to whether the controlled group member offered to its Full-time employee (and their dependents) the opportunity to enroll in MEC under an eligible employer-sponsored plan.
- The number of Full-time employee for each month during the calendar year.
- For each Full-time employee, the months during the calendar year for which coverage under the plan was available.
- For each Full-time employee, the employee’s share of the lowest cost monthly premium (self-only) for coverage providing minimum value offered to that employee under an eligible employer-sponsored plan, by calendar month.
- The name, address, and taxpayer identification number of each Full-time employee during the calendar year and the months, if any, during which the employee was covered under an eligible employer-sponsored plan.
- Such other information as the Secretary may prescribe or as may be required by the form or instructions.
Time and Manner of Reporting
As with the 6055 reporting, an employer satisfies its reporting requirements under section 6056 if it files with the IRS a return for each employee using Forms 1095–C and 1094–C, or another set of forms the IRS designates. The return must be filed on or before February 28 (or March 31 if filed electronically) of the year following the calendar year in which MEC was provided. The proposed regulations require electronic reporting for reporting entities that file 250 or more returns during the calendar year.
Statements Furnished to Individuals
Employers required to report under section 6056 must also furnish an annual written statement to each employee identified on the annual IRS return. The statement must include the following information:
- The employer’s name, address and EIN.
- The information required to be shown on the section 6056 return with respect to the employee.
Employee statements may be provided either by furnishing to the employee a copy of Form 1095-C or any other form designated by the IRS. A substitute statement may be used if it includes the required information and complies with IRS procedures or other guidance. The statements must be furnished on or before January 31 of the year following the calendar year in which MEC is provided. If mailed, the statement must be sent to the individual’s last known permanent address. A reporting entity may furnish the statement electronically if it meets the requirements set forth in the proposed regulations, including affirmative consent from the recipient in an electronic format.
The first section 6056 employee statements must be furnished no later than February 1, 2016 because January 31, 2016, is a Sunday.
The proposed regulations allow employers to use third parties, including third party administrators, to file returns and furnish employee statements, but the employer retains ultimate responsibility for providing the information. For employees eligible to participate in a multi-employer plan, the proposed regulations note that one return would be filed by the multi-employer plan administrator, pertaining to the employees eligible to participate in the multi-employer plan. A separate return would be filed by the employer for the remaining employees who are not eligible to participate in a multi-employer plan.
Potential Simplified Methods
Employers that sponsor self-insured plans are subject not only to the section 6056 reporting requirements, but also to reporting requirements under section 6055, as well as reporting requirements under 6051, which requires employers to provide Forms W-2. The proposed regulations include provisions designed to simplify reporting such as possibility of using indicator codes on Form W-2s, and allowing self-insured health plans to furnish a single statement to covered individuals for both sections 6055 and 6056. The IRS is also considering a number of additional simplified reporting methods for plan designs that meet certain requirements, including, but not limited to:
- Replacing section 6056 employee statements with Form W-2 reporting.
- Eliminating the need to determine whether particular employees are full-time if adequate coverage is offered to all potentially full-time employees.
- Allowing employers to report the specific cost of coverage to an employee only if the cost is above a specified dollar amount.
- Limited reporting for certain self-insured employers offering no-cost coverage to employees and their families. Please note these are proposed regulations, so they may change.
In March 2014, the U.S. Department of the Treasury and the Internal Revenue Service released final rules to implement the information reporting provisions for insurers and certain employers under the ACA that take effect in 2015.
Self-funded employers with more than 50 employees must begin reporting under both sections in 2015, although the IRS will now provide a single, consolidated form that employers can use to report both to the IRS and to employees regarding the coverage that is available. The top half of the new form will satisfy Section 6056 reporting, which includes information required to be given to the IRS and to employees about the health care coverage employers have or have not offered to workers. The data elements requested are intended to help the IRS enforce employer “pay or play” penalties and help the IRS verify information provided by consumers as to whether they are eligible for premium tax credits under the ACA.
The bottom half of the form would satisfy 6055 reporting that requires certain information on individuals that are provided minimum essential coverage in order to help the IRS enforce individual mandate penalties and determine an individual’s eligibility for premium tax credits.
You can read in detail about the reporting requirements here.
More information can be found here: http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions