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September 8, 2014
The IRS has released draft instructions for the employer health plan reporting requirements contained in the Affordable Care Act (ACA). Applicable large employers, and small employers who offer self-funded plans, now have the information they need to start planning for the required reporting beginning in 2016 for 2015 health
The ACA requires employers, plan sponsors, and insurers to report certain plan and coverage information to provide the IRS with the information necessary to administer and regulate various aspects of the ACA under its jurisdiction, including: the individual shared responsibility payments (the “individual mandate”); an individual’s eligibility for a premium tax credit when purchasing health insurance through a public exchange; and the regulation of the §4980H employer shared responsibility rules.
Effective Date and Timing of Reporting
Employer reporting is required beginning in early 2016 for 2015 employer plan and employee coverage data. Reporting will be on a calendar year basis regardless of the employer’s plan year. Employers may voluntarily report 2014 information to the IRS beginning in 2015, but this is not required.
Annual employer returns must be filed with the IRS by the last day of February (March 31, if filed electronically). Corresponding employee statements must be provided annually to full-time employees by January 31. These are the same deadlines that apply to employer W-2 reporting.
The IRS delayed the employer shared responsibility requirements for most employers with 50-99 full-time equivalents (FTEs) until 2016; however, reporting requirements have not been delayed. Consequently, employers with 50–99 FTEs are still subject to the reporting requirements beginning in 2016 for 2015 calendar year plan data.
Which Employers Must Report?
All fully-insured and self-funded “applicable large employers” (ALE) as defined by the ACA (generally those with at least 50 FTEs) will be required to comply with some portion of the reporting requirements. ALEs who sponsor self-funded plans are subject to additional detailed individual participant coverage reporting.
Small employers who do not meet the definition of an ALE are also required to report employer offer of coverage information to the IRS if they sponsor a self-funded health plan.
Small employers who offer only fully-insured plans are not subject to the reporting requirements. Health insurance companies will report individual participant coverage details to the IRS for fully-insured plans.
Overview of Reporting Requirements
In general, the ACA health plan reporting process will work much the same as current W-2 and 1099 reporting. A statement (Form 1095) will be provided to employees with a copy going to the IRS, and employers will be required to also file at least one employer Form 1094, which provides certain employer-related plan and coverage offer information. The exact information required to be provided to the IRS will depend on the following factors (described in more detail below). Of particular relevance is whether the employer plan is self-funded or fully-insured.
Separate requirements apply to small self-funded employers who do not qualify as an ALE, and to employers who participate in a multi-employer plan (such as a plan administered by a union). These employers will use Forms 1094-B and 1095-B. Reporting requirements for small self-funded employers and multi-employer plans are not covered in this issue brief.
Employee 1095 (or Alternative Statement) Reporting Details
The Form 1095 (or alternative statement if applicable) must be provided to any employee who was full-time for any month during the calendar year. The Form 1095 contains three parts, but not all employers must complete all three parts. The amount of information required depends on a number of factors (see below).
Form 1095 Elements
Part I – Basic employee and employer information including names, taxpayer ID numbers, address contacts information, etc.
Part II – Used to report offers of coverage, employee contribution requirements, and employer safe harbors (applicable to that employee), for each month of the calendar year.
Part III – Used to provide monthly details on employees, spouses and dependents covered by the plan during the calendar year. Data includes name, SSN (or DOB if SSN is not available), and an indication of which calendar months the individual was covered by the plan.
Which Parts of the 1095 Do Employers Have to Complete?
A fully-insured or self-funded employer who makes a qualifying offer (see above) to an employee for all 12 months of the calendar year may provide a simplified statement in lieu of providing Form 1095. However, even when an employer makes a qualifying offer and provides a simplified statement to the employee, a Form 1095 must still be filed with the IRS.
The employee alternative statement must include:
Employer 1094 Reporting Details
The employer plan information and offer of coverage Form 1094 also has three parts.
Form 1094 Elements
Part I – Basic employer information including name, EIN number, address, contact information, etc.
Part II – Additional information on the employer including:
Part III – This section is used to report aggregate employer information for each month of the calendar year, including:
Simplified 1094 Reporting with 98% Offer of Coverage
Employers who qualify for the 98% offer method do not need to report the number of full-time employees for each month of the calendar year. To take advantage of this method, an employer is required to certify that:
Other 1094 Reporting Issues
The forms and instructions that have been released are only draft forms and may not be used to actually provide information to employees or file with the IRS. Final versions of the forms and instructions are expected to be released very soon to accommodate employers who wish to voluntarily report 2014 data.
Obviously, this new reporting imposes significant administrative obligations on ALEs. Fortunately, the optional reporting for 2014 provides employers an opportunity to test their systems and vendors in preparation for 2016. It is expected that many employers will do a “test run” of the reporting requirements for 2014 even if they have no intention of providing that data to the IRS.
Draft forms and instructions can be found on the IRS website at: opens in a new window http://apps.irs.gov/app/picklist/list/draftTaxForms.html.
As always, should you have any questions, please contact your opens in a new windowParker, Smith & Feek Benefits Team.
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