Let the data collection begin! On March 6, 2014, the highly anticipated final regulations for employer reporting were released. According to the Assistant Secretary for Tax Policy, Mark J. Mazur, “Today’s announcement is part of the Administration’s effort to provide certainty and early guidance about major health policies so employers, small business owners and other individuals can plan for 2015. Treasury’s final rules significantly streamline and simplify information reporting while making it easier for employers and insurers of all sizes to provide the quality, affordable health coverage that every American deserves.”
Section 6056 requires employers to report to the IRS information about healthcare coverage offered to full-time employees, in order to administer the employer shared responsibility provisions of section 4980H of the code. Section 6056 also requires those employers to provide to employees statements that employees may use to determine whether, for each month of the calendar year, they may clam on their individual tax returns a premium tax credit under section 36B. Section 6055 requires information reporting by any person who provides minimum essential coverage to an individual during a calendar year, which information relates to the individual shared responsibility section provisions. Like Section 6056, transmittals to the IRS, as well as individual employee statements, are required. IRS transmissions are due no later than February 28 each year (March 31 if filed electronically); employee statements must be furnished on or before January 31 of the year immediately following the calendar year to which the employee statements relate.
GENERAL REPORTING METHODS
The final rules include the following key provisions.
Single, Combined Form for Information Reporting: Employers that self-insure are allowed to report in a single, consolidated form that can be used to report to the IRS and employees under both sections 6055 and 6056, thereby simplifying the process and avoiding duplicated submissions. The combined report includes two sections: the top is for information required for 6056 reporting, the bottom, for section 6055.
- Employers with less than 50 full-time employees are exempt from the employer shared responsibility provisions and are not required to report.
- Employers considered applicable large employers (ALEs)* are subject to the final reporting requirements. Those that self-insure will complete both sections of the combined form.
- ALEs that do not self-insure will complete only the top section of the report, or information pertaining to section 6056. Insurers and other providers of health coverage will only report under the bottom section, information pertaining to section 6055, via a separate form for that sole purpose.
Simplified Option for Employer Reporting: This simplified option is provided for employers that offer a qualifying offer of coverage to any of their full-time employees. This is a simplified alternative to the monthly, employee-specific information that the general rules require.
- A qualifying offer of coverage is one that provides an offer of minimum value coverage where employee-only coverage is at a cost to the employee of no more than 9.5% of income (approximately $1,100 in 2015, which is 9.5% of the Federal Poverty Level), and is combined with an offer of coverage for the employee’s family.
- For employees who receive a qualifying offer for ALL 12 months of the calendar year, employers will need to report only the names, addresses, and taxpayer identification numbers of those employees and an indicator of the fact they received a full-year qualifying offer. Employees will receive a copy of this simplified report or a standard statement for use when filing the individual tax return.
- For employees who receive a qualifying offer for less than a full 12 months of the year, employers will be able to simplify reporting to the IRS and to employees for each of those months with the use of a code indicating that the offer was made within that month.
- In keeping with the phase-in approach to the regulations, to allow for a phase-in of the simplified approach, employers certifying that they have made a qualifying offer to at least 95% of their full-time employees (plus an offer to their families) will be able to use an even simpler alternative for reporting in 2015. These employers will be able to use the simplified reporting method for their entire workforce, including any employees who do not receive a qualifying offer for the full year. These employers will provide employees with standard statements relating to their potential eligibility for premium tax credits.
The final regulations also give employers the opportunity to avoid identifying those employees who are full-time and just include in the report those employees who may be full-time. In order to take advantage of this option, the employer must certify that it offered affordable, minimum value coverage to at least 98% of the employees for whom it is reporting.
*An applicable large employer (ALE) is any member that is an applicable large employer or a member of an aggregate group. Each ALE member with full-time employees is the entity responsible for filing and furnishing statements with respect to its full-time employees under Section 6056. Only ALE members with full-time employees are subject to the filing and statement furnishing requirements of Section 6056 (and only with respect to the full-time employees).
SECTION 6056 REPORTING
As summarized above, there is a general method for reporting to the IRS and supplying employee statements set forth in the regulations. The general method is available for all employers and with respect to reporting for all full-time employees. The regulations do provide alternative reporting methods, but these may only be available for certain groups or groups of employees. In any cases where an alternative method cannot be used, the general method stands. The alternatives are optional so any employer may choose to report for any or all of its full-time employees using the general method even if an alternative method is available.
In an effort to simplify and streamline the reporting requirements, as a general method, the regulations provide that the Section 6056 return may be made by filing Form 1094-C (a transmittal) and Form 1095-C (an employee statement), or other forms the IRS designates. Alternatively, the Section 6056 return may be made by filing a substitute form. Any substitute form must include all of the information required to be reported on Forms 1094-C and 1095-C or other forms the IRS designates and comply with applicable revenue procedures or other published guidance relating to substitute returns.
The final regulations require the following information for reporting the Section 6056 return:
- Name, address, ALE employer identification number, and the calendar year for which the information is reported.
- Name and telephone number of the ALE’s contact person.
- A certification as to whether the ALE offered to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, by calendar month.
- The number of full-time employees for each calendar month during the calendar year, by calendar month.
- For each full-time employee, the months during the calendar year for which minimum essential coverage under the plan was available.
- For each full-time employee, the employee’s share of the lowest cost monthly premium for self-only coverage providing minimum value offered to that full-time 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.
The final regulations DO NOT require the reporting on the following data elements:
- Reporting of the length of any permissible waiting periods under Section 4980H. Although the length of a waiting period is not relevant for administration of the premium tax credit or for an individual to prepare his or her tax return, Treasury and the IRS anticipate that information will be requested, using an indicator code, regarding whether coverage was not offered to an employee during certain months because of a permissible waiting period, since it is relevant to the administration of 4980H.
- Reporting of the employer’s share of the total allowed costs of benefits provided under the plan because this is not relevant to the administration of the premium tax credit and section 4980H. However, since minimum value is relevant, Treasury and the IRS anticipate that information will be requested using an indicator code.
- Reporting of the monthly premium for the lowest-cost option in each of the enrollment categories under the plan (e.g., employee only, family).
- Reporting of the months, if any, during which any of the employee’s dependents were covered under the plan.
INFORMATION NEEDED FOR SECTION 4980H
To assist in administering Section 4980H and the premium tax credit, the IRS will need certain information not specifically set forth under Section 6056 but authorized under Section 6056(b)(2)(F). Under the general method of Section 6056 reporting, the following information will be reported through the use of indicator codes for some information as part of the return and the employee statements:
- Information as to whether coverage offered to full-time employees and their dependents provides minimum value and whether the employee had the opportunity to enroll his or her spouse in the coverage;
- The total number of employees by calendar month;
- Whether an employee’s effective date of coverage was affected by a permissible waiting period by calendar month;
- Whether the ALE had no employees or otherwise credited any hours of service during any particular month, by calendar month;
- Whether the ALE is a person who is a member of an aggregated group, and if applicable, the name and EIN of each employer member of the aggregated group constituting the applicable large employer on any day of the calendar year for which information is reported;
- If an appropriately designated person is reporting on behalf of an ALE that is a governmental unit or any agency – the name, address and identification number of the designated person;
- If an ALE is a contributing employer to a multiemployer plan, whether, with respect to a full-time employee, the employer is not subject to an assessable payment under Section 4980H due to the employer’s contributions to the multiemployer plan; and
- If a third party is reporting for an ALE with respect to the ALE’s full-time employees, the name, address, and identification number of the third party – in addition to the name, address, and EIN of the ALE already required under the final regulations.
It is also contemplated that the following information will be reported with respect to each full-time employee for each calendar month using a code:
- Minimum essential coverage meeting minimum value was offered to:|
- The employee only
- The employee and the employee’s dependents only
- The employee and the employee’s spouse only
- The employee, the employee’s spouse, and dependents
- Coverage was not offered to the employee and:
- Any failure to offer coverage will not result in a payment under Section 4980H;
- The employee was not a full-time employee;
- The employee was not employed by the ALE during that month; or
- No other code exception applies
- Coverage was offered to the employee for the month although the employee was not a full-time employee for that month;
- The employee was covered under the plan; and
- The ALE met one of the affordability safe harbors with respect to the employee.
As with other government statements, an ALE may furnish the Section 6056 employee statement in an electronic format in lieu of a paper formant, provided that the furnisher meets the requirements of the regulations. The recipient must have affirmatively consented to receive the statement in electronic format. The consent may be withdrawn and as long is it is withdrawn before the statement is furnished a paper statement must be provided. If a change in hardware or software required to access the statement creates a material risk that the recipient will not be able to access the statement, the furnisher must, prior to changing the hardware or software, provide the recipient with notice.
We now have the final reporting data requirements released. Large employers can begin the task of ensuring all the proper data are gathered, accumulated, and maintained as we wait for the templates and instructions for form submission to be released. Given that much of the data required will be reported with new indicator codes, a significant burden has been placed on the employer, if they intend to do this manually. Many will look to third parties to manage and report the data, which is a good plan given that much of these data come from multiple systems and create very complicated data collection. Not to mention the need to manage variable staff, analyze best options for benefit decisions, and automate audit and all compliance. Health E(fx) delivers on all requirements under the ACA, making the employer task simple.
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