What employees need to know now to file tax forms for PPACA

Original post benefitspro.com

The Patient Protection and Affordable Care Act (PPACA) reporting deadlines are rapidly approaching, presenting a major administrative burden for employers who face penalties for failing to report in a timely and accurate manner.

While there has been significant discussion of employer roles and responsibilities, employees have been largely left out of the equation.

However, many employees will soon be receiving new forms that are critical to their ability to file their tax returns and to their employers’ ability to accurately fulfill their own reporting requirements.  Among these are Forms 1095-A, 1095-B, and 1095-C.

With this in mind, it is important for employers to educate individual taxpayers on what they are required to do and when and how to complete these requirements in the easiest and most efficient manner.

1095-C

The most commonly received form will be the new 1095-C, which millions of Americans will be receiving for the first time this year.

This new government form is used to tell the Internal Revenue Service that you were eligible for insurance coverage under the Affordable Care Act and whether you took advantage of or waived this coverage.

This form will be sent by employers no later than March 31 to all eligible full-time employees who worked for a company with a total of 100 or more full-time or full-time equivalent employees in 2015. For the purposes of this form, full-time is any employee working 30 or more hours per week or 130 hours in a calendar month.

According to the IRS guidance, Form 1095-C helps to determine whether both the employer and the employee have complied with the “shared responsibility” clause of the ACA.

The form also determines whether an individual or family qualifies for the Premium Tax Credit, which reduces the burden of purchasing health insurance.

Anyone who does not have coverage elsewhere and chose to decline employer-sponsored health care coverage will be required to pay a penalty for not carrying coverage--this penalty will be assessed on their tax return.

For 2015, the penalty for declining all health care coverage is $325 per uninsured adult and $162.50 per uninsured child or 2 percent of household income, whichever is greater up to a family maximum of $975.

The penalty will increase to $695 per uninsured adult and $347.50 per child or 2.5 percent of household income up to a family maximum of $2,085 in 2016, and will continue to rise with inflation year-over-year.

However, the IRS offers special exemptions based on income, circumstance and membership in certain groups, so those without coverage should research their options or consult a tax professional. (The most common exemption is for those who declined employer-sponsored coverage that would have cost more than 8 percent of their total household income.)

Health care exemptions can be claimed by filing IRS form 8965 with your taxes. As previously noted, the form also determines who may be eligible for premium credits to help defray the expense of coverage.

Employers are required to submit insurance coverage information, along with social security numbers and other identifying employee information to the IRS, and employee failure to disclose a waiver of coverage may result in an audit and penalties greater than the ACA individual mandate penalty.

1095-B

Form 1095-B essentially serves the same purpose as form 1095-c, but is used by and sent to employees of companies with fewer than 100 employees.

It may also be sent directly by an insurer to certify that individuals/families had non-employer sponsored coverage in place in 2015.  This coverage may have come from:

  • Government health care plans such as Medicare Part A, Medicare Advantage, Medicaid, the Children's Health Insurance Program, and Tricare for military members, veterans’ medical benefits and plans for Peace Corps volunteers.
  • Health coverage purchased through the "Marketplace" -- Web-based federal and state insurance markets set up under the Affordable Care Act.
  • Any individual health insurance policy in place before the Affordable Care Act took effect.

Depending on the way a health care plan is structured, some employees may receive both a 1095-B and a 1095-C.

1095-A

Form 1095-A is only applicable to those who purchased their health care coverage through ACA’s health care exchanges.

This form plays a critical role in reconciling the Advanced Premium Tax Credits (also known as APTCs)--a yearly stipend based on modified adjusted gross income designed to help lower-income individuals and families defray the cost of purchasing exchange-based health insurance--for 2015 and in determining future credits for 2016.

Per IRS and ACA requirements, any excess APTC received in the previous year must be repaid through income tax.

What to do with these forms

Like the more familiar W-2 or 1099 forms, the 1095-A, B, and C will be needed to file a 2015 tax return for anyone who receives it.

Those using a tax preparer will need to bring it with them along with their other filing documents, and those doing their own taxes or using tax preparation software will need to keep this document with their tax records in case of any further inquiry /audit by the IRS.

Help is available

Of course, this is just one important factor in gaining a more thorough understanding of the complexities of the ACA.  While the IRS has worked to streamline the process as much as possible, many employers and employees are struggling to understand and keep pace with changing requirements.

However, for quick questions, there are many good resources available to both employers and employees.  One of the best is the IRS website.

As in all tax-related issues, the most important factors in handling ACA reporting for all groups are to know what’s coming, prepare in advance, keep excellent records, take note of deadlines and avail yourself of helpful resources.


ACA Cadillac Tax: IRS Issues Next Installment of Preliminary Guidance

Originally posted by ubabenefits.com

In February, employers, administrators and others got to see some preliminary thoughts the Internal Revenue Service (IRS) has about the so-called “Cadillac Tax,” included in the Affordable Care Act (ACA). That initial glimpse came when the IRS issued Notice 2015-16. At the end of July, the IRS issued its second installment, Notice 2015-52. After considering the comments its receives in connection with both Notices, the IRS expects to issue proposed regulations, at which time comments will again be requested and considered before any final rules are imposed. If you would like to send comments to the IRS concerning any of the proposals in Notice 2015-52, email those comments to Notice.comments@irscounsel.treas.gov with “Notice 2015-52” in the subject line no later than October 1, 2015.

What is the “Cadillac Tax?”

The ACA added a new excise tax under section 4980I of the Internal Revenue Code (“Code”) that applies to tax years after December 31, 2017. The tax seeks to discourage high-cost health plans and applies, in general, when the aggregate cost of employer-sponsored coverage – referred to as “applicable coverage” – exceeds a statutory dollar limit. That excess is subject to a 40 percent nondeductible excise tax.

Notice 2015-15

IRS Notice 2015-16 describes potential approaches regarding a number of issues under Code § 4980I. These include (1) the definition of applicable coverage, (2) the determination of the cost of applicable coverage, and (3) the application of the dollar limit to the cost of applicable coverage to determine any excess benefit subject to the excise tax. Read a more detailed discussion of the contents of that notice.

Notice 2015-52

Notice 2015-52 builds on Notice 2015-16 by addressing additional issues under § 4980I, including:

  • Who is liable for the excise tax

The liability for the tax will fall on “coverage providers.” For insured plans, this generally will be insurance carriers. For coverage under HSAs or Archer MSAs, the coverage provider will be employers. The third category of coverage provider is “the person that administers the plan benefits.” This category will capture self-funded plans, but the IRS is not sure how it should be defined and seeks comments on two approaches discussed in the Notice.

  • Issues for employers that are part of groups of organizations under common control

The IRS recognizes that for employers that are part of controlled groups, a number of issues will have to be addressed. These include identifying (1) the coverage made available by employers in the group, (2) the employers that will be responsible to calculate and report the excess benefit, and (3) the employers liable for improperly calculating the tax. The IRS requests comments on all of these issues.

  • Pass-throughs and gross-ups concerning the tax

The IRS recognizes that coverage providers liable for the tax may, nonetheless, pass the cost of the tax along to others that may reimburse the coverage provider for having to pay the tax. The IRS addresses the tax treatment of these pass-throughs and reimbursement payments, including how to calculate gross-ups of those payments for tax purposes.

  • Notice and payment of the tax

Under Code § 4980I, employers must (1) calculate the excess benefit subject to the tax and the share of that excess benefit for each coverage provider, and (2) notify the IRS and the coverage providers of those amounts. The IRS is looking for input on the form and timing of those notice requirements, among other issues. Also, as with the PCORI fee, the IRS intends to designate Form 720 as the method to pay the tax.


Simplifying the Administration of Cafeteria Plan Election Changes

Originally posted by ubabenefits.com

Election change requests are the most rule-centric item encountered in the day-to-day administration of a cafeteria plan. Most cafeteria plans, although not required to do so, allow election changes to the fullest extent permitted by law. But what makes these requests so tedious is the fact that administrators and employees must ‘prove the exception’ to the general rule that cafeteria plan elections are irrevocable and cannot be modified mid-year.

Usually, employees will request a change to their cafeteria plan election for a “life event” that is fairly straightforward – e.g., marriage, divorce, new child, etc. But for other “change in status” events, the governing IRS regulations can be nuanced with no definitive answer as to whether an election change is permitted. While implementing administrative procedures to help make these determinations is important, the process is incomplete without a general understanding of the change in status rules to fill in the gaps.

The Change in Status Regulations

Although its name sounds like a George Orwell novel, the “life events” described in the Change in Status Regulations are much more mundane. The IRS has identified six categories of change in status events in the regulations. These are: (1) a change in legal marital status; (2) a change in the number of dependents; (3) a change in employment status; (4) when a dependent satisfies or ceases to satisfy dependent eligibility requirements; (5) a change in residence, and; (6) the start or termination of an adoption proceeding (where adoption assistance is provided through the cafeteria plan).

Any event not falling within one of these six event categories cannot serve as the basis for an election change. However, the Change in Status Regulations do not provide a complete list of permissible events within each category. For example, the change in employment status category describes events where the employee, employee’s spouse, or the employee’s dependent loses or gains eligibility status for the applicable benefit. Terminations, new jobs, leaves of absence, and changes in worksite are all identified as a change in employment status event. But a change in employment event may also occur if a spouse loses coverage due to a reduction of hours or an employee becomes eligible for benefits at a second employer.

An employee walks into HR . . .

From a plan administration perspective, the first consideration should be whether the terms of the cafeteria plan permit a change to the election for the event that occurred. Cafeteria plans are permitted to allow an election change for any of the events covered by the Change in Status Regulations, but are not required to do so. Instead, plan sponsors may restrict the number of event categories or narrow the types of events where an election change is allowed in each category. What the cafeteria plan cannot do is create additional event categories or have more lenient requirements than the Change in Status Regulations.

The eligibility criteria for the underlying insurance policies and plan documents of the component benefits should also be reviewed. These documents are critical in the determination process because the IRS requires that an election change be consistent with the change in status event (which must have already occurred). Generally, the consistency requirement means the election change must reflect the event. For example, a recently divorced employee’s election change request to move from employee-only to family coverage would not be “consistent” with the divorce and the request should be denied.

Administrators should then substantiate the reason for the change in election. This requirement may be satisfied by obtaining an employee’s certification that the event occurred and, unless there is reason to believe it did not, no additional follow-up is required.

Once the employee has certified the date of the event, administrators should re-visit the plan document to determine whether the change request is subject to any time requirements. Cafeteria plans normally impose a 30-60 day window for requesting the election change. Plans with extended time limits, or none at all, may find it difficult to satisfy the consistency requirement because there may no longer be a causal connection between the change in status event and election change request.

Additional Considerations

Change in status events are not the only occasions where cafeteria plan participants may be permitted to revoke or modify an election, although they are the most common. Events such as changes to the cost or coverage of a group health plan, HIPAA special enrollment rights, FMLA, COBRA qualifying events, and funding of an HSA with pre-tax contributions all have unique rules and considerations. Some events may allow an election change for one component benefit of the cafeteria plan but not the other (e.g., dependent care FSA vs. health FSA) or affect an employee’s ability to make pre-tax contribution.

Even the most detailed procedures and checklists will not exhaust all of the variables administrators must account for when reviewing election change requests. However, using a checklist or similar document will focus your approval determination toward ensuring that a cafeteria plan election change is permitted and meets the IRS’s requirements. Unique circumstances are bound to occur within any workforce and a consistent process will aide in the identification of issues that need to be considered further or require the assistance of legal counsel.


IRS Makes it Riskier to Maintain Individually-Designed Retirement Plans

Originally posted by ubabenefits.com

The Internal Revenue Service just made it riskier to maintain a tax-qualified individually-designed retirement plan by eliminating the five-year determination letter remedial amendment cycle for these plans, effective January 1, 2017.

Although determination letters are not required for retirement plans to maintain tax-qualified status under the Internal Revenue Code, virtually all employers sponsoring individually-designed retirement plans have long relied on the Internal Revenue Service’s favorable determinations that their plans meet the Code’s and the IRS’ vexingly complex – and ever-changing – technical document requirements. A plan risks losing tax-qualified status (and all the favorable tax treatment that goes along with that status) if the plan document is not timely amended to reflect frequent, sometimes obscure, Code and regulatory changes. In light of that, the IRS has long offered a program for reviewing and approving those plan documents – often conditioning its favorable determination letter on the employer’s adoption of one or more corrective technical amendments. The current program, established in 2005, has provided for a five-year remedial amendment cycle which effectively extended the period of time during which a plan could be amended under certain circumstances to retroactively comply with the ever-changing qualification requirements. Under this determination letter program, employers have filed for determination letters for their individually-designed plans every five years and had an opportunity to fix plan document issues raised by the IRS on review.

The IRS announced elimination of the five-year determination letter remedial amendment cycle in Announcement 2015-19 and said that determination letters for individually-designed plans will be limited to new plans and terminating plans. A transition rule applies for certain plans currently in the five-year cycle (i.e., employers with “Cycle E” or “Cycle A” plans may still file for determination letters) but, effective July 21, 2015, the IRS will not accept off-cycle applications except for new plans and terminating plans.

The IRS said that plan sponsors will be permitted to submit determination letter applications “in certain other limited circumstances that will be determined by Treasury and the IRS” but did not give a hint as to what those circumstances might be. The IRS intends to periodically request comments from the public on what those circumstances ought to be and to then identify those circumstances in future guidance.

In addition, the IRS said that it is “considering ways to make it easier for plan sponsors to comply with the qualified plan document requirements” which might include providing model amendments, not requiring amendments for irrelevant technical changes, or permitting more liberal incorporation by reference.

Comments on the issues raised in the Announcement – e.g., what changes should be made to the standard remedial amendment period rule, what considerations ought to be taken into account regarding interim amendments, and what assistance should be given to plan sponsors wishing to convert to pre-approved plans – may be submitted to the IRS until October 1, 2015.


IRS Releases Information and Forms for Satisfying the Individual Mandate and Claiming 2014 Premium Tax Credits

Originally posted February 5, 2015 by Linda Rowings on www.ubabenefits.com.

Although employers are not required to offer coverage during 2014, individuals are generally required to have health coverage during 2014 and must report on that coverage through their 2014 federal income tax return. In many cases, the employee will be able to simply state through a “yes/no” question on their federal income tax form that all individuals claimed on the tax form had minimum essential coverage during all of 2014. Individuals will not be required to attach proof of coverage, and employers and insurers are not required to supply proof of coverage provided during 2014. Individuals may wish to maintain evidence of coverage (such as pay stubs showing deductions for premiums or explanations of benefits) in case they are audited, but this is not required.

Individuals who did not have the needed coverage for the entire year, or who are claiming an exemption from the individual mandate, must use Form 8965 to claim an exemption or determine their penalty (which is determined on a month-by-month basis). The penalty for failing to have coverage in 2014 is the greater of 1% of income and $95 per person or $295 per family.

Individuals who received a premium tax credit/subsidy will need to complete Form 8962. Both state and federally-run Marketplaces will provide all individuals who had coverage through the Marketplace with a Form 1095-A. This form will include information the person will need to complete the Form 8962, including the employee’s monthly premium and tax credit received, so that the employee can reconcile the premium tax credit already applied toward premium payments with the tax credit amount that they are actually due. Individuals who have not received their full premium tax credit will receive the balance as a tax refund, while those who have received a larger estimated subsidy than they were entitled to will owe additional taxes. The amount that must be repaid is capped, and the IRS has said it generally will waive penalties that may be due for late payment of the amount owed or for failing to pay estimated taxes.

Although employers are not obligated to help employees with these new requirements, for those that wish to do so, the IRS has created a summary and issued Publication 5187 to explain the individual mandate requirements and premium tax credit rules.


Compliance Recap | January 2015

 

Originally posted January 31, 2015 by the United Benefit Advisors, LLC.

IRS Releases Information and Forms for Satisfying the Individual Mandate and Claiming 2014 Premium Tax Credits

Although employers are not required to offer coverage during 2014, individuals are generally required to have health coverage during 2014 and must report on that coverage through their 2014 federal income tax return. In many cases, the employee will be able to simply state through a "yes/no" question on their federal income tax form that all individuals claimed on the tax form had minimum essential coverage during all of 2014. Individuals will not be required to attach proof of coverage, and employers and insurers are not required to supply proof of coverage provided during 2014.
Individuals may wish to maintain evidence of coverage (such as pay stubs showing deductions for premiums or explanations of benefits) in case they are audited, but this is not required.
Individuals who did not have the needed coverage for the entire year, or who are claiming an exemption from the individual mandate, must use Form 8965 to claim an exemption or determine their penalty (which is determined on a month-by-month basis). The penalty for failing to have coverage in 2014 is the greater of 1% of income and $95 per person or $295 per family.
Individuals who received a premium tax credit/subsidy will need to complete Form 8962. Both state and federally-run Marketplaces will provide all individuals who had coverage through the Marketplace with a Form 1095-A. This form will include information the person will need to complete the Form 8962, including the employee's monthly premium and tax credit received, so that the employee can reconcile the premium tax credit already applied toward premium payments with the tax credit amount that they are actually due. Individuals who have not received their full premium tax credit will receive the balance as a tax refund, while those who have received a larger estimated subsidy than they were entitled to will owe additional taxes.
The amount that must be repaid is capped, and the IRS has said it generally will waive penalties that may be due for late payment of the amount owed or for failing to pay estimated taxes.
Although employers are not obligated to help employees with these new requirements, for those that wish to do so, the IRS has created a summary and issued Publication 5187 to explain the individual mandate requirements and premium tax credit rules.

U.S. Supreme Court to Hear Same-Sex Marriage Cases
On January 16, 2015, the U.S. Supreme Court agreed to decide whether states that do not allow same-sex individuals to marry, or that refuse to recognize marriages of same-sex couples that were legally performed in another state or country, are violating the U.S. Constitution. In June 2013, the Supreme Court ruled that the Defense of Marriage Act (DOMA), which provided that for federal law purposes marriage could only be between a man and a woman, was unconstitutional. Because the 2013 Supreme Court decision only addressed federal laws, over the past year-and-one-half many lawsuits have been filed challenging the legality of state bans on same-sex marriage. Most of the Courts of Appeals that have considered these cases have ruled that state bans violate the U.S. Constitution (which overrides a state constitution), and currently same-sex marriages are recognized in about two-thirds of the states. However, the Court of Appeals for the Sixth Circuit, which governs Kentucky, Michigan, Ohio and Tennessee, found the state bans to be permissible.
The Supreme Court has now agreed to decide which interpretation is correct. A decision is expected in late June 2015.
Until that decision is reached, the current laws generally will continue to apply. Based on the 2013 court ruling, employers in all states should be treating both same-sex and opposite-sex spouses equally for purposes of access to tax-free payment of group health premiums -- that is, income should no longer be imputed for coverage provided to same-sex spouses and their children. Income should continue to be imputed if domestic partners are covered.
Employers should remember that they need to administer their plans according to the plan's terms. This means that the employer should review the plan or policy to see how "spouse" is defined. Many plans simply state that employee's "spouse" or "lawful spouse" is eligible -- in that case, if the employee was legally married to a same-sex spouse in any state, in most cases the spouse is eligible under the plan. If the plan states that only opposite-sex spouses are eligible, and the employee or employer is located in a state that recognizes same-sex spouses, the employer should discuss the situation with local counsel.

2015 Federal Poverty Guidelines
The Department of Health and Human Services has published the 2015federal poverty level (FPL) guidelines. These numbers are used when determining whether a person is eligible for a premium tax credit. For 2015, in most states FPL is $11,770 for a single person and $24,250 for a family of four. This compares to $11,670 for a single person and $23,850 for a family of four in 2014. FPL in Alaska for 2015 is $14,720 for a single person and $30,320 for a family of four and in Hawaii it is $13,550 for a single person and $27,890 for a family of four.

Qualified Transportation Benefit Adjustments
In December 2014, Congress retroactively increased some of the limits for qualified transportation benefits. Because the increase occurred so late in 2014, questions were raised about how to handle related adjustments to income and FICA. On January 9, 2015, the IRS issued a Notice that provides a streamlined method for employers to handle FICA adjustments. Employees will make income adjustments on their individual tax returns.

Reminder
Each year, group health plan sponsors that provide prescription drug coverage to individuals eligible for Medicare Part D due to age, disability, or certain diseases must notify the Centers for Medicare & Medicaid Services (CMS) whether the coverage they offer is "creditable" or "non-creditable." Prescription drug coverage is "creditable" when it is actuarially equivalent to Medicare Part D prescription drug coverage or is better than the Medicare coverage. This reporting to CMS is in addition to the notices that must be provided to Medicare-eligible employees and dependents before October 15 of each year. (Because an employer may not be aware if an employee or dependent is or may soon become eligible for Medicare due to disability, for example, many employers provide this notice to all employees each fall.)The CMS notice is due within 60 days after the beginning of the plan year, which means that calendar year plans must submit this year's disclosure to CMS by March 1, 2015.
Reporting must be done online using the Disclosure to CMS Form on the CMS website. Instructions, including screen shots, are also available on that website.

Question of the Month

Q: What is a "plan year" and why does it matter?
A: Many of the requirements that apply to health plans take effect as of the start of a plan year. Under rules established by the U.S. Department of Labor, the "plan year" must be defined in the plan document or summary plan description (SPD). If the plan is large enough that a Form 5500 is needed, the plan year described in these documents should match the "plan year" on which the Form 5500 is filed. The policy renewal year may or may not be the same as the plan year. When deciding when new requirements will apply, the employer should use the first day of the plan year, not the policy renewal date, if the dates do not match. While most plans should have a plan document and SPD, if these documents do not exist, it is not entirely clear whether the policy year or the deductible year should be considered the plan year. To avoid this uncertainty, and meet other federal laws, employers without SPDs should seriously consider adopting them.

Download the complete January Compliance Recap here.

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Determining Minimum Value and Affordability

Source: United Benefit Advisors, LLC

The IRS has released final regulations that address how wellness incentives or penalties, contributions to a health reimbursement arrangement, and employer contributions to a Section 125 plan are applied to determine affordability. While these regulations were issued in connection with the individual shared responsibility requirement (also called the individual mandate), the agencies said that they expect to use the same approach when determining affordability for purposes of eligibility for the premium tax credit and the employer-shared responsibility/play or pay requirements.

The regulations provide that when deciding if the employee’s share of the premium is affordable:

  • Wellness incentives or surcharges, except for a non-smoking incentive, may not be considered. In other words, the premium for non-smokers will be used to determine affordability (even for smokers). Any other type of wellness incentive must be disregarded, even if the employee has earned one.
  • If an employer makes contributions to a health reimbursement arrangement (HRA) that the employee may use to pay premiums, the employee’s cost of coverage may be reduced by the employer’s current year contribution to the HRA, provided that the planned employer contribution is publicized before the enrollment deadline.
  • If an employer makes flex contributions through a Section 125 cafeteria plan, the employee’s required contribution may be reduced by flex contributions that (1) may not be taken as a taxable benefit, (2) may be used to pay for minimum essential coverage, and (3) may only be used to pay for medical care.

Because an employer’s contribution to a health savings account (HSA) generally may not be used to pay premiums, employer contributions to an HSA may not be used when determining affordability. For a complete checklist, download UBA's PPACA Advisor, “Preparing for 2015 - Key PPACA Requirements".

Attachment


IRS drafts instructions for ACA reporting requirements

Originally posted September 11, 2014 by Keith R. McMurdy on http://ebn.benefitnews.com.

They promised they would be coming and now they have. On Aug. 28, the Internal Revenue Service issued draft instructions for Forms 1094-C and 1095-C and Forms 1094-B and 1095-B, which I provided in my July 31 entry.

These forms were provided in draft format and they are used to satisfy Affordable Care Act’s “information reporting requirements.” We also got draft instructions for Form 1095-A that relates to the statement about the Health Insurance Exchange Marketplace. The IRS has indicated that it will finalize the forms and instructions in 2014.  On top of that, they issued some FAQs that address the reporting requirements.

As a starting point, the FAQs provide that some short-term penalty relief will be available for incomplete or incorrect information returns that are filed (or employee statements provided to employees) in 2016 for coverage offered, or not offered, in 2015. Under this relief, the IRS will not impose penalties on employers that can demonstrate that they made good faith efforts to comply with the information reporting requirements. This relief applies to returns and statements filed and furnished in 2016 to report offers of coverage in 2015 for incorrect or incomplete information reported on the return or statement, but the relief is not available if you fail to file. You have to show a good faith effort to comply so you cannot simply not file anything an expect relief.

With respect to the instructions themselves, to say that they are lengthy is an understatement.  Employers should read them in detail to understand their obligations. However, some key provisions that help in compliance include:

  • Clarification that employers must file Forms 1095-C and 1094-C with the IRS, and provide a copy of Form 1095-C to employees.
  • A statement that, as noted above, forms 1095-C and 1094-C information returns are not required for 2014. Actual filings are not required until 2016 for the 2015 calendar year but employers may voluntarily file these forms in 2015 for 2014.  If by chance an employer does choose to voluntarily files in 2015 for the 2014 year, penalties for the employer mandate payments will not be assessed for 2014.
  • Establishment of specific dues dates for Forms 1095-C and 1094-C information returns.  They must be filed by February 28 (for paper filings), or March 31 (for electronic filings) of the year following the calendar year to which the return relates.
  • Clarification that a Form 1094-C must be attached to any Forms 1095-C filed by an employer. Each employer must file one 1094-C that reports aggregate employer-level data for all the employer’s full-time employees, which is referred to as the “authoritative transmittal” (and denoted accordingly on Line 19 of the Form 1094-C). Only one authoritative transmittal may be filed for each employer.
  • Employers also must provide a Form 1095-C to each full-time employee by Jan. 31 of the year after the year to which the form relates (so that would be Jan. 31, 2016 for the 2015 reporting year). Incidentally, employee statements must be furnished to individuals in paper format by mail, unless the individual affirmatively consents to receiving the statement electronically.

As with the forms, the instructions are in draft format and subject to change and finalization.  However, between the draft forms and the draft instructions, employers should now be able to ascertain generally what is required of them in reporting. Even though the mandatory reporting requirement does not completely kick in until after 2015, employers should spend some time reviewing these requirements with their plan professionals, preferably sooner rather than later, to get a sense of what data they will have to collect and how who has responsibility for making sure the information is accurate.

 


IRS releases draft instructions for ACA reporting forms

Originally posted August 29, 2014 by Andrea Davis on http://ebn.benefitnews.com

Forms 1094-B and 1095-B are used by organizations that are not reporting to the IRS as large employers – insurers and sponsors of multiemployer plans, for example. Forms 1094-C and 1095-C, meanwhile, are used by organizations that are subject to the employer mandate.

“The instructions are voluminous and reflect the complexity behind the information, particularly that employers are going to have to provide,” says Amy Bergner, managing director, human resource solutions at PricewaterhouseCoopers in Washington, DC.

The IRS released the draft forms a few weeks ago but without draft instructions, “it was difficult to tell exactly what employers and insurers were going to have to do,” she notes. “Now we have these draft instructions that really walk through what’s behind all of the reporting.

Bergner says employers should review the draft instructions as soon as possible with all third-party providers who help them with tax reporting. “Even though these reports are not filed with the IRS or sent to employees until early in 2016, employers have to be capturing the information on a monthly basis starting in January 2015,” she says.

The purpose of the forms is three-fold:

1. When individuals file their individual tax returns, they’re going to have to report whether or not they have health insurance as required by the ACA’s individual mandate. The IRS can compare what the individual is reporting with what the employer is reporting.

2. The IRS can double check whether people who have received federal government subsidies to buy insurance on the exchanges were actually entitled to it. People who are offered employer-sponsored coverage are not entitled to the subsidy.

3. The IRS can enforce the employer mandate, which requires employers with 50 or more full-time employees to offer health insurance.

“The instructions include many of the complicated and detailed rules about the employer mandate, details usually reserved for regulations or other technical guidance,” says Bergner. “We expect that many employers and insurers will need assistance decoding the instructions and the underlying rules to be able to ultimately provide timely and accurate reports.”


IRS Issues Drafts of Individual Responsibility Reporting Forms

Originally posted July 31, 2014 on ubabenefits.com

In order for the IRS to verify that individuals and employers are meeting their shared responsibility obligations, and that individuals who request premium tax credits are entitled to them, employers and insurers will be required to provide reporting on the health coverage they offer. Reporting will first be due early in 2016, based on coverage in 2015.

On July 24, 2014, the IRS published drafts of several of the forms that will be used to provide the required reporting. Instructions were not released with the draft forms, so some questions remain unanswered. The IRS has said that it will issue drafts of the instructions in August and that the final forms and instructions will be available by the end of 2014.

Generally speaking, an employer will not have any reporting requirement if it has fewer than 50 full-time and full-time equivalent employees in its controlled group and it sponsors a fully insured medical plan. All other employers will have at least some reporting. This appears to include employers with 50 to 99 employees for 2015 -- even though the employer-shared responsibility requirement has been delayed until 2016 for most employers in this group, reporting is still needed to help determine whether individual employees owe penalties or are eligible for premium subsidies.

Employers with 50 or more full-time or full-time equivalent employees in their controlled group - whether the coverage offered is fully insured or self-funded - will need to complete both Part I and Part II of IRS Form 1095-C. This form will be required for each employee, regardless of whether the employee is eligible for medical coverage. Part I includes basic identifying information. To complete Part I, the employer will need:

  • The name, address, and Social Security number of the employee
  • The name, address, employer identification number (EIN) and a contact telephone number for the employer (the contact telephone number can be that of a third party)

Part II will be used to determine whether minimum essential, minimum value and affordable coverage was offered and accepted. This data will be used to determine whether the employer owes penalties for not offering minimum essential coverage (these are sometimes referred as the "A" penalty or the $2,000 penalty) or for not offering affordable, minimum value coverage (these are sometimes referred to as the "B" penalty or the $3,000 penalty) and if the employee is eligible for premium subsidies.

The employer will use one of several codes to report whether it offered coverage to the employee, and the extent of the coverage it offered. If coverage did not vary during the calendar year, the employer may simply use one code to report all 12 months. If coverage varied during the year, a code is needed for each month. (Note that this reporting is made on a calendar year basis, even if the employer has a non-calendar year plan.)

The employer also will report the employee's share of the lowest cost monthly premium for self-only minimum value coverage for which the employee is eligible (not the premium for the coverage the employee elected since the contribution amount which determines affordability is the lowest cost premium for self-only minimum value coverage).

The employer also will enter codes that the IRS will use when determining if a penalty is owed. Those codes address whether the employee was eligible for coverage during the month, including whether the employee was employed, classified as full-time, in a waiting period or covered. If the employee was covered during the month, the employer will report whether coverage was affordable and which affordability safe harbor was used.

In addition, employers with self-funded plans will complete Part III of Form 1095-C. Part III information will be used to determine whether the employee's family met its requirement to have minimum essential coverage. To complete Part III, the employer will need:

  • The name and Social Security number (or date of birth if a Social Security number is not available) of each covered spouse and dependent
  • The calendar months each spouse or dependent child was covered (if the person was covered for the whole year, that can be reported rather than month by month reporting)

Information that is similar to the information provided on Part III of Form 1095-C will be provided by the insurer to the employee using IRS Form 1095-B. Form 1095-B will report whether the employee and the employee's spouse and children had minimum essential coverage for each month. This means that an employee who works for a mid-size or large employer that provides coverage on a fully insured basis will receive two forms: Form 1095-B from the insurer and Form 1095-C from the employer. Form 1095-B also will include the origin of the policy (presumably, whether coverage is through an employer, individual insurance, a multiemployer plan, Medicare, Medicaid or the Marketplace), the name, address, and EIN of any employer sponsoring the plan and the Small Business Health Options Program (SHOP) Marketplace unique identifier if coverage is provided through the SHOP.

Employers with 50 full-time and full-time equivalent employees in their controlled group also will need to file IRS Form 1094-C, with a copy of the Form 1095-C it issued to each employee. Employers that are not part of a controlled or affiliated service group (called an ALE Aggregated Group on the form) will complete Parts I, II and III of the form. To complete these parts, the employer will report:

  • The employer's name, address, EIN and the name and phone number of a contact person (who does not need to be an employee)
  • The total number of Forms 1095-C submitted with the transmittal form
  • Whether it is part of an ALE Aggregated Group (i.e., a controlled or affiliated service group)
  • Whether the employer is exempt from some or all reporting or penalties because of its size or offer of coverage to a very high percentage of individuals
  • On a month by month basis (with some ability to report for the full year if nothing changes):
  • Whether minimum essential coverage was offered
  • The total number of full-time employees of that employer
  • The total employee count of that employer
  • Whether the employer qualifies for transition relief either because it had 50 to 99 employees or because it had more than 100 employees, but is a non-calendar year plan

Employers that are part of a controlled or affiliated service group also must enter the name and EIN of all other employers that were part of the group during the calendar year. Each employer in a controlled or affiliated service group must file a separate report, although one member of the controlled group may complete the form on behalf of other members. In certain circumstances, government plans may report on a single form through a "designated government entity."

In summary, the reporting requirements are:

 

 

 

Fully Insured
< 50 FTEs

 

Fully Insured
50 to 99 FTEs

 

Fully Insured
100+ FTEs

 

Self-Funded
<50 FTEs

 

Self-Funded
50 to 99 FTEs

 

Self-Funded
100+ FTEs

 

Form(s) to employees

 

1095-B

 

1095-B/1095-C (Parts I and II only)

 

1095-B/1095-C (Parts I and II only)

 

1095-C (Parts I, III and line 14 only)

 

1095-C (all Parts)

 

1095-C (all Parts)

 

Filed by

 

Insurer

 

Insurer/Plan Sponsor

 

Insurer/Plan Sponsor

 

Employer

 

Employer

 

Employer

 

Form(s) to IRS

 

1094-B

 

1094-B/1094-C (with copies of all 1095s)

 

1094-B/1094-C (with copies of all 1095s)

 

1094-C (with copies of all 1095-Cs)

 

1094-C (with copies of all 1095-Cs)

 

1094-C (with copies of all 1095-Cs)

 

Filed by

 

Insurer

 

Insurer/Plan Sponsor

 

Insurer/Plan Sponsor

 

Employer

 

Employer

 

Employer

 

Note: In this chart "FTE" refers to full-time or full-time equivalent employees.

The reporting will occur with the same timing and process as W-2 and W-3 reporting. The individual will receive a Form 1095 that provides information about his or her coverage. The individual's report will be due on January 31 following the calendar year that is being reported. The employer will provide a "roll-up" report using IRS Form 1094 and copies of the individual 1095 forms. The employer report will be due by February 28 (or March 31 if filed electronically). Employers will be required to file electronically if they issue 250 or more forms. Reporting must be done on a calendar year basis, even if the plan or policy operates on a non-calendar year basis. Because January 31, 2016, and February 28, 2016, are Sundays, employers and insurers will have until February 1, 2016, to provide the first Forms 1095 and until March 1, 2016, to file the first Form 1094 if Form 1094 is filed using paper.

Form 1095 only needs to be provided to the named insured. Employers that mail the form may send it with the W-2 form. If the form is mailed to the employee's last known permanent address and it is returned, the employer does not need to resend the form. Employers may provide the form electronically to the employee if the employee provides a consent that meets certain requirements. If the form is sent electronically and it is returned, the employer must try to obtain a current electronic address. If that is not possible, the notice must be mailed or hand-delivered within 30 days.

Employers concerned about maintaining and transmitting Social Security numbers may use truncated numbers (e.g., XXX-XX-1234). Substitute forms will be permitted.

Employers that offer particularly generous coverage may use alternative, simplified reporting instead of the "general" reporting explained above. Depending on the situation, the employer may be able to use alternative reporting for some employees even though it must use the general reporting method for others. The employer also may use different alternative reporting methods for different groups of employees. Three alternative methods will be available for reporting on coverage offered in 2015:

  1. If the employer makes a "qualifying offer" for each month in the calendar year, it can provide a certification of coverage instead of some of the demographic reporting and provide streamlined reporting to the covered employees. If the employee was not eligible for the full year, this alternative method may not be used for that employee. A "qualifying offer" is an offer that meets all of these requirements:
    -- Is offered to the employee and to any spouse and dependent children
    -- Provides minimum value
    -- Has an employee contribution for single coverage that is less than
    9.5% of the federal poverty level in the 48 contiguous states (which
    would be a maximum contribution for 2014 of $92.38 per month)
  2. If the employer offers affordable, minimum value coverage to at least 98% of its total employees (regardless of whether they are full-time or part-time) it does not need to report whether an employee is full-time and it does not need to provide a count of its full-time employees. However, it will need to provide all of the other information required under the general method, and if an employee requests a premium tax credit, it will need to respond to an IRS inquiry about the employee's work and coverage status.
  3. For 2015 only, an employer that has provided a "qualifying offer" to 95% of its full-time employees, their spouses, and dependents may simply provide each of its full-time employees with a statement informing the covered employees that they will not be eligible for premium tax credits (if the qualifying offer was made for each of the 12 months of the year), or that they may be eligible for premium tax credits for any months in which a qualifying offer was not made. The statement must provide contact information for the employer. The employer transmittal will need to provide identifying information for the covered employees and affirmation that a qualifying offer was made.

Even though these forms are not final, employers may want to study them as they begin to determine whether they are currently collecting, and will be able to retrieve, the information needed to complete the forms.

Notes:

"Minimum essential" coverage is basic medical coverage. Coverage does not need to include the 10 essential health benefits to be considered minimum essential coverage.

"Minimum value" coverage is coverage that has an actuarial value of at least 60%.

A plan sponsor generally is the employer for employer-provided coverage and the board of trustees or committee for a multiemployer plan.

The regulations acknowledge the difficulties that reporting may present for employers with employees covered by multiemployer plans. The plan administrator of the multiemployer plan may complete Form 1095-B for its members and provide it to the employer to transmit with the forms for employees not covered by the multiemployer plan. The employer is ultimately responsible for the filing. Additional details are to be provided in the instructions when they become available.

Employees who receive a premium tax credit/subsidy will file IRS Form 8962 with their individual federal income tax return. Coverage that is obtained through a Marketplace, except for SHOP coverage, will be reported on IRS Form 1095-A.