2016 Draft Forms & Instructions Released: Affordable Care Act Reporting Update

Great feature from The National Law Review by Damian A. Myers,

Since our last ACA Reporting Update, the extended deadlines to distribute Forms 1095-B and 1095-C to covered individuals and employees and to file the forms with the IRS have passed.  The IRS has stated, however, that late forms can still be submitted via electronic filing and the forms that received an error message should be corrected.  By many accounts, the first ACA reporting season presented numerous challenges.  From collecting large amounts of data to compiling the forms, to working with service providers that faced their own unique challenges, to facing form rejections and error notifications from an inadequate IRS electronic filing system, employers and coverage providers faced obstacles nearly every step of the way.  Nevertheless, most employers and coverage providers were able to get the forms filed and put the 2015 ACA reporting season behind them.

But, alas, there is no rest for the weary. In late-July, the IRS released new draft 2016 Forms 1094-B and 1095-B (the “B-Series” Forms) and Forms 1094-C and 1095-C (the “C-Series” Forms).  Additionally, on August 1, the IRS released draft instructions to the C-Series Forms (as of the date of this blog, draft instructions for the B-Series Forms have not been released).  For the most part, the 2016 ACA reporting requirements are similar to the 2015 requirements, subject to various revisions described below.

  • Various changes have been made to the forms and instructions to reflect that certain forms of transition relief are no longer applicable. For example, the non-calendar year transition relief (for plan years starting in 2014) that applied in 2015 does not apply in 2016. Similarly, changes have been made to reflect that the “Section 4980H Transition Relief” is still relevant only for non-calendar year plans though the end of the plan year ending in 2016.  The Section 4980H Transition Relief exempts applicable large employers (“ALEs”) with 50-99 full-time employees from penalties under Section 4980H of the Internal Revenue Code (the “Code”) and reduces the 95% threshold to 70% for other ALEs.  The relief also exempts ALEs from having to offer coverage to dependents if certain requirements are met. For calendar year plans, the threshold is at 95% throughout 2016 and dependent coverage must be offered during each month of the year.

  • The draft instructions to the C-Series Forms provide more detail and examples on how ALEs should prepare the forms. Instead of referring to “employers” throughout the instructions, the IRS has replaced that term in most cases with “ALE Member.”  The reason for this change is to highlight the fact that each separate ALE Member must file its own forms. Examples related to completing the authoritative Form 1094-C highlight that each separate entity (determined based on employer identification number) is required to file its own authoritative Form 1094-C.

  • As promised by the IRS last year, there are two new indicator codes for Line 14 of Form 1095-C. These new codes ask employers to indicate whether a conditional offer was made to a spouse. An offer of coverage to a spouse is conditional if it is subject to one or more reasonable, objective conditions. For example, if a spouse must certify that he or she is not eligible for group health coverage through his or her employer, or is not eligible for Medicare, in order to receive an offer of coverage, the offer is considered conditional.

  • The draft instructions to the C-Series Forms reflect that the good faith compliance standard applicable to 2015 forms (under which filers could avoid reporting penalties upon a showing of good faith) no longer applies for 2016 ACA reporting. Going forward, reporting penalties may be waived only upon the standard showing of reasonable cause.

  • The draft instructions to the C-Series Forms include new information related to coding for COBRA continuation coverage. There has been some uncertainty regarding how to treat offers of COBRA continuation coverage since the IRS removed relevant guidance from its Frequently Asked Questions website in February 2016. Similar to the 2015 instructions, the draft 2016 instructions provide that offers of COBRA coverage after termination from employment should be coded with 1H (Line 14) and 2A (Line 16) whether or not the COBRA coverage is elected. The new instructions now state that this coding sequence also applies for other, non-COBRA post-employment coverage, such as retiree coverage, when the former employee was a full-time employee for at least one month of the year.

In the case of an offer of COBRA coverage following a reduction in hours, the basic coding requirement is the same as in 2015 – the offer of COBRA coverage is treated as an offer of coverage on Line 14 of the Form 1095-C. The draft instructions expand on this basic requirement to explain how to code Lines 14 and 16 when the offer of COBRA coverage is not made to a spouse or dependent.  In general, for purposes of Code Section 4980H, an offer of coverage made once per year to an employee and his or her spouse and dependents is treated as an offer for each month of the year even if the coverage is declined for the employee, spouse, and/or dependents.  Under general COBRA rules, only those individuals enrolled in coverage immediately prior to the qualifying event receive an offer of COBRA coverage.

So how does this play out when an employee with a spouse and dependents elects self-only coverage during open enrollment and later loses that coverage due to a reduction in hours? The draft instructions treat the initial offer of coverage at open enrollment and the offer of COBRA coverage as two separate offers of coverage.  To determine the proper coding, the employer must look at who had the opportunity to enroll at each offer.  During open enrollment, the employee, spouse and dependent had the opportunity to enroll.  Thus, until the reduction in hours and loss of coverage, the coding should be 1E (offer to employee, spouse and dependent) in Line 14 and 2C (enrolled in coverage) in Line 15.

In contrast, the offer of COBRA coverage was only available to the employee and, therefore, after the reduction in hours, the coding should be 1B (offer to employee only) in Line 14. If the employee does not elect the COBRA coverage, code 2B (part-time employee) could be inserted in Line 16.  If, however, the employee does elect COBRA coverage, it appears that code 2C (enrolled in coverage) should still be inserted in Line 16.  Although this latter coding sequence is likely intended to protect the spouse and dependents from being “firewalled” from a premium credit, there appears to be nothing to indicate that the employer should not be assessed a penalty for failing to make an offer to the employee’s dependents.

  • The draft instructions for the C-Series Forms provide additional insight into how to calculate the number of full-time employees for purposes of column (b) in Part III of the Form 1094-C. The draft instructions clarify that the determination of full-time employee status is based on rules under Code Section 4980H and related regulations and not on other criteria established by an employer. Note that, currently, the draft instructions state that the monthly measurement period must be used for this purpose, but it appears that this is a mistake and that it should reference both the monthly measurement and look-back measurement methods. The IRS may clarify this in the final instructions.

  • One important non-change in the draft instructions is that the specialized coding for employees subject to the multiemployer plan interim guidance remains in effect for 2016 reporting. The interim guidance provides that an employee is treated as having received an offer of coverage if his or her employer is obligated pursuant to a collective bargaining agreement to contribute to a multiemployer plan on the employee’s behalf, provided that the multiemployer plan coverage is affordable and has minimum value and the plan offers dependent coverage to the eligible employee. The coding for such as employee is 1H (no offer of coverage) for Line 14 and 2E (multiemployer plan interim guidance) for Line 16.

There will undoubtedly be tweaks to the draft instructions to the C-Series forms, but significant changes appear unlikely. Given that only five months remain in 2016, employers should start planning now for 2016 ACA reporting based on the draft instructions and make alterations as necessary when final instructions and other guidance is released.

See the original article Here.


Myers, D. A. (2016 August 4). 2016 draft forms & instructions released: affordable care act reporting update. [Web blog post]. Retrieved from address http://www.natlawreview.com/article/2016-draft-forms-instructions-released-affordable-care-act-reporting-update

Impact of Telemedicine on HSA Eligibility

One of the hottest benefit trends in 2016 is the adoption of free or low cost “telemedicine” programs to provide employees easy and affordable access to medical care. However, employers adopting these programs alongside high deductible health plans (HDHPs) need to be sure that they do not inadvertently disqualify the covered employees from eligibility for a health savings account (HSA).

The term “telemedicine” generally refers to healthrelated services delivered over the telephone or internet to employees and covers services ranging from non-specific wellness information about health conditions to primary care diagnosis and advice with prescription drug services. The employee’s cost for such services also varies and may consist of a charge on a “per-use” basis, or a monthly or annual fee for access. In many cases, employers are subsidizing the cost of the services or offering the services free of charge to encourage usage, which could create issues for employees with HSA coverage.

An HSA allows participants to defer compensation on a pre-tax basis for the purpose of paying eligible medical expenses if the participant is covered under an HDHP. In addition, the HSA participant must not be covered under any “disqualifying coverage.” Disqualifying coverage includes any health coverage that provides a benefit before the HDHP deductible is met and is often referred to as “first dollar coverage.” The IRS rules allow an exception from the first dollar coverage prohibition for certain types of coverage, including “permitted insurance” (for example, workers’ compensation, specified disease or illness insurance, per diem hospital benefits), “excepted benefits” (such as stand-alone dental or vision benefits), preventative care services, certain employee assistance programs (EAPs), and discount card programs allowing employees to receive discounted health services at managed care rates if the employee must pay for the balance until the HDHP deductible is met. Telemedicine programs that fall under one of the above categories will not prevent an individual from contributing to an HSA.

However, many telemedicine programs go beyond providing preventative care or EAP benefits and do not fall within the permitted insurance or excepted benefits categories. Thus, a telemedicine benefit could count as disqualifying coverage, for example, if the employer pays a portion of the cost of a telemedicine consultation, or the participant pays less than fair market value for access to the consultation, before meeting the HDHP deductible. Any telemedicine program providing primary care or prescription drug services in particular would likely trigger IRS scrutiny unless the employer can establish that the cost passed on to participants is the fair market value for the services. Although the IRS has not yet weighed in on the impact of telemedicine programs on HSA benefits, employers that sponsor HDHPs and telemedicine programs should consider the risks of potential HSA disqualification with legal counsel to ensure employees are not subjected to unintended income and excise taxes for participating in disqualifying coverage.

Content included in the Summer 2016 Benefits and Employment Briefing provided by our partner, United Benefit Advisors

Proposed regulations clarify TIN responsibilities, create new questions

Ryan Moulder gives a little clarity on the new TIN regulations in the article below.

On Aug. 2, 2016 the IRS published in the Federal Register proposed regulations which among other things attempt to clarify the confusion regarding Taxpayer Identification Number solicitations. This is the government’s third attempt to clarify the TIN issue since the creation of IRC section 6055. The first attempt was made in the preamble to the final regulations for section 6055. In an attempt to bring greater clarity and to gather further comments on the issue, the government issued Notice 2015-68. Notice 2015-68 states an employer will not be subject to the penalties for the failure to report a TIN if the entity follows the regulations set forth at section 301.6724-1(e) with the additional modifications:

  1. The initial solicitation is made at an individual’s first enrollment or, if already enrolled on September 17, 2015, the next open enrollment;
  2. The second solicitation is made at a reasonable time thereafter, and
  3. The third solicitation is made by December 31 of the year following the initial solicitation.

The Notice is not a model for clarity and this issue has only been exasperated by the number of AIRTN500 error messages employers received when submitting the Form 1095-C. With that as a backdrop, the government is once again trying to clarify an employer’s solicitation obligation through proposed regulations. The proposed regulations only apply to the Form 1095-B and to Part III of the Form 1095-C (the Part that is used for employers that sponsor a self-insured plan). The proposed regulations do not affect Parts I or II of the Form 1095-C. This article focuses on the proposed regulations as they relate to Part III of the Form 1095-C. However, most of the concerns discussed in this article could be applied to the Form 1095-B.

As a refresher to what we have written about in previous publications, an employer submitting a Form 1095-C is subject to the penalty provisions of section 6721 and section 6722 for failure to timely file a correct information return or failure to timely furnish a correct statement to the individual. The penalties under both section 6721 and section 6722 may be waived if the failure to timely file (or furnish) a correct information return (or statement) was due to reasonable cause and not due to willful neglect. An employer may meet this standard by showing it acted in a responsible manner and that the failure was the result of events beyond the employer’s control or there were mitigating factors. An employer in danger of violating section 6721 and section 6722 as the result of a missing TIN or an incorrect TIN can follow the procedures laid out in specific sections of the regulations to fulfill the standard discussed in the preceding sentences.

The proposed regulations did a good job distinguishing between missing TINs (discussed at section 301.6724-1(e)) and incorrect TINs (discussed at section 301.6724-1(f)). Treasury and the IRS agreed with commenters that some modifications needed to be made to the solicitation process for missing TINs. However, the proposed regulations leave unchanged the regulations set out for incorrect TINs.

One of the problems commenters complained about with regard to missing TINs is it did not adequately define the term “opened” which was relevant to determine when the initial solicitation needed to be made to satisfy the regulations. An initial solicitation for a missing TIN must be made at the time an account is “opened.” Prior to the existence of the Form 1095-C, missing TIN solicitations were typically performed for financial accounts. These accounts are generally considered “opened” on the first day the account is available for use by the owner. However, this understanding of the term “opened” does not translate well to health coverage.

To rectify this problem, the proposed regulations provide that for the purposes of the Form 1095-C an account is considered “opened” on the date the filer receives a substantially complete application for new coverage or to add an individual to existing coverage. The proposed regulations indicate the initial solicitation for a missing TIN can be satisfied by requesting the enrolling individual’s TIN as part of the application process.

If the initial solicitation for a missing TIN does not produce a TIN, the first annual solicitation under the proposed regulations must be made no later than 75 days after the date on which the account was “opened” or, if the coverage is retroactive, no later than 75 days after the determination of retroactive coverage is made. The second annual solicitation for a missing TIN remains unchanged from the current regulations and must be made by December 31 of the year following the year the account is opened. It is important to note an employer may continue to rely on the rules discussed in Notice 2015-68 or may follow the proposed regulations until the final regulations are published.

Additional relief is provided by the proposed regulations for a missing TIN. For any individual enrolled in coverage on any day before July 29, 2016, the account will considered to be opened on July 29, 2016. An employer will have satisfied its initial solicitation obligation with respect to an individual who is already enrolled so long as the employer requested the enrolled individual’s TIN as part of the application process for coverage or in any other appropriate fashion before July 29, 2016.

Consistent with Notice 2015-68, the first annual solicitation would need to be made within a reasonable time after July 29, 2016 if the initial solicitation did not produce a TIN. An employer who performs the first annual solicitation within 75 days (before Oct. 11, 2016) will be treated as having made the first annual solicitation within a reasonable time. In this situation, if the first two solicitations (the initial solicitation and the first annual solicitation) do not produce a TIN, the second annual solicitation would need to be made by December 31, 2017.

The proposed regulations do not change the solicitation process for incorrect TINs. Therefore, for an incorrect TIN, the first annual solicitation must be made on or before December 31 of the year in which the employer was notified of the incorrect TIN unless the employer was notified of the incorrect TIN in December in which case the employer’s solicitation must be made by January 31 of the following year (see section 301.6724-1(f)(1)(ii)). Similarly, the rules for the second annual solicitation for an incorrect TIN remain unchanged. Therefore, if the employer is notified in any following year after the first annual solicitation that an employee’s (or other dependents’) TIN is incorrect, a second annual solicitation must be made on or before December 31 of the year in which the employer was notified of the incorrect TIN unless the employer was notified of the incorrect TIN in December in which case the employer’s solicitation must be made by January 31 of the following year (see section 301.6724-1(f)(1)(iii)).

The current regulations state that an employer may be notified of an incorrect TIN by the IRS or by a penalty notice issued by the IRS under section 6721 (see section 301.6724-1(f)(1)(ii)). Employers are being notified of an incorrect TIN on Part III of the Form 1095-C with an AIRTN500 error message. We were under the assumption that this would trigger the TIN solicitation obligation. However, footnote 2 of the proposed regulations appears to call this into question. Footnote 2 states:

A filer of the information return required under section 1.6055-1 may receive an error message from the IRS indicating that a TIN and name provided on the return do not match IRS records. An error message is neither a Notice 972CG, Notice of Proposed Civil Penalty, nor a requirement that the filer must solicit a TIN in response to the error message.

This footnote could be interpreted several ways. One possible reading would result in an employer having no solicitation obligation despite the fact an employee’s Form 1095-C triggered an AIRTN500 error message. Alternatively, this footnote could be read to mean an employer who received an AIRTN500 error message would not in all cases be required to make a solicitation. This would be the case if the employer had already fulfilled an initial solicitation as well as two additional annual solicitations at a prior time

However, we think the instructions to the Form 1095-C require an employer receiving an AIRTN500 error message to make some sort of effort to identify a correct TIN for a covered individual. Among other items, an employer is responsible for filing a corrected Form 1095-C if there was an error in the TIN in Part I or Part III related to covered individuals. The source of the error identification may be an IRS error message when submitting the Form 1095-C. The AIRTN500 error message is telling an employer there is an error in a TIN in either Part I or Part III of the Form 1095-C.

However, and to murky the water even further, the instructions for the Form 1094-C/1095-C state “Regulations section 301.6724-1 (relating to information return penalties) does not require you to file corrected returns for missing or incorrect TINs if you meet the reasonable cause criteria.” The confusion with this statement begins with the statement appearing to be at odds with the Form 1094-C/1095-C instructions requirement that a corrected return be filed for an incorrect TIN in Part I or Part III. However, this could conceivably be reconciled with the current regulations. The current regulations require an employer to include the updated TIN with any information return that has an original due date which is after the date that the employer receives the updated TIN (see section 301.6724-1(f)(1)(iv)). Therefore, these statements could be reconciled by viewing the current regulations standard of only updating forms after the correct TIN has been received (as stated in section 301.6724-1(f)(1)(iv)) as trumping the Form 1094-C/1095-C instructions need to correct a return for an incorrect TIN in Part I or Part III.

What is more difficult to reconcile is footnote 2 and the statement in the Form 1094-C/1095-C instructions. As discussed above, footnote 2 could be read to mean no solicitation effort is needed in the event of an AINTN500 error message. Seemingly to the contrary, the Form 1094-C/1095-C instructions state an employer does not need to file a corrected return for a missing or incorrect TIN if the employer meets the reasonable cause criteria of section 301.6724-1. This is inconsistent because, to meet the reasonable cause criteria of section 301.6724-1, an employer must follow the solicitation procedures for missing and incorrect TINs discussed in section 301.6724-1(e) and section 301.6724-1(f) respectively.

One possible reading of all of these statements would give employers two potential paths. If the footnote 2 path is followed, no formal solicitation would need to be made. However, if the footnote 2 path is followed and an informal solicitation produces a correct TIN, the employer would need to file a corrected Form 1095-C and typically would need to furnish the employee a corrected statement. This path is unsatisfying to a conservative legal mind. Alternatively, the second path would not require a corrected return but the formal solicitation procedures discussed in section 301.6724-1 would need to be followed. The uncomfortable aspect of this option is no corrected return would be filed after the employer is made aware that either a TIN in Part I or Part III of the Form 1095-C is incorrect. Again, this path is unsatisfying to a conservative legal mind.

Given the uncertainty created by footnote 2 and the statement in the Form 1094-C/1095-C instructions, we still view the formal solicitation as the best practice if an informal inquiry does not solve the TIN issue. Additionally, we view filing a corrected return as the safest practice. It is important to note that correcting errors is a requirement to use the good faith efforts standard to file accurate and complete information returns in 2015. Therefore, an employer must at least make some sort of effort to figure out what is causing the AIRTN500 error message.

Ideally, the IRS would release a simple overriding statement. The statement would begin “In the event one of your Form 1095-Cs triggers an AIRTN500 error message…” This would be followed by a simple statement or two as to what type of solicitation needs to be performed and whether a corrected Form 1095-C needs to be completed. We urge the IRS to take such action as the AIRTN500 error message was received for millions, if not tens of millions, of Form 1095-Cs.

We understand that the AIRTN500 error message has been the source of immense frustration for many employers. The proposed regulations appear to be another small step in the right direction towards an amicable solution. However, footnote 2 and the Form 1094-C/1095-C instructions cast uncertainty as to when the formal solicitation procedures need to be followed. Employers need to continue to monitor the government’s guidance on this important issue. And, until we get official word from the IRS, we view the formal solicitation procedures along with a corrected return when the solicitation is successful as the safest way to ensure compliance.

See the original article posted on EmployeeBenefitAdvisor.com on August 11, 2016 Here.


Moulder, R. (2016, August 11). Proposed regulations clarify TIN responsibilities, create new questions. Retrieved from http://www.employeebenefitadviser.com/opinion/proposed-regulations-clarify-tin-responsibilities-create-new-questions

Compliance Recap: August 2016

August remained relatively quiet in the employee benefits world, with only new draft versions of the instructions for Forms 1095-C, 1095-C, 1094-B and 1095-B. The new draft versions of the specific forms were released in July. The IRS also released the annual contribution limits for health savings accounts (HSAs) and the deductible minimums and out-of-pocket limits for high deductible health plans (HDHPs). Finally, the IRS issued proposed regulations on reporting minimum essential coverage (MEC).

UBA Updates

UBA released seven new advisors in August:

UBA updated existing guidance:

Reporting Minimum Essential Coverage

Minimum essential coverage (MEC) is the type of coverage that an individual must have under the Patient Protection and Affordable Care Act (ACA). Employers that are subject to the ACA's shared responsibility provisions (often called "play or pay") must offer MEC coverage that is affordable and provides minimum value. In fall 2015, the IRS issued Notice 2015-68 stating it was planning to propose regulations on reporting MEC coverage that would, among other things, require health insurance issuers to report coverage in catastrophic health insurance plans, as described in section 1302(e) of the ACA, provided through an Affordable Insurance Exchange (Exchange, also known as a Health Insurance Marketplace).

In August 2016, the IRS released the anticipated proposed regulations, incorporating the guidance given in Notice 2015-68. These regulations are generally proposed to apply for taxable years ending after December 31, 2015, and may be relied on for calendar years ending after December 31, 2013.

Read more about the proposed regulations.

2017 HSA and HDHP Limits Released

For calendar year 2017, the annual limitation on HSA deductions for an individual with self-only coverage under a high deductible health plan is $3,400. For calendar year 2017, the annual limitation on HSA deductions an individual with family coverage under a high deductible health plan is $6,750.

For calendar year 2017, a "high deductible health plan" is a health plan with an annual deductible that is not less than $1,300 for self-only coverage or $2,600 for family coverage, and the annual out-of-pocket expenses (deductibles, copayments, and other amounts, but not premiums) do not exceed $6,550 for self-only coverage or $13,100 for family coverage.

Draft Reporting Instructions Released

The IRS released the draft reporting instructions for Forms 1094-C and 1095-C, and Forms 1094-B, and 1095-B. 1095-C Forms are due to employees by January 31, 2017. Paper filings are due to the IRS by February 28, 2017, and electronic filings are due by March 31, 2017. Penalties per form (for failure to file) have increased from $250 to $260.


The 1094-C instructions provide clarification on applicable large employers and controlled group reporting.

An ALE Member is, generally, a single person or entity that is an applicable large employer, or if applicable, each person or entity that is a member of an Aggregated ALE Group.

A Form 1094-C must be filed when an ALE Member files one or more Forms 1095-C. An ALE Member may choose to file multiple Forms 1094-C, each accompanied by Forms 1095-C for a portion of its employees, provided that a Form 1095-C is filed for each employee for whom the ALE Member is required to file. If an ALE Member files more than one Form 1094-C, one (and only one) Form 1094-C filed by the ALE Member must be identified on line 19, Part I as the Authoritative Transmittal, and, on the Authoritative Transmittal, the ALE Member must report certain aggregate data for all full-time employees and all employees, as applicable, of the ALE Member.


The instructions indicate Line 14 should never be left blank, even for months prior to and after an individual's employment. Two new codes are available for Line 14.

New codes 1J and 1K address conditional offers of spousal coverage (also referred to as coverage offered conditionally). A conditional offer is an offer of coverage that is subject to one or more reasonable, objective conditions (for example, an offer to cover an employee's spouse only if the spouse is not eligible for coverage under Medicare or a group health plan sponsored by another employer). Using new codes 1J and 1K, an ALE Member may report a conditional offer to a spouse as an offer of coverage, regardless of whether the spouse meets the reasonable, objective condition. A conditional offer generally would affect a spouse's eligibility for the premium tax credit under section 36B only if all conditions to the offer are satisfied (that is, the spouse was actually offered the coverage and was eligible for it). To help employees (and spouses) who have received a conditional offer determine their eligibility for the premium tax credit, the ALE Member should be prepared to provide, upon request, a list of any and all conditions applicable to the spousal offer of coverage.

The instructions also provide new information on reporting offers of COBRA coverage. Former employees (and their spouses or dependents) offered COBRA due to termination of employment would be reported as not being offered coverage on the 1095-C, without regard to their enrollment in COBRA. Employees offered COBRA during their employment are reported as having offers of coverage.

Employers who have more than 250 1095-C returns and who are not prepared to file electronically may file their first 250 forms on paper, and then pay the penalty for the missing remaining forms.

If you are required to file 250 or more information returns, you must file electronically. The 250-or-more requirement applies separately to each type of form filed and separately for original and corrected returns. For example, if you must file 500 Forms 1095-B and 100 Forms 1095-C, you must file Forms 1095-B electronically, but you are not required to file Forms 1095-C electronically. If you have 150 Forms 1095-C to correct, you may file the corrected returns on paper because they fall under the 250 threshold. However, if you have 300 Forms 1095-C to correct, they must be filed electronically. The electronic filing requirement does not apply if you apply for and receive a hardship waiver. The IRS encourages you to file electronically even though you are filing fewer than 250 returns. If you are required to file electronically but fail to do so, and you do not have an approved waiver, you may be subject to a penalty of $260 per return for failure to file electronically unless you establish reasonable cause. However, you can file up to 250 returns on paper; those returns will not be subject to a penalty for failure to file electronically. The penalty applies separately to original returns and corrected returns.

1094-B and 1095-B

Health insurance issuers are encouraged to report catastrophic health plan coverage for Marketplace plans for calendar year 2016. Form 1095-B now contains the language "Do not attach to your tax return. Keep for your records." The instructions were updated to reflect the fact that a taxpayer identification number (TIN) may be used on the 1095-B, Part I, lines 2 and 3, and Part IV, columns (b) and (c).

Question of the Month

Q. If an active employee is enrolled in the employer's group health plan and their spouse is Medicare eligible due to disability (not end stage renal disease), does Medicare or the group health plan pay first for the spouse's claims?

A. If the employer has 100 or more employees, the group health plan will pay first and Medicare will pay second. If the employer has fewer than 100 employees, Medicare will pay first and the group health plan will pay second.

IRS Proposes New Section 6055 Reporting Requirements for Self-Insured Employers

Great article from our partner, United Benefit Advisors (UBA) by Vicki Randall

Employers with self-insured health plans are facing new Section 6055 regulations regarding the reporting of minimum essential coverage. The proposed regulation requires self-insured employers to report this information to the IRS on either Form 1095-B or in Part III of Form 1095-C, if the coverage is provided by an applicable large employer.

Section 6055 reporting identifies those individuals who are enrolled in minimum essential coverage. In order to accomplish this, the reporting forms require the inclusion of each individual’s Taxpayer Identification Number (TIN). For an individual, this is his or her Social Security number. While employers generally have the SSNs of their employees, they are less likely to have this information for an employee’s spouse or dependents. The proposed regulations include new guidance relating to the solicitation of TINs and the solicitation process employers should follow in order to avoid any penalties for filing without the proper TINs.

As long as “reasonable efforts” are made to secure the TINs of covered individuals, an employer is permitted to report a date of birth when no TIN has been provided. The proposed regulations lay out the following three-point process that should be used in order to meet the “reasonable efforts” guideline.

Reasonable efforts process chartIf individuals are already enrolled in coverage, July 29, 2016, is to be used as the initial solicitation date as long as a TIN was solicited as part of the application for coverage or at any other point before July 29, 2016. The second solicitation is then required within 75 days after July 29, 2016, which would be October 12, 2016.

Dan Bond, Principal at Compliancedashboard said, “Interestingly enough, these proposed regulations do not change the solicitation process for incorrect TINs, and there remains some confusion over what the IRS deems as a trigger for soliciting TINs in the situation that they are incorrect. They included a footnote in these proposed regulations that we presume is referencing the AIR [Affordable Care Act Information Returns] filing system that says just because an error message is received, that error message isn’t a notice for a penalty. Nor does the filer need to start the solicitation process in response to the error message. This statement leaves some question as to what triggers a solicitation need. We are watching to see what the IRS does with this.”

Although this process is part of a proposed rule, the IRS has stated that self-insured employers may rely on the process pending the release of a final rule.

For applicable large employers and self-funded employers of all sizes who have now completed the first round of required IRS reporting under the Patient Protection and Affordable Care Act (ACA), request UBA’s ACA Advisor, “IRS Reporting, Now What?” for information on play or pay penalties, when the penalty is triggered, how the penalty will be assessed and documentation employers must have.

Topics: ACA, PPACA, self funded health plans, IRS Form 1095, Section 6055 Reporting

See the original article Here.


Randall, V. (2016 September 6). IRS propses new section 6055 reporting requirements for self-insured employers. [Web log post]. Retrieved from address http://blog.ubabenefits.com/irs-proposes-new-section-6055-reporting-requirements-for-self-insured-employers

Feds reveal how to handle tax treatment of wellness rewards

Did you get the Wellness Program notice from the IRS? Jared Bilski outlines how the new memorandum may impact your wellness benefits in the article below.

Original Post from HRMorning.com on June 10, 2016

Most HR pros are focused on ensuring their wellness rewards meet the strict requirements of the ACA and the ADA. But the IRS just reminded employers there are other considerations as well.

Via its Office of Chief Counsel, the agency just released a memorandum on its views of the tax treatment of rewards under employer wellness plans.

Note: IRS memoranda don’t constitute formal advice. However, they do give employers a good understanding of how the agency views compliance topics.

Cash, cash-equivalent rewards

The memorandum confirms that certain tax rules apply to employer-sponsored wellness program. Coverage — including health screenings and other medical care — provided by an employer-sponsored wellness program is generally excluded from an employee’s income under specific sections of The Tax Code. But cash rewards or cash-equivalent rewards earned as a result of a wellness program are a different story.

According to the IRS, if an employee earns a cash reward under the program, that reward must be included in the employee’s gross income under Code Section 61 and is a payment of wages subject to employment taxes.

In addition, if an employee earns a cash-equivalent reward that isn’t excludible from his or her income — e.g., the payment of gym membership fees — the fair market value of that reward will be included in the employee’s gross income and is a payment of wages subject to employment taxes.

Additional clarifications

A few additional clarifications in the IRS memorandum:

  • If employers reimburse all or a portion of the premiums paid by the employee through a cafeteria plan for the company’s wellness plan, those reimbursements will be included in the employee’s gross income and are payments of wages subject to employment taxes.
  • Although some non-cash benefits may be excludible as de minimis fringe benefits (e.g., a T-shirt for a company wellness plan), cash fringe benefits generally aren’t eligible to be treated as excludable de minimis fringe benefits.

Find the original article here.


Bilski, J. (2016, June 10). Fed reveal how to handle tax treatment of wellness rewards [Web log post]. Retrieved from http://www.hrmorning.com/feds-reveal-how-to-handle-tax-treatment-of-wellness-rewards/

IRS Update on Filing ACA Forms After June 30, 2016

The IRS is giving a pass this year but encourages those who missed the deadline to file ACA Forms to still complete filing returns. See the article below from ThinkHR.com for more information.

Original Post from ThinkHR.com on July 1, 2016

If you are an applicable large employer, self-insured employer, or other health coverage provider, the deadline to electronically file ACA information returns (e.g., Forms 1094-B, 1095-B, 1094-C and 1095-C) with the IRS was June 30, 2016. The ACA Information Returns (AIR) system will remain up and running after the deadline.  If you were not able to submit all required ACA information returns by June 30, 2016, you are advised to complete the filing of your returns after the deadline.

It is important to note the following:

  • The AIR system will continue to accept information returns filed after June 30, 2016.  In addition, you can still complete required system testing after June 30, 2016.
  • If any of your transmissions or submissions was rejected by the AIR system, you have 60 days from the date of rejection to submit a replacement and have the rejected submission treated as timely filed.
  • If you submitted and received “Accepted with Errors” messages, you may continue to submit corrections after June 30, 2016.

The IRS is aware that some filers are still in the process of completing their 2015 tax year filings.  As is the case for other information returns, penalties may be associated with the submission of the ACA information returns for failure to timely file required returns. As the IRS has publicly stated in various forums in recent months, filers of Forms 1094-B, 1095-B, 1094-C and 1095-C that miss the June 30, 2016 due date will not generally be assessed late filing penalties under section 6721 if the reporting entity has made legitimate efforts to register with the AIR system and to file its information returns, and it continues to make such efforts and completes the process as soon as possible. In addition, consistent with existing information reporting rules, filers that are assessed penalties may still meet the criteria for a reasonable cause waiver from the penalties.

If you are not an electronic filer and you missed the May 31, 2016 paper filing deadline for ACA information returns, you should also complete the filing of your paper returns as soon as possible.

For more information, the IRS provides helpful questions and answers on the ACA reporting requirements for applicable large employers here.

Read the original article here.


Unknown (2016, July 1). IRS Update on Filing ACA Forms After June 30, 2016 [Web log post]. Retrieved from https://www.thinkhr.com/blog/hr/irs-update-on-filing-aca-forms-after-june-30-2016/

Civil Penalties Adjusted with Interim Final Rule for ERISA Violations

Released by the United States Department of Labor through The Federal Register on July 1, 2016.

Effective August 1, 2016, the amounts for civil penalties will be adjusted as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015.

The interim final rule made adjustments to the civil monetary penalties enforced by the Employee Benefits Security Administration (EBSA) under the Employee Retirement Income Security Act of 1974 (ERISA). The adjustments apply to penalties assessed after August 1, 2016, whose violations occurred after November 2, 2015.
Some highlights of the new penalty amounts for ERISA violations include:
  • The maximum penalty for failure/refusal to properly file a plan annual report (Form 5500) increased from $1,100 per day to $2,063 per day the Form 5500 is late.
  • The maximum penalty for failure to provide a Summary of Benefits Coverage under the Public Health Services Act increased from $1,000 per failure to $1,087 per failure.
  • The maximum penalty for failure to provide an automatic contribution arrangement notice under ERISA increased from $1,000 per day to $1,632 per day.
  • The penalty for providing required CHIP notices under ERISA is increased from $100 per day to $110 per day
  • The maximum penalty for failure of a multiple employer welfare arrangement (MEWA) to file a report required by regulations issued under ERISA increased from $1,100 per day to $1,502 per day.
  • The maximum penalty for failure to furnish reports (e.g., pension benefit statements) to former participants and beneficiaries or maintain records increased from $11 per employee to $28 per employee.
  • The maximum penalty for failure to comply with ERISA requirements relating to genetic information increased from $100 per day to $110 per day.

To read the full release from The Federal Register, click here

Fact Sheet

IRS Reporting: Now What?

Original Post from UBABenefits.com

By: Danielle Capilla, Chief Compliance Officer at United Benefit Advisors

Applicable large employers and self-funded employers of all sizes have now completed the first round of required IRS reporting under the Patient Protection and Affordable Care Act (ACA). The ACA requires individuals to have health insurance, while applicable large employers (ALEs) are required to offer health benefits to their full-time employees.In order for the IRS to verify that (1) individuals have the required minimum essential coverage, (2) individuals who request premium tax credits are entitled to them, and (3) ALEs are meeting their shared responsibility (play or pay) obligations, employers with 50 or more full-time or full-time equivalent employees and insurers were required to report on the health coverage they offered. Similarly, insurers and employers with less than 50 full time employees but that have a self- funded plan also have reporting obligations. All of this reporting is done on IRS Forms 1094-B, 1095-B, 1094-C and 1095-C.

Now that the first set of forms has been completed, many employers are wondering what the next steps are. Employers that did not fulfill all of their obligations under the employer shared responsibility provision (play or pay) might owe a penalty to the IRS. A penalty will be owed in regard to the 2015 plan year if:

  • The employer does not offer health coverage or offers coverage to fewer than 70 percent of its full-time employees and the dependents of those employees, and at least one of the full-time employees receives a premium tax credit to help pay for coverage on a Marketplace; or
  • The employer offers health coverage to all or at least 70 percent of its full-time employees, but at least one full-time employee receives a premium tax credit to help pay for coverage on a Marketplace, which may occur because the employer did not offer coverage to that employee or because the coverage the employer offered that employee was either unaffordable to the employee or did not provide minimum value.

As of March 2016, the only information from the IRS on the payment of these penalties is as follows:

The IRS will adopt procedures that ensure employers receive certification that one or more employees have received a premium tax credit. The IRS will contact employers to inform them of their potential liability and provide them an opportunity to respond before any liability is assessed or notice and demand for payment is made. The contact for a given calendar year will not occur until after the due date for employees to file individual tax returns for that year claiming premium tax credits and after the due date for applicable large employers to file the information returns identifying their full-time employees and describing the coverage that was offered (if any).

If it is determined that an employer is liable for an Employer Shared Responsibility payment after the employer has responded to the initial IRS contact, the IRS will send a notice and demand for payment. That notice will instruct the employer on how to make the payment. Employers will not be required to include the Employer Shared Responsibility payment on any tax return that they file.

Employers will be notified if an employee who either was not offered coverage, or who was not offered affordable, minimum value, or minimum essential coverage, goes to the Exchange and gets a subsidy or “advance premium tax credit.” To understand this “Employer Notice Program” the appeals process, and how affordability must be documented, request UBA’s newest ACA Advisor, “IRS reporting Now What?”

Taxation of Identity Protection Services

Original post ubabenefits.com

According to the IRS, identity theft has been the number one consumer complaint to the Federal Trade Commission for 15 consecutive years. The Bureau of Justice Statistics estimates that 17.6 million people were victims of identity theft in 2014. Organizations at every level are trying to protect employee and customer personal information from computer hacking that can disclose sensitive information to identity thieves. As a protective measure, some businesses are providing identity theft protection services in the hopes of preventing and mitigating damage from a data breach. Some insurance carriers are now also offering identity protection services to their customers at no additional cost. Questions were posed to the IRS concerning the taxability of identity protection services provided at no cost to customers, employees, or other individuals whose personal information may have been compromised in a data breach.

The taxation of this identity protection benefit/service was considered by the IRS in 2015 and again in early 2016. Originally, the IRS determined that an individual whose personal information may have been compromised in a data breach does not have to include the value of such an identity protection service in his or her gross income. Similarly, the IRS had ruled that an employer providing such data protection services to employees whose personal information may have been compromised in a data breach of the employer’s recordkeeping system (or employer’s agent or service provider) does not have to include the value of such service in the employee’s gross income or wages. The value does not have to be reported on an individual’s W-2. (See IRS Announcement 2015-22.)

But what about identity theft protection services that are offered as a precautionary measure before a breach occurs? Blue Cross Blue Shield, for example, is now offering identity protection services to all eligible BCBS members on an opt-in basis as of January 1, 2016. The offering includes credit monitoring, fraud detection and fraud resolution support. After the IRS elicited comments on Announcement 2015-22, it decided to extend the same tax treatment to identity protection services provided to employees or other individuals before a breach occurs, similar to that offered by Blue Cross Blue Shield. (See Announcement 2016-02.) The reasoning behind this ruling is that providing identity protection services to employees and others before a data breach occurs will foster earlier detection of a data breach and may minimize the impact of a breach on operations.

While this tax treatment does not apply to cash received in lieu of the identity protection service or proceeds received under an identity theft insurance policy, it is a benefit that is worthwhile to flag for your clients at a time when identity theft continues be a growing problem in the United States.