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Two New Reporting Requirements Beginning in 2016
But Are Important Now
Recently, the IRS published final regulations implementing two new information reporting requirements under ACA that are first due in 2016 (containing information for the 2015 calendar year). These requirements are often referred to as Section 6055 and Section 6056 reporting. While the first reporting deadline is over a year away, both the Section 6055 and 6056 reporting require detailed information and employers should begin planning how to capture and report this information. This alert provides a comprehensive discussion of the reporting requirements and applicable forms.
Purpose of the information reporting
The Section 6055 reporting verifies months in which covered individuals have minimum essential coverage for purposes of the individual mandate. Generally, those individuals without minimum essential coverage are subject to the individual mandate penalty. The Section 6056 reporting obtains information about the group health plan coverage offered to an employer’s full-time employees. This reporting helps determine an employer’s pay or play penalty liability and an individual’s eligibility for premium tax credits. Eligibility for minimum essential health coverage will disqualify an individual from eligibility for premium tax credits.
Who must file?
Employers with self-funded health plans, insurance carriers, governmental agencies and others that provide minimum essential coverage are subject to the Section 6055 reporting requirement (and must also furnish an individual statement to the individual who enrolls in minimum essential coverage). Employers subject to the pay or play rules under ACA (those employing an average of 50 or more full- time employees and full-time equivalents in the prior calendar year) are subject to the Section 6056 reporting requirement (and must also furnish an individual statement to each full-time employee).
While the required deadline for filing may seem far into the future, the rules provide valuable insight into employer and service provider obligation.
General reporting method: Sections 6055 and 6056
The final regulations provide a general reporting method utilizing a single form to report to the IRS and to employees for both Section 6055 and Section 6056 reporting. Form 1095–C will have two sections – one for the information required for Section 6055 reporting and one for information required for Section 6056 reporting.
Employers with self-funded health plans will complete both sections of the form, while employers with fully insured plans will only complete the 6056 section of the form. Insurance carriers will use a separate form (Form 1095-B) to provide the information required for Section 6055 reporting.
Section 6055 reporting is not required for coverage that provides benefits as a supplement to minimum essential coverage. Specifically, the preamble to the final regulations provides that Section 6055
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reporting is not required for health reimbursement arrangements (HRAs), on-site medical clinics, health savings accounts (HSAs), and wellness programs that are an element of other minimum essential coverage (ex. the program provides reduced premiums or cost-sharing under a group health plan). The final regulations provide for simplified reporting methods for Section 6056 reporting for employers who meet certain requirements (discussed in further detail below).
Information required to be reported
Both the Section 6055 and 6056 reporting require detailed information. These requirements are discussed below:
Section 6055
Reporting entity’s name, address, and EIN;
The name, address, and TIN, or date of birth if a TIN is not available, of the responsible individual (generally the individual who enrolls himself and others in minimum essential coverage). Entities are not required to report the TIN of a responsible individual not enrolled in the coverage;
The name and TIN, or date of birth if a TIN is not available, of each individual who is covered under the policy or program;
For each covered individual, the months for which, for at least one day, the individual was enrolled in coverage and entitled to receive benefits; and
Any other information specified in forms, instructions, or published guidance.
For group health plan coverage, the following information must be provided in addition to the above:
Name, address, and EIN of the employer sponsoring the plan; and
Whether the coverage is through the SHOP Exchange (and if so, the SHOP’s unique identifier).
Section 6056
Employer’s name, address, and EIN;
Telephone number of the employer’s contact person;
The calendar year for which the information is reported;
A certification as to whether the employer offered its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, by calendar month;
The months during the calendar year for which minimum essential coverage under the plan was available;
Each full-time employee’s share of the lowest cost monthly premium (self-only) for coverage providing minimum value offered to that full-time employee under an eligible employer-sponsored plan, by calendar month;
The number of full-time employees for each month during the calendar year;
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Name, address, and taxpayer identification number of each full-time employee during the calendar year and the months, if any, during which the employee was covered under the plan; and
Any other information specified in forms, instructions, or published guidance. Filing with the IRS, furnishing individual statements, and applicable deadlines
Filers will submit a “transmittal form” (either 1094-B or 1094-C) to the IRS with the Forms 1095-B or 1095-C. Employers are allowed to contract with third parties to file reporting and furnish individual statements for purposes of Section 6056 compliance. However, the employer remains responsible for Section 6056 compliance. Electronic filing with the IRS is required if an entity is required to file at least 250 returns. For this determination, only those returns required under Sections 6055 and 6056 are taken into account and each section is considered separately for purposes of whether the 250-return threshold is met.
Deadline for filing with the IRS. The deadline to file the forms with the IRS is February 28 (or March 31 if filing electronically) of the year immediately following the calendar year to which the return relates. For example, the first filing which reports information for the 2015 calendar year is due February 28, 2016 (or March 31, 2016 if filing electronically).
For purposes of Section 6055 reporting, the individual statement is provided only to the “responsible individual” who is generally the individual who enrolls himself (and others) in minimum essential coverage. Under Section 6056, the individual statement is provided to full-time employees. Individuals can consent to receive the statement electronically using a process similar to the consent to receive the W-2 electronically. Mailing the statement via first class mail to the last know permanent address satisfies the requirement to provide the statement (even if the statement is returned).
Deadline for furnishing individual statements. Individual statements must be provided on/before January 31 of the year following the calendar year in which the minimum essential coverage is provided. For example, the first individual statement which reports information for the 2015 calendar year is due by January 31, 2016.
4 Simplified reporting methods
Two simplified reporting methods are available to certain employers as alternatives to reporting information on full-time employees on a monthly basis.
The two simplified methods are available where:
Employees receive a “Qualified Offer” of coverage
An employer makes a “qualifying offer” if:
o The employer offers coverage that provides minimum value and the employee’s share of employee-only coverage does not exceed $1,100 in 2015 (an amount equal to 9.5% of the Federal Poverty Level); and o Minimum essential coverage is offered for the employee’s spouse and
dependent children.
This simplified method varies based on whether the employee received the qualifying offer for the full year or a portion of the year:
o Qualifying offer for twelve months of the year. The employer will use a code identifying that qualifying coverage was offered for twelve months of the year and will only be required to report the name, address, and taxpayer identification number of the employees. Employees must be provided with a copy of the simplified 1095-C report or a general statement (in a format prescribed by the IRS) indicating that the employee received a full year qualifying offer and therefore the employee (and the employee’s family members, if any) are generally ineligible for a premium tax credit for those twelve months.
o Qualifying offer for less than all twelve months of the year. The employer will file and furnish the Section 6056 reporting under the general reporting method for months in which a qualifying offer was not received (ex. A full-time employee who terminated employment during the middle of the calendar year would not receive a qualifying offer for the entire year) but can use an indicator code to report for months for which a qualifying offer was received.
Alternative method for 2015. For 2015 reporting only, employers certifying they made a qualifying offer to at least 95% of their full-time employees (and to their spouses and dependents) will be able to use simplified reporting for their entire workforce, including employees who do not receive a qualifying offer for the full year. Employers must provide employees with standard statements (in a format prescribed by the IRS) providing information regarding their possible eligibility for premium tax credits.
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Affordable, minimum value coverage is offered to at least 98% of employees. If affordable coverage that provides minimum value is offered to at least 98% of the employees on whom an employer is reporting, an employer is allowed to complete the Section 6056 reporting with respect to all employees and does not have to specify whether an employee is a full-time employee or identify the number of full-time employees. Coverage is affordable if it meets any of the affordability safe harbors under the final pay or play regulations. If an employee included in this reporting declines coverage and claims a premium tax credit with respect to Exchange coverage and the IRS contacts the employer to determine whether any pay or play penalties are due, the employer can determine at that point whether the employee was a full-time employee and provide that information to the IRS. The IRS sets the level at 98% to ensure that employers have offered coverage to at least 95% of their full-time employees and therefore have no liability for the “no coverage” penalty.
Applicable penalties and penalty relief
Penalties for failure to timely file a correct filing required under Section 6055 or 6055 may result in penalties of $100 per return not to exceed $1.5 million for the calendar year. Penalties for failure to timely furnish a correct individual statement to full-time employees required under Section 6055 or 6056 may result in penalties of $100 per statement not to exceed $1.5 million for the calendar year. For reports filed in 2016 (containing 2015 information), the IRS will not impose penalties on entities that report incorrect or incomplete information if the entity can demonstrate a good faith effort to comply with the reporting requirements. This relief does not apply to reports that are filed late.
While the deadline for filing may seem far into the future, the reporting requirements will require significant data collection. Please contact our office if you have any questions about the Section 6055 or Section 6056 reporting requirements.
