The IRS has released updated
guidance on the reporting requirements for applicable large employers
("ALEs") under Internal Revenue Code Sections 6055 and
6056. Beginning in 2016, ALEs must file Forms 1094 and 1095 to give
information to the IRS and plan participants about health coverage
provided in the prior year. The IRS will use these forms to enforce
the employer penalties, individual mandate and tax credit eligibility
rules under the Affordable Care Act ("ACA").
Background. ALEs (i.e., an employer that employed an
average of at least 50 full-time employees on business days during
the preceding calendar year) will be required to file and distribute
information reporting forms under Code Sections 6055 and 6056.
Employers must report whether: (i) an individual is covered by
minimum essential coverage; and (ii) an offer of minimum essential
coverage that provides minimum value was made to each full-time
Employers will use Form
1095-C to report whether or not they comply with the ACA's mandate requiring
them to offer coverage to at least 95 percent of full-time employees
(70 percent for 2015). Form 1095-C requires employers to report:
whether the offered coverage meets the ACA's minimum essential
coverage standards for minimum value; whether the employer offered
such coverage to dependents and spouses; the name of every full-time
employee; which months of the year they were employed; and which
months they were covered or had an offer of coverage.
IRS Guidance.The latest guidance consists of an updated
Q&A document covering basic reporting requirements and a new
Q&A document addressing more specific issues that may arise when
completing Forms 1094 and 1095. The following are some highlights
from the guidance:
Clarification on ALEs
that must Report. An ALE with no
full-time employees for any month of the year is not obligated to
report unless the ALE sponsors a self-insured health plan in which
any employee, spouse, or dependent is actually enrolled. In that
case, the ALE must still file Forms 1094-C and 1095-C even if it has
no full-time employees. In addition, ALEs must file and furnish Forms
1095-C to all full-time employees regardless of whether they were
offered coverage during the year.
Controlled Groups. The guidance provides examples demonstrating
how reporting differs when an ALE reports for separate divisions and
when ALEs are part of a controlled group. In the former situation,
employees working for multiple divisions must receive aggregated
information on a single Form 1095-C; in the latter situation,
employees must receive a separate Form 1095-C for full-time
employment with each ALE in the controlled group.
Qualifying Offer Method
of Reporting. Under the
qualifying offer method of reporting, ALEs are allowed to furnish a
simplified employee statement to employees receiving qualifying
offers for all 12 months of the year. The guidance confirms that ALEs
may not use simplified statements for employees who actually enroll
in the ALE's self-insured plan.
Delivery to Employees. Forms 1095-C may be delivered to employees in
any manner permitted for delivery of Forms W-2.
New Hires and Terminating
Employees. When reporting offers
of coverage on Part II of Form 1095-C, ALEs may indicate that an
offer of coverage was made for a month only if the offer would have
provided coverage for every day of the month. Similarly, if a
terminating employee's coverage ends before the end date of the month
of termination, the ALE must report that no coverage was offered for
that month. However, when reporting coverage information under Part
III of Form 1095-C, an employee should be reported as having coverage
if the employee is enrolled on any day of the month.
Reporting Offers of COBRA
Coverage. The guidance explains
how ALEs that sponsor self-insured plans should report enrollment
information for non-employee COBRA beneficiaries (e.g.,
ex-spouses) and illustrates reporting under various COBRA scenarios.
Qualifying beneficiaries electing COBRA independently from the
employee must receive separate forms, while those who receive COBRA
due to an employee's election should be included on the same form
that is provided to the employee.
A COBRA offer made due to
termination of employment is reported as an offer of coverage only if
the former employee enrolls in COBRA coverage and the employee's cost
of coverage reflects the COBRA premium for the lowest-cost, self-only
coverage providing minimum value. Conversely, a COBRA offer made to
an active employee due to a reduction of hours must be reported as an
offer of coverage on Form 1095-C even if the employee declines COBRA
Important Takeaways for
Employers. With mandatory
reporting for ALEs beginning in 2016, understanding the reporting
requirements is critical. Accordingly, employers should give careful
attention to this and all future IRS guidance as the reporting
deadline rapidly approaches.
The IRS guidance may be
accessed at: http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-about-Employer-Information-Reporting-on-Form-1094-C-and-Form-1095-C