Background

The Affordable Care Act (ACA) imposes complex reporting requirements in order for the government to track compliance with the individual and employer mandates, and determine eligibility for premium tax credits. The ACA adds two new Sections to the Internal Revenue Code:

• Section 6055 – Provider Reporting (Used to enforce the individual mandate)
• Applies to: Insurance Companies, Employers with Self-Insured Plans, and Self-Insured Multiemployer and Governmental Plans
• Section 6056 – Employer Reporting (Used to enforce the employer mandate and administer Premium Tax Credit program)
• Applies to: Applicable Large Employers – 50+ full time equivalents on average in prior calendar year.

Reporting Due Dates (Deadlines extended)

The first statements and returns required to be filed are for the 2015 calendar year, and must be sent to employees by March 31, 2016 and filed with the IRS no later than May 31, 2016, or June 30, 2016, if filed electronically (electronic filing required for employers filing 250 or more forms, although hardship waivers from the electronic filing requirements may be available via Form 8508)

IRS will not respond formally to requests for extensions for CY2015, as these latest extensions apply automatically and are more generous.

Frequently Asked Questions

General

Q: How is a full-time employee determined under the Affordable Care Act (ACA)?

A: To determine who is a full-time employee that should receive a Form 1095-C under Section 6056, there are two different methods an employer may choose.

Monthly measurement method

Employer counts an employee’s hours of service for each month in a calendar year.

Generally requires employer to treat an employee as being full-time for any month in which the employee’s hours of service total 130.

This method is best suited for stable workforces where employees’ schedules are predictable.

When hours don’t vary, the employer can be fairly confident about which employees are full-time and which employees are part-time.

Look-back measurement method

An employer may determine the status of an employee as full-time during a future period (referred to as the stability period), based upon the employee’s hours of service in a prior period (referred to as the measurement period).

This method is best suited for workforces where employees’ hours vary.

When schedules are less certain, employers can identify full-time employees before the beginning of a potential coverage period.

Q: Do we report on every employee who worked 130 hours in one or more months of 2015?

A: Employees in a limited non-assessment period (LNAP) are not reported as full-time employees. LNAPs include waiting periods and initial measurement periods when employees are otherwise eligible for coverage but for having satisfied the waiting period or initial measurement period. An employer may use the entire LNAP even if employees are offered coverage during that time. Employees who terminate during an LNAP will not receive a Form 1095-C as long as they did not enroll in self-insured coverage during that time.

Q: What is an applicable large employer (ALE) under the Affordable Care Act?

A: Whether an employer is an ALE is determined each calendar year, and generally depends on the average size of an employer’s workforce during the prior year. If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year. Employers who are not ALEs may be eligible for the Small Business Health Care Tax Credit.

If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is an ALE for the current calendar year, and is therefore subject to the employer shared responsibility provisions and the employer information reporting provisions.

To determine its workforce size for a year an employer counts the hours of all employees worked on a monthly basis, up to 120 hours per employee per month. Full-time employees are considered to work 120 hours per month for these purposes. Divide the total hours by 120. Repeat the process for each month of the year and divide the total by 12, dropping any fraction remaining at the end. If the number is less than 50 the employer is not an ALE for the following calendar year. Special rules apply for employers with seasonal employees when the seasonal employees work fewer than 120 days (or four months) per year and the employer would not otherwise be an ALE but for the seasonal employees.

 Completing the Forms

Q: What information is required under Section 6055?

A: Section 6055 reporting requires the name, address, and Social Security number (SSN) for all covered individuals (including spouses and dependents) to be reported to the IRS. The report must also include the months for which the individual was enrolled in coverage for at least one day. This information allows the IRS to verify that a particular individual has MEC. In the case of fully insured group health coverage, issuers are also required to report the name of the employer, address and Employer Identification Number (EIN).

Q: What information is required under Section 6056?

A: Section 6056 requires the name, address and employer identification number (EIN) of the ALE along with the name and telephone number of a contact person be reported to the IRS. The report must also include the calendar year for which the information is reported and certification as to whether the ALE offered full-time employees (and dependents) the opportunity to enroll in MEC under a plan by calendar month. Each full-time employee’s share of the monthly premium for self-only coverage offered under the employer’s lowest cost plan that provides minimum value, by calendar month is reported, as well as the number of full-time employees for each month during the calendar year. The name, address, and Social Security number (SSN) of each full-time employee during the calendar year and the months, if any, during which the employee was offered coverage under the plan.

Q: How is “affordable” coverage determined under the ACA?

A: Coverage is “affordable” if:

• Employee’s cost for single coverage does not exceed 9.5% (as indexed) of household income (or W-2 wages or another permitted safe harbor), and
• Plan provides “minimum value”

Cost for employee-only coverage under lowest cost plan that provides minimum value cannot exceed 9.5% (as indexed) of:

• W-2 (Box 1)
• Must wait to end of year to confirm
• Must be used for all months of the year in which the employee is offered coverage
• Rate of Pay (monthly cost cannot exceed 9.5% of hourly rate of pay × 130)
• E.G.: $10 per hour—affordable if employee not charged more than $123.50 per month for employee-only coverage
• Federal Poverty Level (FPL)
• Use FPL based on the state in which employee is employed
• In 2015, coverage is affordable under the FPL if the cost does not exceed about $93 / month

Indexed thresholds: 9.56% for 2015 and 9.66% for 2016

Q: Do the employer mandate penalties increase each year?

A: Yes, see the chart below:

 Q: What Forms are required for both fully-insured and self-funded health plans??

A: See ACA Reporting Quick Reference Chart below:

Filing and Distributing the Forms

Q: Which employees must receive a Form 1095-C?

A: An ALE must provide and file Form 1095-C for each employee who was a full-time employee of the ALE member. Additionally, an ALE member that operates a self-insured health plan must file Form 1095-C for non-full-time employees or non-employees who enroll in health coverage. (Note: a self-funded employer also has the option of reporting enrollment of non-full-time and non-employees enrolled in coverage on Form 1095-B.).

Q: Which forms go to the IRS and which go to an employee?

A: Forms 1094 are a transmittal to the IRS and Forms 1095 are a statement to plan participants, although the 1095 forms are sent to the IRS as well. Further, the “B” Forms relate to the individual mandate of minimum essential coverage (MEC) and “C” Forms are related to the employer mandate of health coverage offers. Employers that sponsor self-insured plans will report months of coverage in Part III of Form 1095-C as the insurance carrier is not required to provide the “B” forms when the plan is self-insured.

Q: Must an organization furnish the employee statements to the full-time employees electronically or may it be hand delivered?

A: The regulations permit employers to furnish the statement to employees electronically, but it is not required. Employers may distribute the 1095-C to individuals through hand delivery, first class mail, or electronic delivery. If employers distribute the 1095-C electronically, they must receive consent from the employee and reference the 6056 return in the consent. For employers who choose website posting as the means of electronic delivery, the employee must be notified of the posting, the employer must disclose how to access the posting, and the posting must remain available until October 15th of the year following the applicable reporting year.

Q: Where can the Final 2015 forms and instructions be found?

A: The Final 2015 Forms can be found at the IRS website via the links below.

Section 6055 – Provider Reporting

Form 1094-B (transmittal to IRS): www.irs.gov/pub/irs-pdf/f1094b.pdf

Form 1095-B (employee statement): www.irs.gov/pub/irs-pdf/f1095b.pdf

Instructions: www.irs.gov/pub/irs-pdf/i109495b.pdf

Section 6056 – Employer Reporting

Form 1094-C (transmittal to IRS): www.irs.gov/pub/irs-pdf/f1094c.pdf

Form 1095-C (employee statement): www.irs.gov/pub/irs-pdf/f1095c.pdf

Instructions: www.irs.gov/pub/irs-pdf/i109495c.pdf

A Closer Look at the Forms

Form 1094-C Detail

Each entity with its own EIN will have one and only one “authoritative” 1094-C

1. “Qualifying Offer”— Highly affordable offer (FPL safe harbor) to FT employees
2. Qualifying Offer made to at least 95% of FT employees in one or more months
3. 50-99 Transition Relief (Code A in column (e) of 1094-C) or 100+ Transition Relief (Code B)
4. For all months of the year, employer offered affordable, MV coverage to at least 98% of employees for whom it is filing a Form 1095-C

Q: When should Box C in Line 22 be checked?

A: Box C is checked when an employer qualifies for transition relief from penalties under the employer mandate based on size

• Employer that is not relying on transition relief based on size does not need to check box C
• Example: An employer with 100+ FTEs on average in 2014 that offered coverage to at least 70% of FT employees in each month of 2015 would not check box C

Employers relying on transition relief based on size must insert an “A” or “B” in lines 23-35 of column (e) of form 1094-C

• Size determination is made on a controlled group basis
• Code A: Employers who had 50-99 FTEs on average in 2014
• Relief from pay-or-play penalties in 2015
• Code B: Employers who had 100+ FTEs on average in 2014
• 30 employee reduction increased to 80 for purposes of the $2,000 penalty

Q: How is the $2,000 Penalty Relief reported?

A: When an employer has offered coverage to at least 70% of FT employees and the employer does not yet offer dependent coverage or the employer has a non-calendar year plan and did not offer to 70% until 2015 PY, enter X in the “Yes” box in column (a) for lines 23-35 of form 1094-C.

Form 1095-C Detail

Q: What are the Codes in Line 14 for Offers of Coverage?

A: The Codes for Line 14 are shown in the table below.

Q: What should be entered in Line 15 – Cost of Coverage?

A: Complete line 15 only if code 1B, 1C, 1D, or 1E is entered on line 14 either in the “All 12 Months” box or in any of the monthly boxes. Note that this amount may not be the amount the employee is paying for the coverage, for example, if the employee chose to enroll in more expensive coverage such as family coverage.

Q: What are the Codes in Line 16 to report safe harbors?

A: The Codes for Line 16 are shown in the table below.

Q: How is $3,000 Penalty Relief for Employers with Non-Calendar Year Plans Reported?

A: When an Employer qualifies for non-calendar plan year transition relief and has offered affordable, minimum value coverage to the employee by the start of the 2015 plan year enter code 2I in line 16 of form 1095-C until the start of the 2015 plan year.

Q: How is COBRA reported?

A: Final Form 1095-C instructions for 2015 provide that COBRA offered due to termination of employment is reported as “no offer” (Code 1H) on Line 14 of Form 1095-C, regardless of whether COBRA is elected.

• Code 2A is used in line 16 regardless of whether the employee elects COBRA.
• Use code 2B in the month of termination

COBRA offered due to reduction in hours is reported in the same manner and using the same code as an offer of that type of coverage to any other active employee.

Q: Does an employer have to fill in the cost of the plan for union employees?

A: Final Form 1095-C instructions for 2015 provide that employers with collectively bargained employees enter code 1H in line 14 and code 2E in line 16 for any month for which the multiemployer relief applies for that employee, regardless of whether any other code in Series 2 (including code 2C) might also apply.

• Multiemployer relief: An employer is treated as offering coverage to an employee if the employer is required by a collective bargaining agreement to contribute for that employee to a multiemployer plan that offers, to individuals who satisfy the plan’s eligibility conditions, health coverage that is affordable and provides minimum value, and that also offers health coverage to those individuals’ dependents (or is eligible for transition relief regarding offers of coverage to dependents).

Simplified Reporting Methods

 Q: What is the Qualifying Offer Method?

A: A Qualifying Offer (QO) is an offer of minimum value coverage to the employee that costs no more than 9.5% (as indexed) of the federal poverty level.

• Employee-only cost cannot exceed $1,124 for 2015 (~$93.66/month)
• Offer must include offer of MEC to spouse and children
• To check box A in line 22 of Form 1094-C, the employer must make a QO to at least one full-time employee for each month of the year in which a pay-or-play penalty could apply for that employee

Employer reporting for employees who receive a QO for the entire calendar year is “simplified“. Employers making a QO will only need to report names, addresses, and tax IDs for employees who receive a QO for the entire year.

• Indicator Code 1A used in line 14 on 1095-C to report a QO
• Lines 15 and 16 are blank when code 1A is used in line 14

Q: What is the Qualifying Offer Method Transition Relief for 2015?

A: It is available if employer made a Qualifying Offer to at least 95% of full-time employees in one or more months of 2015. It allows the employer to use Code 1I in line 14 of 1095-C for months in which the employee did not receive a Qualifying Offer. If Qualifying Offer not made for all 12 months and Qualifying Offer Transition Relief for 2015 does not apply, full reporting is required for any month in which Qualifying Offer was not made. Employees with Qualifying Offers either receive Form 1095-C or may be provided an “alternative statement” informing them that the family is ineligible for a premium credit that year.

Q: What is the 98% Offer Method?

A: The 98% Offer Method is an “Option to Report without Separate Certification of FT Employees“.

Employers that offer affordable, minimum value coverage to at least 98% of employees (and dependents) included on the report may certify the offering without identifying which employees are full time.

All the 98% Method provides is the ability to report without counting the number of full-time employees each month.

Q: When might the 98% Method be useful?

A: The 98% method may be useful when an employer with a self-insured plan offers coverage to full-time and part-time employees and does not want to have to count full-time employees when reporting on Form 1094-C. Employers using this method are not required to complete the FT employee count in Part III, column (b) of Form 1094-C.

Penalties

Q: Is there Penalty Relief for 2015?

A: Employers that show a good faith effort in complying with the information reporting requirements under section 6056 will not be liable for any accuracy related penalties. The reasonable cause standards do apply under normal rules for those that fail to meet the timely reporting requirements.