IRS Issues Final Regulations Implementing the ACA’s Information Reporting Requirements under Code Sections 6055 and 6056

On March 1, 2014, the Internal Revenue Service (“IRS”) issued final regulations implementing the following information reporting requirements under the Internal Revenue Code (the “Code”) as added by the Affordable Care Act (the “ACA”):

• Section 6055 (http://www.gpo.gov/fdsys/pkg/FR-2014-03-10/pdf/2014-05051.pdf): Requires health insurance issuers and sponsors of self-insured group health plans to report information to the IRS and provide statements to “responsible individuals” regarding coverage provided in the prior calendar year to enable the IRS to determine whether such individuals met their obligation to maintain “minimum essential coverage” for themselves as required under Section 5000A of the Code.
• Section 6056 (http://www.gpo.gov/fdsys/pkg/FR-2014-03-10/pdf/2014-05050.pdf): Requires employers with more than 50 full-time employees (including full-time equivalent employees) (“Applicable Large Employers” or “ALEs”), regardless of whether the employer offers coverage that is insured or self-insured, to report information to the IRS and provide statements to full-time employees regarding health plan coverage provided in the prior calendar year to enable the IRS to:
  • Administer the employer shared responsibility provisions of Section 4980H of the Code; and
  • Determine whether any full-time employees of the employer may claim a premium tax credit on their individual tax returns under Section 36B of the Code for individual coverage purchased through a state or federal insurance exchange marketplace.

While the final regulations generally adopt the proposed regulations (see our September 2013 newsletter for a detailed discussion of the proposed regulations), they provide the following welcome relief:

• Simplified Section 6056 reporting;
• Combined Section 6055 and Section 6056 reporting for Applicable Large Employers that sponsor self-insured plans;
• Clarification when a covered individual’s birth date may be reported in lieu of his or her taxpayer identification number or “TIN” (e.g., Social Security Number); and
• Electronic disclosure of Section 6055 and 6056-mandated statements with individual consent.

Compliance Deadline

Although the reporting requirements apply to calendar years beginning after December 31, 2014, no penalties will be imposed for failing to comply until 2016 when reports are due for coverage provided during 2015. Note: Under the final regulations, ALEs with at least 50 full-time employees but fewer than 100 full-time employees (including full-time equivalent employees) that qualify for special 2015 transition relief from the employer shared responsibility provision under Section 4980H must still report under Code Section 6056. For information about the special transition relief for certain employers, please see our February 2014 article here.

Final Regulations Under Code Section 6055 — Providers of Minimum Essential Coverage

Who Must Report:

Under Section 6055, the following providers of minimum essential coverage are considered “reporting entities” and must file annual information returns with the IRS via the Form 1094-B (or another form designated by the IRS) on or before February 28 (March 31 if filed electronically) of the year following the calendar year in which the coverage was provided:

• Plan sponsors of self-insured health plans as follows:
  • For single-employer self-insured plans, the employer;
  • For self-insured plans covering the employees of related corporations and which are treated as sponsored by more than one employer, each of the participating employers;
  • For multi-employer self-insured plans, the association, committee, joint board of trustees or other similar group of representatives of the parties who establish or maintain the plan;
  • For self-insured plans maintained by an employee organization, the employee organization;
  • For self-insured Multiple Employer Welfare Arrangements (“MEWAs”), each participating employer; and
  • For other self-insured plans, the designated plan sponsor.
• Health insurance issuers, including those providing coverage obtained through the Small Business Health Options Program (“SHOP”) of the state or federal insurance exchange marketplace;
• The executive department or agency of a governmental unit that provides coverage under a government-sponsored program such as Medicaid, CHIP, or Medicare (final regulations reserve the definition of “agency” or “instrumentality” for purposes of determining whether an entity is a governmental unit); and
• Other providers of minimum essential coverage to an individual.

“Minimum essential coverage” is:

• Coverage under an employer-sponsored plan (generally, medical and prescription drug plans, but not coverage that consists of “excepted benefits” such as limited-scope dental or vision plans, health flexible spending accounts, or health reimbursement arrangements that supplement minimum essential coverage);
• Coverage purchased through the state or federal insurance exchange marketplace;
• Coverage under a government sponsored program, including Medicare, Medicaid, CHIP, TRICARE, coverage through Veterans Affairs, and Peace Corps volunteer coverage; and
• Other coverage designated by the Department of Health and Human Services (e.g., self-funded student health coverage, Medicare Advantage plans, etc.) as minimum essential health coverage.

What Information Must Be Reported to the IRS:

The final regulations require reporting of the following information to the IRS via the Form 1094-B:

• The name, address and Employer Identification Number (“EIN”) information of the reporting entity (i.e., plan sponsor);
• The name, TIN (e.g., Social Security Number), and address of the “responsible individual” (i.e., includes the primary insured, employee, former employee, parent, or other related person named on an application who enrolls one or more individuals in minimum essential coverage; TIN is not required if the “responsible individual” is not actually enrolled in coverage);
• The name and TIN for each individual who is actually enrolled. An individual’s date of birth may be provided in lieu of the TIN, if the TIN is not available, but only after reasonable efforts have been made to collect the TIN, i.e., after two unsuccessful annual solicitations generally by December 31 of the first year and December 31 of the following year ( e.g., December 31, 2014 and December 31, 2015);
  • Note: no reporting is required for individuals who are offered coverage but who do not enroll.
• The months during which each individual was covered (i.e., any month during which the individual had coverage on at least one day during the month); and
• Employer Identification Number (“EIN”)
  • If coverage is self-insured, EIN of the plan sponsor;
  • If coverage is insured, the health insurance issuer must report the EIN of the employer maintaining the insured health plan coverage;
  • If coverage is provided through SHOP, the health insurance issuer must report EIN of employer.

Section 6055 Statements that Must Be Furnished to “Responsible Individuals”:

Section 6055 further requires the above-referenced reporting entities to furnish written statements to each “responsible individual” who is reported to the IRS on the Form 1095-B by January 31 of the year following the applicable coverage year (including individuals who died during the year). An extension of up to 30 days for good cause is available upon written application to the IRS if filed on or before the Form 1095-B due date.

The final regulations clarify that individual statements must be mailed to the individual’s last known address (Note: a statement may be electronically provided, but only if the individual affirmatively consents to such disclosure in a manner that demonstrates that he or she is able to access the electronic statement). The first reports to “responsible individuals” are due by January 31, 2016 for coverage provided during 2015.

What Information Must Be Included in the Section 6055 Statements to Responsible Individuals:

The final regulations require reporting entities to furnish annual statements that include the following information to each “responsible individual”:

• The name, address, and a contact number for the reporting entity (the final regulations allow a reporting entity to designate a third party as the contact person); and
• The information that was reported to the IRS with respect to the covered individual (Note: the preamble to the final regulations clarifies that the TIN may be truncated on an individual’s statement).

Final Regulations Under Code Section 6056 (Applicable Large Employers) — Facilitating Compliance with the Employer Shared Responsibility Provisions under Section 4980H

Code Section 6056 requires ALEs, including employers who contribute to a multiemployer plan, to report certain information to the IRS and furnish related statements to employees. If the ALE is a controlled group, each member of the controlled group will have its own separate Section 6056 reporting obligation, provided the ALE member has full-time employees. For example, if an employer consists of a parent corporation and ten subsidiaries (each with 50 or more full-time employees), there are 11 ALE members (i.e., the parent and each of the ten subsidiaries) that might be required to report. If only five of the 11 ALE members have full-time employees, only those ALE members will be required to report.

What Information Must Be Reported to the IRS under the General Method:

Under the final regulations, ALEs (and applicable ALE members) must report the following information under the general method of reporting with the IRS via the Form 1094-C (a transmittal) on or before February 28 (March 31 if filed electronically) of the year following the applicable calendar year to which the return relates:

• The name, address, and EIN of the ALE or applicable ALE member (Note: If a third party is reporting for an ALE or an ALE member, the name address and EIN of the third party;
• The name and telephone number of the ALE’s contact person;
• The calendar year for which the information is reported;
• A certification as to whether the ALE offered its full-time employees (and their dependents, i.e., natural children and adopted children up to age 26) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, by calendar month;
• The months during the calendar year for which minimum essential coverage under the plan was available;
• For each full-time employee, the 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; and
• The name, address and TIN of each full-time employee during the calendar year and the months, if any, during which the employee was covered.

An ALE must also report through the use of indicator codes the following information:

• Information as to whether the coverage offered to full-time employees and their dependents provides minimum value and whether the employee had an opportunity to enroll his or her spouse;
• The total number of employees by calendar month;
• Whether an employee’s effective date of coverage was affected by a permissible waiting period under Section 4980H, by calendar month;
• Whether the ALE member had no employees or otherwise credited any hours of service during any particular month, by calendar month;
• Whether the ALE is a member of an aggregated group, as defined under Code Sections 414(b), 414(c), 414(m), or 414(o), and, if applicable, the name and EIN of each employer comprising the ALE;
• If an appropriately designated person is reporting on behalf of an ALE member that is a governmental unit, agency or instrumentality, the name, address and EIN of the designated person;
• If an ALE or ALE member contributes to a multiemployer plan, whether, with respect to a full-time employee, the employer is not subject to an assessable payment under Section 4980H because of the employer’s contributions to the multiemployer plan; and
• If a third party is reporting for an ALE member, the name, address, and TIN of the third party (in addition to the name, address and EIN of the ALE member).

Section 6056 Statements that Must Be Furnished to Full-Time Employees

Section 6056 further requires ALEs and ALE members to furnish written statements to each full-time employee who is reported to the IRS on the Form 1095-C by January 31 of the year following the applicable coverage year (including individuals who died during the year). An extension of up to 30 days for good cause is available upon written application to the IRS if filed on or before the Form 1095-C due date.

Similar to the final rules regarding Section 6055 statements, the final Section 6056 regulations state that statements must be mailed to the full-time employee’s last known permanent address. Furthermore, a statement may be electronically provided, but only if the employee affirmatively consents to such disclosure in a manner that demonstrates that he or she is able to access the electronic statement. The first reports to employees are due by

January 31, 2016 for coverage provided during 2015.

What Information Must Be Included in the Section 6056 Statements to Full-Time Employees:

The following information must be included in the statements to full-time employees:

• The name, address and EIN of the ALE; and
• The information required to be shown on the Section 6056 return to the IRS with respect to the full-time employee.

Alternative Methods for Section 6056 Reporting:

Acknowledging the cost and administrative burden of complying with the reporting requirement under Section 6056, the final regulations provide the following simplified reporting methods for ALEs (or ALE member):

• Reporting Based on Certification of Qualifying Offers. To limit reporting for a particular full-time employee to the employee’s name, TIN and address, an ALE may opt to certify that the ALE (or ALE member) made a “qualifying offer” of coverage to the full-time employee. This means that for all months during the year in which the employee was a full-time employee, the ALE (or ALE member): (1) offered minimum essential coverage providing minimum value at an employee cost for self-only coverage not exceeding 9.5% of the federal poverty level (i.e., no more than $1,100 in 2015); and (2) offered minimum essential coverage to the employee’s spouse and dependents.
• If an ALE takes advantage of this simplified reporting for any full-time employee, it must provide that employee with copies of the simplified return or a standard statement indicating that the employee received a full-year qualifying offer of coverage. For employees who receive a qualifying offer for less than the full year, the ALE must report to the IRS and furnish employee statements for those months by entering a code indicating that the qualifying offer was made.
• Special 2015 Rule for Employees Receiving Qualifying Offers. For 2016 reporting on the 2015 calendar year, an ALE may opt out of providing the Form 1095-C to employees and furnish a more generalized statement instead (format to be prescribed by the IRS), if it certifies that it made a “qualifying offer” of coverage to at least 95% of its full-time employees and to their spouses and dependents. To qualify for this alternative, the ALE must file the Form 1095-C with the IRS, providing the employees’ names, Social Security Numbers, and addresses, indicating that a qualifying offer was made for all 12 months or the specific months of the calendar year.
• Reporting Option That Does Not Require Separate Identification of Full-Time Employees — 98% Offers. If an ALE certifies on the Form 1094-C that it offered affordable minimum essential coverage providing minimum value to at least 98% of ALL of its employees (and their dependents) (i.e., not just full-time employees), it can satisfy its reporting obligation under Code Section 6056 without having to identify or specify the number of full-time employees.

Combined Reporting Under the Final Regulations for Employers Reporting Under Both Code Sections 6055 and 6056

Under the final regulations, an ALE that sponsors a self-insured group health plan may combine its reporting under Sections 6055 and 6056 via the Form 1095-C. An ALE that sponsors an insured group health plan will complete only the first section of the Form 1095-C regarding the reporting required by Section 6056, while an ALE that sponsors a self-insured group health plan must complete both sections of the Form 1095-C to report the information required by Sections 6055 and 6056. If an ALE combines its reporting to the IRS via the Form 1095-C, it may report information required by Sections 6055 and 6056 to covered individuals via a single statement.

Mailings May Be Consolidated

The final regulations clarify that employers may mail one or more of the information returns it must provide to employees in the same mailing. For example, an ALE that sponsors a self-insured plan may mail the Form W-2 and the statements required by Section 6055 and 6056 together.

Deadlines for Code Sections 6055 and 6056 Reporting

Under Code Sections 6055 and 6056, reporting entities and ALEs must file returns with the IRS on or before February 28 (March 31 if filing electronically) of the year following the calendar year in which it provided coverage. The final regulations clarify that an ALE must file electronically only if it is required to file at least 250 copies of a specific form, as opposed to 250 of any form. For example, if the ALE files 250 W-2s, it must file electronically. However, if it files 200 W-2s and 50 Form 1099s, then it will not meet the 250 “same form” threshold. Reporting entities and ALEs must furnish statements to covered individuals and employees by January 31 of the year succeeding the calendar year to which the statement relates. The first IRS returns and employee statements will be due in 2016 for reporting on the 2015 calendar year.

Next Steps for Plan Sponsors

Although reports to the IRS and employee statements under Code Sections 6055 and 6056 are not due until 2016, employers subject to the reporting requirements may want to consider reviewing their internal processes for collecting the necessary information or performing a “test run” on its systems in 2014. The IRS has stated that it will release draft forms in the near future. If you have any questions, please contact the authors of this article or the Trucker Huss attorney with whom you normally work.