Health Care Reform: New Health Coverage Reporting Requirements
New reporting requirements under the Patient Protection and Affordable Care Act (ACA) will take effect for calendar year 2015, with initial reporting in early 2016. While the ACA includes several significant filing requirements, we will look at filings imposed on employers providing self-insured group health coverage to their employees as well as employers subject to the shared responsibility, or employer mandate, rules. The IRS will use the new reporting statements to enforce penalties relating to the individual mandate and employer mandate rules. Financial institutions need to start planning to ensure their systems can capture the needed information for reporting purposes.
Individual Mandate Reporting – IRC Section 6055
Section 6055 requires any person, including insurers and certain employers providing self-insured coverage, providing minimum essential coverage to an individual to file Forms 1094-B (transmittal) and 1095-B (return); instructions also are available on the IRS website. These forms report the identities and periods of coverage for all covered persons to the IRS and taxpayers on a month-by-month basis. Employers purchasing fully insured health coverage will not be responsible for filing these forms, as the responsibility falls to the insurer. An employer providing employer-sponsored self-insured health coverage with fewer than 50 full-time employees reports employees enrolled in the employer-sponsored self-insured health coverage on these forms.
Employer Mandate Reporting – IRC Section 6056
An employer with 50 or more full-time employees is considered an applicable large employer (ALE) under IRC Section 4980H and should comply with IRC Section 6056 employer mandate reporting instead of filing under IRC Section 6055. ALEs will use Forms 1094-C (transmittal) and 1095-C (return) to report information regarding offers of health coverage and enrollment in health coverage for their employees on a monthly basis.
ALEs providing self-insured group health coverage may use Forms 1094-C and 1095-C to complete their reporting requirements under both Sections 6055 and 6056 in lieu of filing both sets of forms; instructions are available from the IRS. Fully insured ALEs will complete Parts I and II on Form 1095-C, while self-insured ALEs will complete Parts I, II and III for their covered members. The information reporting is required of employers subject to the employer mandate delay for having between 50 and 99 employees.
These reporting requirements will require significant data collection by employers, including coordination with payroll reporting systems by the beginning of 2015 to collect the needed data for the 2015 coverage period. Software companies likely will provide updates to capture the pertinent information in late 2014. For example, in November 2014, Microsoft will release a service pack update for Dynamics GP 2013 that includes an update to capture the necessary information, while Microsoft Dynamics GP 2015 will include the data-tracking functionality when it's released. IRS Publication 5165, ACA Information Returns Guide for Software Developers and Transmitters, is under development and should provide insight into this area.
The filing deadlines for the new forms will follow the filing deadlines for Form W-2. Information statements for 2015 must be distributed to employees by February 1, 2016. The forms must be submitted to the IRS by February 29, 2016, if filing by paper or by March 31, 2016, if filing electronically. Employers filing 250 or more similar forms must file electronically with the IRS; this requirement applies separately to each type of form. Electronic distribution to employees only is allowed if specific consent is received from each employee. Some accounting software will not have e-filing capabilities, so companies will need to purchase solutions from independent software vendors in order to e-file.
Failure to file an information return or failure to include all required information may result in penalties of up to $100 per form, or $200 per full-time equivalent (FTE), with a maximum penalty of $1.5 million ($500,000 for small businesses) per year. If corrected forms are filed within 30 days of the original due date, the penalty is reduced to $30 per form with a maximum penalty of $250,000 ($75,000 for small businesses) per year. If corrected forms are filed more than 30 days after the original due date but by August 1, the penalty is reduced to $60 per form with a maximum penalty of $500,000 ($200,000 for small businesses) per year. Short-term relief is available for reporting entities filing 2015 returns and statements in 2016 that can show a good faith effort was made to comply with the information reporting requirements. No relief is provided for reporting entities that intentionally disregard the requirement to file the required forms. These entities would be subject to penalties of up to $250 per form ($500 per FTE).
Though filing isn’t required until 2016, employers need to act now to determine which forms they'll be required to file and how they'll gather the information needed to complete these forms. Employers should talk to their accounting and payroll software providers, third-party administrators, IT department and others to determine if preparations are being made to properly track the required information by the beginning of 2015. The IRS has issued draft forms and instructions to assist reporting entities as they prepare for the new reporting requirements.
If you have additional questions on these issues, including technology updates, contact your BKD advisor.