What s News in Tax Analysis That Matters from Washington National Tax

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1 What s News in Tax Analysis That Matters from Washington National Tax The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans Employers and individuals in the United States must comply with shared responsibility requirements for health insurance coverage. Using a question and answer format, this article outlines some general rules, with a focus on how the rules may apply in connection with globally mobile employees who are U.S. persons providing services outside the United States and non-u.s. persons providing services within the United States. Monday, July 28, 2014 by Veena K. Murthy, Washington National Tax Veena Murthy is a director in the WNT Compensation and Benefits group. The enactment of the Patient Protection and Affordable Care Act (the Affordable Care Act ) generally means that individuals within the United States are subject to the individual shared responsibility requirements, and employers with employees performing services within the United States are subject to the employer shared responsibility requirements. The shared responsibility requirements are also referred to as the individual mandate and the employer mandate, respectively, and operate separately from one another: A failure by an individual and members of the individual s household to have health coverage whether provided by an employer or obtained privately may subject the individual taxpayer to penalties. A failure by an applicable large employer ( Large Employer ) to offer employer-sponsored health coverage that complies with the mandate may subject the employer to penalties under certain conditions discussed below. The following Q&As outline some of the general rules under each type of mandate, with a focus on how each mandate may apply in connection with globally mobile employees who are U.S. persons providing services outside the United States and non-u.s. persons providing services within the United States. entity. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International.

2 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page 2 These Q&As are not intended as a comprehensive guide to the Affordable Care Act s shared responsibility requirements nor do they provide advice on specific situations. Each of these shared responsibility requirements has complex rules, exceptions, and certain issues that are not fully resolved details are beyond the intended scope of these Q&As. Individual situations should be addressed with an appropriate tax advisor. Background 1. What is shared responsibility? For individuals, shared responsibility generally means that an individual shared responsibility payment (a tax penalty) applies if the individual and certain members of the individual s household are not exempt from the requirement and do not have the required health coverage, called minimum essential coverage ( MEC ). For an applicable large employer (see Q&A-24), shared responsibility generally means that a Large Employer is subject to an employer shared responsibility payment (a tax penalty) if (1) the employer does not offer MEC of a certain value and affordability, (2) any full-time employee of the Large Employer obtains a tax credit or subsidy towards coverage under a health exchange in the individual market, and (3) the Large Employer receives a certificate that the employee has enrolled in a recognized exchange. 2. What is minimum essential coverage? Minimum essential coverage is defined in section 5000A(f), and generally includes coverage under: Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended (the Code ) or the applicable regulations promulgated pursuant to the Code (the regulations ). An eligible employer-sponsored plan ; A health plan offered in the individual market within a state (i.e., the health exchanges); A government-sponsored program (such as Medicare and Medicaid); A grandfathered health plan; and Other health benefits coverage recognized by the Secretaries of Health and Human Services ( HHS ) and the Internal Revenue Service ( IRS ).

3 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page 3 3. What is an eligible employer-sponsored plan? Eligible employer-sponsored plans include group health plans or insurance coverage offered by an employer to an employee. This includes a governmental plan (not generally applicable in the private employer setting) or any other plan or coverage offered in the small or large group market within a State, including grandfathered health plans for purposes of the Affordable Care Act. The regulations clarify that eligible employer-sponsored plans include selfinsured group health plans, as well as a plan offered to an employee on behalf of an employer, for example, by a professional employer organization or a leasing company. 4. What is the difference between the individual shared responsibility provision and the employer shared responsibility provision? There are a number of differences between each shared responsibility provision. The requirements and penalties are separate from one another, and are discussed in the Q&As below addressing each type of mandate. One important difference is that with respect to the employer mandate, MEC is only considered to meet the minimum requirement if it under an arrangement that satisfies eligible employer-sponsored coverage. With respect to the individual mandate, a broader array of arrangements is considered MEC, including coverage purchased under a health exchange. This distinction is important because if an employer pays or reimburses an employee for coverage the individual purchases on a health exchange, this does not mean the employer satisfies the MEC requirements for purposes of the employer mandate. Further, if an employer reimburses employees for individual MEC coverage the individual purchases on a health exchange or from an insurance company outside of the employer arrangement, on a pre-tax or nontaxable basis, the employer can be subject to significant penalties under section 4980D (for failure to meet certain group health plan requirements related to market reforms). 1 Section 4980D penalties are generally $100 per day per impacted employee, and per each type of violation. 1 See Notice , I.R.B

4 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page 4 5. What is the effective date of the individual mandate? The individual mandate is effective as of January 1, What is the effective date of the employer mandate? The employer mandate was also effective as of January 1, 2014, but has been delayed until Individual Shared Responsibility 7. What happens if an individual does not have MEC? If an individual is subject to the individual mandate and does not have either the individual MEC or MEC purchased from an employer arrangement, a penalty generally applies and must be paid when filing the Form 1040 (or Form 1040-NR). This requirement may apply to the individual taxpayer, the taxpayer s spouse (if filing a joint tax return), and certain members of the individual s household. 8. How is the individual penalty calculated? The individual penalty amount for a tax year is the lesser of: The sum of the monthly penalties for the year (described next), or The sum of the monthly national average premiums for a bronze level of coverage offered through a health exchange for the individual s applicable family size. 2 For 2014, the monthly penalty is one-twelfth (1/12) of the greater of: The sum of the applicable dollar amount ($95 per adult individual 3 ) for all individuals for whom the taxpayer is liable up to a maximum of $285 (300 percent of $95), or 2 3 Family size is determined based on the number of individuals for whom the taxpayer is allowed a deduction under section 151 for the tax year. For 2015, the applicable dollar amount is $325 (300 percent of this is $975), and for 2016 is $695 (300 percent of this is $2,085). Children age 18 or under are one-half of the adult rate.

5 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page 5 One percent 4 of the excess of the taxpayer s household income over the taxpayer s income tax return filing threshold based on the filing status for the year (i.e., single, joint filer, etc.). Household income is the sum of modified adjusted gross income for the taxpayer and all other individuals who are taken into account in determining the taxpayer s family size and who were required to file a Form 1040 for the tax year. Generally, modified adjusted gross income is the adjusted gross income modified to include amounts exempted under section 911 and tax-exempt interest. 9. How is the individual penalty paid? The individual penalty is paid when filing an individual tax return (i.e., Form 1040 or Form 1040-NR) if the individual (or others for whom the individual is liable) does not have MEC for each month of the tax year in which required. Generally, if an individual who is liable for the penalty fails to pay it, the IRS will determine whether the penalty applies based on the reporting required under section 6055 by providers of MEC (insurers and selfinsured employers). Section 6055 reporting is generally not required for 2014, although it is encouraged. For further information on this reporting requirement, see Q&As-36-38, Who is liable for the individual penalty? A taxpayer is subject to the individual penalty for each month that the taxpayer or any individuals who qualify as the taxpayer s dependents under section 152 (even if not claimed as dependents) do not have MEC (unless one of the exemptions, discussed below, applies). If a taxpayer s dependent is subject to the MEC requirement and does not satisfy it, the taxpayer is liable for the penalty. 4 This percentage for 2015 is 2.0 percent and for 2016 is 2.5 percent.

6 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page 6 If the taxpayer files a joint tax return, both the individual and spouse are jointly liable for the penalty that applies to each spouse as well as any dependents. 11. Who are exempt individuals? There are certain statutory exemptions from the requirement to obtain MEC. Generally, these include individuals who: Fall under one of the religious exemptions; Are members of an Indian tribe; Have income below the income tax return filing threshold; Fall under the short coverage gap; Suffer a hardship; Cannot afford coverage; Are incarcerated; Are not lawfully present What is a short coverage gap? A short coverage gap is continuous period of less than three months during which a nonexempt individual is not covered under MEC. The individual penalty does not apply when a short coverage gap occurs. However, if an individual fails to have MEC for a continuous period beyond the short coverage gap period (for three or more months in a year), no exemption applies for any of the months in the continuous period. Certain rules apply when more than one short coverage gap within a calendar year occurs, as well as continuous periods straddling more than one calendar year. 13. How does the not lawfully present exemption apply? The not lawfully present exemption applies to any month during which an individual for the month is not a citizen or national of the United States or is not an alien lawfully present in the United States. 5 Section 5000A(d) and (e).

7 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page 7 The term national is not defined. However, the regulation refers to such individuals as exempt noncitizens and adds the requirement that the individual also either be a nonresident alien for the taxable year that includes the month, or that the individual be not lawfully present (within the meaning of immigration law) on any day in the month. This suggests that a national includes both green card holders and U.S. tax residents. 14. In which globally mobile situations is an individual exempt from the individual penalty? An international assignee may be eligible for exemption from the individual penalty if she is either a section 911 qualified individual (discussed below), or a nonresident alien of the United States (an NRA discussed below). 15. Who is a section 911 qualified individual? An individual is treated as having MEC for any month during the period described in section 911(d)(1)(A) or (B) as a qualified individual. In other words, such an individual is effectively exempted from the penalty for any such month. During the relevant period, an individual must have a tax home outside the United States and either be a: U.S. citizen who establishes she has been a bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year; or U.S. citizen or resident who, during a consecutive 12-month period, is present in a foreign country or countries for at least 330 full days. 6 Since the 2014 Form 1040 and Instructions have not yet been released, it is not yet clear how this exemption applies if a taxpayer has not established that she (or family members for whom the taxpayer may otherwise be liable for the penalty) is a section 911 qualified individual at the time the tax return is due. If the requirements of section 911(d)(1) are not satisfied, the remaining provisions of section 5000A apply (assuming no other exemption applies). 6 Section 5000A(f)(4).

8 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page Who is a nonresident alien? The exemption applies for any month in which an individual is a nonresident alien of the United States with the meaning of section 7701(b)(1)(B) for the taxable year. 7 An NRA under this definition is an individual who: Is not a U.S. citizen; Is not a green card holder; Does not meet the substantial presence test for the year; and Has not made a first-year election to be treated as a U.S. resident. Note: Based on the language of the applicable regulation, it appears this exemption applies only if the individual is an NRA for the entire taxable year, as opposed to a portion of the year. 17. What is considered MEC in the cross-border context? For purposes of the individual penalty, as a general matter, any of the types of MEC described in Q&A-2 are MEC. This includes eligible employer-sponsored coverage, which typically is coverage under a U.S. employer-sponsored plan for U.S.-based employees which qualifies as MEC. However, when an international assignee is covered under a non-u.s. plan, or a plan designated as an expatriate plan, only certain types of coverage may be MEC. 18. What types of non-u.s. or expatriate plans have been designated as MEC? Certain self-insured group health plans; Certain insured expatriate health plans (with plan years ending on or before December 31, 2015); and Certain insured plans regulated by a foreign government. 7 Section1.5000A-3(c).

9 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page To qualify as MEC, what requirements apply to a non-u.s. self-insured group health plan? Based on guidance provided by the Centers for Medicare & Medicaid Services ( CMS ) under the HHS, 8 a self-insured group health plan is generally MEC without regard to where the plan is located. Therefore, self-insured group health plans sponsored by non-u.s. employers are included under the definition of MEC. However, in order for such a plan to qualify as MEC, HHS requires the plan sponsor to comply with certain notice requirements and to comply with the reporting requirements of section 6055 with respect to enrollees who are citizens or nationals of the United States. Although the term national of the United States is undefined, it is likely this encompasses U.S. tax residents (see Q&A-13) as well as green card holders. Note: Even though the Section 6055 reporting requirement has generally been delayed until the 2015 tax year, it is not clear whether the delayed effective date applies for purposes of this particular requirement. 20. To qualify as MEC, what requirements apply to an insured expatriate health plan? Under temporary guidance that applies to plans with plan years ending prior to January 1, 2016, an insured expatriate health plan may be considered MEC if it meets the following parameters: It is an insured group health plan which limits coverage to individuals who are expected to reside outside of their home country (including the United States) for at least six months of a 12-month period, and their covered dependents. 9 It complies with provisions of the pre-affordable Care Act version of title XXVII of the PHS Act 10 (such as mental health parity provisions, HIPAA nondiscrimination, ERISA claims procedures, and ERISA Part 1 disclosure and reporting obligations) CCIIO Sub-Regulatory Guidance, HHS, Centers for Medicare & Medicaid Services (CMS), issued on October 31, January 9, 2014 FAQs about Affordable Care Act Implementation (Part XVIII). Such provisions are beyond the scope of this Q&A; plan sponsors may wish to consult with health law counsel regarding these requirements.

10 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page 10 According to the Departments of HHS, Labor, and Treasury, this temporary transition relief applies to provide the departments with time to gather further information and analyze challenges with expatriate plans. 21. To qualify as MEC, what requirements apply to an insured group health plan regulated by a foreign government? If an individual is covered under an insured group health plan that is regulated by a foreign government: For a month in which the individual is physically absent from the United States for one day of the month; or For a month in which an individual is physically present within the United States for the entire month if the coverage provides health benefits within the United States while the individual is on expatriate status, then the individual is considered to have MEC in that month. However, in order for such a plan to qualify as MEC, HHS requires the plan sponsor to comply with certain notice requirements and to comply with the reporting requirements of section 6055 with respect to enrollees who are citizens or nationals of the United States. Although the term national of the United States is undefined, it is likely this encompasses U.S. tax residents (see Q&A-13) as well as green card holders. Note: Even though the section 6055 reporting requirement has generally been delayed until the 2015 tax year, it is not clear whether the delay applies for purposes of this particular requirement. In addition, it is not clear whether a foreign insurer will be willing to report this information; therefore, employers may need to work with their foreign insurers to determine whether this requirement will be met. 22. Can health coverage provided by or mandated by a foreign government, or other types of foreign health coverage not already addressed, be considered MEC? HHS provides for an application process to be recognized as MEC for foreign health coverage if such coverage does not otherwise qualify as MEC under the various rules and guidance. The details of this application process are found within sub-regulatory guidance issued by CMS on

11 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page 11 October 31, Generally, in order to be recognized as MEC, the foreign coverage must substantially meet all of the requirements of Title I of the Affordable Care Act that apply to non-grandfathered plans in the individual market (the market reform provisions such as prohibitions on pre-existing conditions, no lifetime and annual limits, dependent coverage, patient protections, appeals, preventive health services, etc.). HHS is expected to publish a list of foreign health coverage that has been recognized as MEC. Employer Shared Responsibility 23. Who is liable for the employer penalty? Applicable large employers are subject to the employer penalty if they do not comply with the employer mandate. 24. What is an applicable large employer? A Large Employer is an employer which employed at least 50 full-time equivalency ( FTE ) employees during the preceding calendar year. A Large Employer is determined based on the employees of the members of a controlled group under the rules of section 414(b), (c), (m), and (o). This includes employees of non-u.s. members of the controlled group. Each member of a Large Employer is responsible for the penalty with respect to its employees Transition Rule: For 2015, a Large Employer is defined as an employer with at least 100 full-time equivalency employees. If an employer has between FTEs, in order to be eligible for the 2015 transition relief, the employer cannot reduce the size or hours of the workforce or materially reduce health coverage after February 9, 2014; in addition, the employer must certify on a prescribed form that it meets the eligibility requirements for this relief when reporting under section 6056 for CCIIO Sub-Regulatory Guidance, HHS, Centers for Medicare & Medicaid Services (CMS), issued on October 31, 2013.

12 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page How are full-time equivalency employees determined? 12 Full-time equivalencies are applied to part-time, variable, and temporary employees of the employer, to determine whether, in the aggregate, there are, on average, at least 50 FTE employees (or 100 in 2015). Seasonal workers (not seasonal employees, separately defined) who work less than 120 days in a year are not counted for this purpose. Generally, the number of FTE employees in a calendar month is determined by taking the aggregate number of hours worked by employees who were not full-time in a calendar month and dividing by 120. If the number of FTE employees plus full-time employees equals 50 (or 100 in 2015), an employer is considered a Large Employer. This test, using full-time equivalency employees, is only used to determine whether the employer crosses the line to be a Large Employer. 26. Does an employer count the hours of U.S. or foreign employees who perform services solely outside of the United States when determining if it is a Large Employer? No. Hours of service do not include hours of service related to earning compensation that constitutes income from sources without the United States within the meaning of sections 861 through 863 and the regulations thereunder. 13 Therefore, only employees who have performed services within the United States are considered when determining whether an employer (including all controlled group members) is a Large Employer. Note that even though an employee may perform a portion of services within and without the United States and for different members of a controlled group, the employer counts all hours attributable to services performed within the United States for all members of a controlled group Laurence Shulman, How Many Full-Time Employees Do I Have Under the ACA?, KPMG s What s News in Tax (July 1, 2013). Section H-1(a)(24)(ii)(C).

13 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page What requirements apply if an employer meets the 50 FTE (100 FTE in 2015) threshold to be considered a Large Employer? Very generally: If an employer is a Large Employer, all full-time employees of the Large Employer and their children up to age 26 must be offered MEC that is considered minimum value and affordable. If a Large Employer fails to offer coverage at all, and even a single fulltime employee obtains a tax credit or subsidy for coverage in the health exchange (and the Large Employer receives a certificate that the employee has enrolled in a recognized exchange), the Large Employer is subject to a penalty that is generally $2,000 multiplied by the total number (reduced by 30) of all full-time employees. This is called the A Penalty. If a Large Employer offers coverage that is either not minimum value or not affordable and any full-time employee obtains a tax credit or subsidy for coverage in the health exchange (and the Large Employer receives a certificate that the employee has enrolled in a recognized exchange), the Large Employer is subject to a penalty that is generally $3,000 per each full-time employee who obtained the tax credit or subsidy. This is called the B Penalty. However, the B Penalty cannot be higher than the A Penalty. Note: The $2,000 and $3,000 figures were intended to apply for 2014; since the employer shared responsibility requirement has been delayed to 2015, these dollar figures are likely to be higher and are currently not known Transition Rule: Only in 2015, the reduction of 30 employees in the penalty formula is a reduction of 80 employees for Large Employers having 100 or more full-time employees. 28. How is the employer penalty reported and paid? The penalty is assessed on a monthly basis, but for simplicity, is described based on annual amounts. The IRS anticipates that it will contact a Large Employer to inform it of any potential liability only after appropriate information returns have been filed. Generally, the IRS will base its determination on the reporting required

14 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page 14 under section 6056 and information it will receive from the health exchanges on employees who become eligible for the tax credit or subsidy. 29. What is Minimum Value? To be considered minimum value, very generally, the employer must pay at least 60 percent of the cost of the health coverage for the employee (single coverage), based on actuarial values. A minimum value calculator is available on the HHS website at: What is Affordable Coverage? To be affordable, the employee s portion of the premium for single coverage must not cost more than 9.5 percent of the employee s household income as defined under section 36B(d)(2)(A) (a similar definition to household income for purposes of the individual penalty, but with some differences). However, because an employer cannot determine an employee s household income, the regulations offer three safe harbor methods to determine whether the cost is affordable for an employee. Generally, the three safe harbors provide that the employee s portion of the premium for single coverage cannot cost more than 9.5 percent (an indexed percentage) of: The employee s Form W-2, Box 1 wages; The Federal Poverty Limit based on the annual poverty rate for a family size of one; 130 hours multiplied by the employee s rate of pay at the beginning of the year. Whichever method an employer chooses to use must be applied uniformly and consistently among a reasonable category of employees Section H-5(e).

15 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page Who is a full-time employee for purposes of the requirement to offer coverage and for purposes of calculating the penalty? A full-time employee is generally an employee who performs services on average at least 30 hours per week within the United States. Hours of service performed outside the United States are not counted for this purpose, regardless of the tax status (U.S. citizen, NRA, etc.) of the employee. Note that even though an employee may perform a portion of services within and without the United States and for different members of a Large Employer, the employer counts all the hours attributable to services performed within the United States for all members of a Large Employer. 32. How do I identify which employees are full-time employees? The regulations under section 4898H provide detailed guidance on this determination. Generally, two methods are provided the monthly measurement period and the look-back measurement period. The details of these rules are very complex; below is a high-level simplified summary. Under the monthly measurement period, the Large Employer counts an employee s hours of service for each calendar month. Generally, an employee with 130 hours of service per month is a full-time employee. Under the look-back measurement period, a Large Employer chooses a 3-12 month look-back measuring period to count an employee s average hours of service. If the employee was employed on average at least 30 hours per week during the measuring period, then the Large Employer must treat the employee as a full-time employee. If the employee is parttime, coverage is not required generally for a period that can be no longer than the measuring period used. Special rules apply for variable hour employees, new employees, and seasonal employees. In the international context, special rules apply to permit the employer to treat certain employees transferring from a domestic member of a Large Employer to a foreign member as terminated employees, as well as to treat certain employees transferring from a foreign member of a Large Employer to a domestic member as new employees.

16 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page 16 Additionally, there are requirements regarding consistency of methods among categories of employees, and with respect to measuring periods within the look-back measurement method. In addition, an employer may use certain optional waiting periods and administrative periods during which coverage is not required. 33. Must a Large Employer offer coverage to a full-time employee s children who are nonresident aliens? A full-time employee s child who is not a U.S. citizen or national and not residing in the United States is not considered a dependent for purposes of the employer mandate, unless that child is a resident of a country contiguous to the United States (Canada, Mexico). Certain other exceptions apply for adopted children. 34. Can a foreign entity be a Large Employer? Yes, a non-u.s. employer can be a Large Employer, based on FTE employees providing services within the United States. This may apply if the non-u.s. employer is a single entity with no related entities or affiliates, or if the non-u.s. employer is a member of a controlled group determined to be a Large Employer. 35. Are there any special rules to consider? If a Large Employer offers MEC to all but five percent of its full-time employees (or, if greater, five full-time employees) and their children up to age 26, then the Large Employer is treated as having offered coverage to its full-time employees and their dependents and is not subject to the A Penalty. This relief does not apply with respect to the B Penalty, however Transition Rule: For 2015 only, the A penalty does not apply if an employer offers coverage to 70 percent of its full-time employees (and their dependents). This relief does not apply with respect to the B Penalty, however.

17 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page 17 Health Coverage Reporting 36. What are the IRS health coverage information reporting requirements? Employers have been required to report health care costs on Form W- 2 since 2012 (under transition rules, for employers who filed at least 250 Form W-2s in the prior year; note this transition rule may not apply for 2014). Section 6055 requires insurers (including employers who self-insure) to report certain health insurance coverage information to any individual who is being provided MEC and to the IRS. Section 6056 requires Large Employers to report certain health insurance coverage information to their full-time employees and to the IRS. 37. When is reporting under sections 6055 and 6056 effective? Although reporting was effective as of 2014, the IRS has indicated it will not impose penalties for failure to report for the 2014 year, although it is encouraged. The reporting which will be on various versions of Form 1095 is based on the deadlines that apply to Forms W-2. Therefore, these annual filings are first due to the IRS by February 28, 2016 (March 31 if electronic) and to the individual with health coverage by January 31, What must be reported under section 6055? Generally, the reporting entity s and sponsoring employer s names, addresses, and EINs; the names, addresses, and TINs of enrollees (the primary insured and each covered individual); and the months in which each enrollee was covered by the plan for at least one day. The IRS uses this information to determine whether the individual shared responsibility penalty applies to individual taxpayers. Generally, the IRS is required to send a notice no later than June 30 of each year to any individual who files an individual tax return and fails to enroll in MEC.

18 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page What must be reported under section 6056? Generally, the information described above for section 6055 reporting is required, in addition to certification by month of whether the Large Employer offered MEC to its full-time employees (and their children up to age 26); the total number of full-time employees for each month; the names, addresses, and TINs of full-time employees; the months in which each full-time employee was offered coverage; the months in which each full-time employee was enrolled in coverage at least one day; and the fulltime employee s share (by month) of the lowest-cost monthly premium for self-only coverage that provides minimum value. The IRS uses this information to match employees who have received a tax credit or subsidy for coverage under a health exchange and are certified as enrolled in a recognized exchange, to determine whether a Large Employer is subject to the employer shared responsibility penalty. 40. Is combined reporting permitted? Large Employers (based on having at least 50 FTEs) may combine sections 6055 and 6066 reporting on new IRS Form 1095-C. If the Large Employer self-insures health coverage, it fills out both sections of the Form 1095-C for MEC reporting (section 6055) and section 6056 reporting (full-time employee health coverage information). If the Large Employer provides insured health coverage, it only fills out the section 6056 portion of the form. 41. Can one member of a Large Employer report on behalf of other members? Generally, each employer member of a Large Employer s controlled group must separately report under sections 6055 and Electronic filing is required unless the Large Employer member files fewer than 250 returns. However, a Large Employer may have a third party facilitate the reporting. This includes facilitation by a member of the Large Employer s controlled group, however, a separate return must be filed for each member with that member s EIN. In addition, each member of the Large Employer s controlled group remains liable with respect to the requirements for timely and correct reporting.

19 The Impact of the Affordable Care Act on International Assignees and Their Health Care Plans page Is an Employer Identification Number ( EIN ) required to file the reports required under sections 6055 and 6056? Yes. 43. How do foreign employers without EINs file the reports required under sections 6055 and 6056? The proposed regulations under section 6055 solicited comments on rules for reporting by foreign employers without EINs that sponsor self-insured group health plans. However, the final regulations did not include any guidance on this point. Nevertheless, in informal comments, the IRS has indicated that foreign employers are required to apply for EINs in order to file the required reports under sections 6055 and This is because the IRS requires information on coverage based on the common law employer of an employee. KPMG s What's News in Tax is a publication from Washington National Tax that contains thoughtful analysis of new developments and practical, relevant discussions of existing rules and recurring tax issues. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. This article represents the views of the author or authors only, and does not necessarily represent the views or professional advice of KPMG LLP.

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