Issue Eighty-Four April 2014

Transcription

1 Issue Eighty-Fur April 2014 April 28, 2014 The gvernment recently released final Affrdable Care Act (ACA) reprting requirements/ regulatins. The prpsed regulatins were issued last fall and were explained in ur Refrm Update at The final regulatins significantly changed the tw emplyer reprting requirements: Sectin 6055 applies t rganizatins that ffer Minimum Essential Cverage (MEC). Sectin 6056 applies t all Applicable Large Emplyers (ALEs). An ALE is an emplyer with 50 r mre full time equivalent emplyees and subject t the ACA play r pay rules. The IRS will use Sectin 6055 reprts t mnitr cmpliance with the individual mandate requiring taxpayers t either btain MEC r pay a tax penalty. It will use Sectin 6056 reprts t determine whether an emplyer needs t pay a penalty fr failing t ffer minimum value, affrdable cverage. The IRS will als use Sectin 6056 reprts t audit the premium credits individuals receive t purchase subsidized cverage in the Marketplace. The reprting requirements were riginally set t apply in Hwever, the IRS delayed the reprting requirements until 2015 ut f cncern that reprting parties did nt have enugh time t cmply. The reprting requirements will apply fr the 2015 calendar year and reprts will be due in early The final regulatins significantly changed the Sectin 6056 reprting. This Refrm Update reviews the final reprting requirement rules. Sectin 6055 Reprting Sectin 6055 requires any rganizatin ffering MEC t reprt certain infrmatin related t MEC. Gvernment plans, insurance carriers and self-funded emplyers are subject t this reprting. The final rules recgnized self-funded emplyers wuld be burdened because they wuld be subject t bth Sectin 6055 and The final rules d nt subject Sectin 6055 reprting t self-funded emplyers. Instead, the IRS will issue an addendum t Sectin 6056 reprting t cver the infrmatin required by bth 6055 and 6056 reprting fr self-funded emplyer-spnsred health plans. The Sectin 6055 reprting has tw parts. Reprting entities must submit an aggregate reprt t the IRS and an individual statement t the respnsible persn, generally the plicyhlder under an individual insured plan. The respnsible persn wuld be the primary insured under gvernment prgrams r the emplyee under fully-insured grup health plans.

2 Issue Eighty-Fur April 2014, Page 2 The final rules clarify that the Sectin 6055 reprting is meant fr MEC nly, nt fr supplemental cverage. Thus the IRS des nt require reprts fr health reimbursement arrangements (HRAs) tied t a medical plan r fr nsite clinics, wellness plans r any ther medical benefits ancillary t the MEC. Since self-funded emplyers d nt have t cmplete the Sectin 6055, this Refrm Update will nt cver the infrmatin that needs t be included. Hwever, a tax identificatin number (scial security number fr mst) must be reprted fr all cvered members. Reprting entities must make reasnable effrts t btain the tax ID number (TIN) fr all cvered members. Reasnable effrts are defined as fllws: A reprting entity must ask fr the dependent s TIN when the relatinship with the reprting entity is first established. Fr health plans, this will typically be when an emplyee r dependent enrlls. If the reprting entity des nt receive the TIN at first, it must try again by December 31 f that year. Fr mst emplyers this time frame will align with pen enrllment. If the dependent des nt prvided the TIN after the first tw attempts, the plan spnsr must try again by December 31 f the fllwing year. If the TIN is still nt reprted, the emplyer is seen as making reasnable effrts. Reprting entities can use a birth date if they cannt btain a tax ID number after making reasnable effrts. Since the prcess can last between 2 and 3 years, emplyers shuld use birth dates when they cannt btain TINs befre the reprt is due. Fr this purpse, emplyers need t understand their insurance carriers will make reasnable effrts t btain the tax ID numbers f cvered dependents. Self-funded emplyers may als need the dependents TINs fr the addendum t the Sectin 6056 reprting. Self-funded emplyers shuld als make reasnable effrts as described abve t secure TINs fr all cvered members. Finally, reprting entities need nly reprt individuals enrlled in the health plan. This reprting will nt require them t include eligible individuals that are nt enrlled. Sectin 6056 Reprting Sectin 6056 reprting applies t emplyers with 50 r mre full-time emplyees r full-time equivalent emplyees. This determinatin is made based n the IRS cntrlled grup. Hwever, penalties under the play r pay rules are administered at the emplyer level. Each member f the IRS cntrlled grup must submit a Sectin 6056 infrmatinal return. Emplyers can use a third party t file the reprt. The final rules include a general reprting methd and a number f alternative reprting methds. All emplyers can use the general methd. The alternative methds apply nly in limited situatins. They can replace the general reprting methd.

3 Issue Eighty-Fur April 2014, Page 3 General Methd This general methd uses Frm 1094 C fr aggregate IRS reprting and Frm 1095-C fr individual statements. Emplyers must submit a separate return fr each full-time emplyee, similar t hw they submit separate W-2s. The IRS may designate substitute frms as well. The IRS has nt released mdel frms yet. Since the IRS cmbined Sectin 6055 and 6056 reprting fr self-funded plans, the Frm 1094-C and 1095-C sectins emplyers need t cmplete are different. Self-Funded Medical Plans - Emplyer uses Frm 1094-C. The emplyer will need t cmplete bth sectins f the frm t submit all the infrmatin required under bth Sectins 6055 and Insured Medical Plans - Emplyers als use Frm 1094-C, but the emplyer cmpletes nly the infrmatin that applies t the Sectin 6056 reprting. Health insurers, selfinsured multi-emplyer plans, and prviders f gvernment-spnsred cverage reprt the required Sectin 6055 infrmatin n Frm 1095-B. The final rules have slightly changed the infrmatin required fr Sectin The fllwing infrmatin needs t be included n the Sectin 6056 reprting: Name, address and EIN f the emplyer (each separate emplyer in a multiple subsidiary situatin). Address and telephne number fr the emplyer s cntact persn (can be a third party). Calendar year fr which the infrmatin is reprted. Certificatin as t whether full-time emplyees (and dependents) culd enrll in minimum essential cverage (MEC). Number f full-time emplyees each mnth. Fr each full-time emplyee: the mnths MEC was available the emplyee s share f the lwest cst mnthly premium fr self-nly cverage prviding minimum value available t that emplyee (by mnth) name, address and scial security number and the mnths, if any, when the emplyee was cvered under an eligible emplyer-spnsred health plan Indicatr cdes t reprt the fllwing infrmatin: Whether cverage prvides minimum value and whether the emplyee culd enrll his r her spuse. Whether an emplyee s effective date f cverage was affected by a permissible waiting perid, by mnth. Whether the emplyer had n emplyees r therwise credited hurs f service, by mnth.

4 Issue Eighty-Fur April 2014, Page 4 Whether the emplyer is part f a cntrlled grup and, if s, the name and EIN f each member that is part f the applicable large emplyer n any day f the year. Fr thse that cntribute t a multi-emplyer plan (such as a unin plan), whether the emplyer des nt have t pay the emplyer penalty because the emplyer cntributed t that plan. If a third party is reprting fr the emplyer, the name, address and ID number f the third party The fllwing infrmatin may als need t be reprted fr each full-time emplyee: Whether the emplyer ffered MEC t the emplyee nly, emplyee and dependents nly, emplyee and spuse nly, r emplyee and family. If the emplyer did nt ffer cverage, whether n penalty applies because the emplyee was nt full-time r nt emplyed during that mnth r whether any ther exceptin applies. Whether the emplyer ffered cverage even thugh the emplyee was nt full-time. Whether the emplyer met any affrdability safe harbr. Infrmatin n the number f mnths that the plan cvered any dependents. This applies nly t self-funded plans because it is required under Sectin 6055 Fr emplyers with emplyees cvered by a unin trust plan r a multiple emplyer welfare arrangement (MEWA), the plan spnsr shuld help cllect data. The plan spnsr may prepare statements fr emplyers n emplyees cvered by a trust plan r MEWA. This is required s emplyers can submit the Sectin 6056 reprting n all f their full-time emplyees. Further details will be prvided with the instructins and mdel frms. Sectin 6056 still requires an individual statement. This statement may be Frm 1095-C r a substitute statement. Alternative Reprting Optins The purpse f the Sectin 6056 reprting is t help the IRS administer the penalties under play r pay rules and audit premium tax credits ffered in the Marketplace. These reprting requirements may present a challenge. Based n emplyer cmments, the IRS has nw prvided simpler reprting ptins fr emplyers. These alternatives apply nly in certain emplyer situatins. If an alternative reprting methd applies, it can be used instead f the general reprting methd. Certificatin f Qualifying Offers Alternative Under this alternative, emplyers certify n the Sectin 6056 transmittal frm that they presented a qualifying ffer f cverage t full-time emplyees and can prvide a simple statement t the emplyee (as ppsed t prviding a Frm 1095-C). An emplyer can use this reprting alternative if fr all mnths during the applicable year in which the emplyee wrks full-time (30 r mre hurs a week), the emplyer makes a qualifying ffer.

5 Issue Eighty-Fur April 2014, Page 5 A qualifying ffer f cverage means the emplyer: Offered MEC prviding minimum value at a cst fr emplyee-nly cverage f nt mre than 9.5% f the single mainland federal pverty line. In 2014 that wuld be an annual cntributin fr emplyee nly cverage f rughly $1,100. Offered MEC t the emplyee s spuse and dependent children (natural and adpted). Emplyers taking advantage f this alternative will need t reprt nly: Emplyee name Emplyee address Emplyee tax identificatin number Emplyers can use a cde fr each mnth they make a qualifying ffer t an emplyee wh was nt ffered cverage fr the full 12 mnths f the year. This alternative is nt available t an emplyer that des nt ffer dependent cverage in Transitinal Rules fr Qualifying Offers Alternative Fr 2015, this ptin is available t emplyers able t certify that they made a qualifying ffer f cverage t at least 95 percent f full-time emplyees, their spuses and their dependent children. The emplyer must send a simple statement t the emplyee abut the cverage by the fllwing January 31. The IRS will prvide the frmat fr this statement. Fr 2015, cverage fr all twelve mnths f the applicable year is nt required fr this transitinal reprting methd. Simply filing the Frm 1095-C satisfies the IRS filing requirement. This frm requires the emplyee s name, scial security number and address. It will als have cdes t indicate the fllwing pssibilities: 1. A qualifying ffer was made fr all 12 mnths. 2. A qualifying ffer was made fr specific mnths. 3. A qualifying ffer was nt made. The IRS will make mdel frms and instructins available. These frms will help emplyers evaluate whether this alternative reprting ptin is wrkable. Reprting withut Separate Identificatin f Full Time Emplyees Alternative This methd is available t emplyers making an ffer f MEC t at least 98 percent f the emplyees whse infrmatin they reprt under Cde Sectin Fr this purpse, emplyers can determine affrdability under any f the applicable safe harbrs. The emplyer in this case is nt required t identify which emplyees are full-time. The final regulatins give an example f this situatin. ABC Cmpany has 1,000 emplyees expected t wrk at least 27 hurs a week. The emplyer des nt want t determine whether any f

6 Issue Eighty-Fur April 2014, Page 6 these emplyees are full-time under the emplyer mandate. Instead, the emplyer ffers minimum value, affrdable cverage t the 990 f these 1,000 emplyees wrking 25 r mre hurs a week. Under this alternative, the emplyer is nt required t reprt either the ttal number f full-time emplyees fr the year r whether an emplyee was cnsidered full-time fr any mnth in the calendar year. If any f these emplyees g t the Exchange t purchase subsidized cverage, the IRS will cntact the emplyer. The emplyer will have t determine full-time status if the IRS needs that infrmatin t mnitr premium subsidies. Transitin Reprting fr Mid-Size Emplyers (50 t 99 Full-Time Emplyees) Emplyers eligible fr transitin relief frm emplyer penalties must still reprt fr Hwever, under this reprting methd, the emplyers need simply certify that they meet the eligibility requirements fr the 50 t 99 transitinal relief. T be eligible fr the 50 t 99 delay in penalties (until 2016) emplyers must certify the fllwing: Limited Wrkfrce Size the number f full-time emplyees and equivalents falls between 50 and 99. Maintenance f Wrkfrce and Aggregate Hurs f Service Frm February 9, 2014, t December 31, 2014, they did nt deliberately reduce the size f their wrkfrce r verall hurs f service wrked in rder t qualify fr this transitinal relief. Reducing the wrkfrce r verall hurs f service is permitted nly fr a bna fide business reasn. Maintenance f Previusly Offered Health Cverage - Frm February 9, 2014, t December 31, 2015, the emplyer will nt eliminate r materially reduce health care cverage that was ffered as f February 9, Fr nn-calendar year plans, the reduced health care cverage cannt ccur befre the last day f the 2015 plan year. Emplyers are nt cnsidered t be eliminating r reducing cverage if: They cntinue t ffer emplyer funding fr cverage that is at least 95 percent f the cntributin they ffered n February 9, 2014, r they ffer the same cntributin percentage. If benefits are mdified, the plan retains minimum value after any benefit changes. The emplyer des nt alter the terms f eligibility fr the grup health plan t narrw r reduce the class f emplyees r dependents ffered cverage under the plan as f February 9, This ptin will allw emplyers t certify they meet the requirements fr delaying penalties. These alternatives may be ptins fr sme emplyers and nt thers. Emplyers shuld review the mdel frms and instructins nce they are released. The instructins will prvide useful details fr all the reprting ptins available t meet the Sectin 6056 requirements.

7 Issue Eighty-Fur April 2014, Page 7 Timing and Prcess The timing and prcess fr filing bth Sectins 6055 and 6056 reprting remains the same as in the prpsed rules. Electrnic filing f Frms 1094-C and 1095-B is required, except fr emplyers filing fewer than 250 returns under Sectin 6056 during the calendar year. Emplyers can send the required individual statements electrnically if the emplyer fllws the rules that apply, such as btaining the emplyee s cnsent t electrnic disclsure f this specific frm. An emplyee s cnsent t receive the W-2 electrnically des nt apply. Emplyers wuld need t receive cnsent specific t this frm. The prcess fr securing cnsent is the same prcess used t cnsent t receive the W-2 electrnically. Emplyers can mail these individual statements if they d want t send them electrnically. The final rules indicate that the Frm 1095-C can be included in the same mailing as the W-2. Emplyee statements must be prvided annually n r befre January 31 (these are the same filing due dates as apply fr Frms W-2). Annual filings related t the aggregate reprting are due n later than February 28 f the year fllwing the year t which the infrmatin relates if sent in paper frmat. If filed electrnically, the electrnic file must be sent by March 31. These deadlines apply even t plans that are nt calendar year plans. Thus the first filings and statements will be due in early 2016 fr the 2015 calendar year. Penalties Tw different sectins f the Internal Revenue Cde discuss the penalties fr nt cmplying with Sectin 6056 reprting: Sectin 6721 discusses failing t send crrect returns t the IRS. The basic penalty is $100 fr each incrrect return. The ttal fine during any calendar year will nt exceed $1,500,000. Sectin 6722 discusses failing t prvide emplyee statements. The penalty is the same as abve but applies fr nt prviding individual statements. The IRS will recgnize gd faith effrts t cmply with this reprting in Fr reprts filed in 2016 (with 2015 infrmatin), n penalties will apply t reprting entities that reprt incrrect r incmplete infrmatin, if they can shw they made gd faith effrts t cmply with the reprting requirements. This relief will nt apply if an emplyer des nt file n time r has nt made a gd faith effrt t cmply.

8 Issue Eighty-Fur April 2014, Page 8 Cncluding Thughts Emplyers nw have many f the details they need t prepare fr the reprting requirements. They will need t determine frmatting when the mdel frms are released. The mdel frms will likely prvide mre details n the General Methd and alternative reprting ptins available t emplyers. Emplyers can begin t identify the data the General Methd requires and determine where their systems huse this data. Several prpsed simplified data reprting ptins may nt apply t sme emplyers. Hwever, ther simplified reprting ptins may be available. Emplyers may use different alternative reprting methds fr different segments f emplyees. The IRS will prvide mre details with the sample frms and instructins. Emplyers can start planning based n these final rules. Remember, all applicable large emplyers must submit this data fr the 2015 calendar year.