September 16, 2014
The Affordable Care Act (ACA) created new reporting requirements under Internal Revenue Code (Code) Sections 6055 and 6056. Under these new reporting rules, certain employers must provide information to the IRS about the health plan coverage they offer (or do not offer) to their employees to assist it in administering ACA’s employer and individual mandates.
On August 28, 2014, the Internal Revenue Service (IRS) released draft instructions for the forms that employers will use to report under Code Sections 6055 and 6056. This followed the release on July 24, 2014 of the actual draft Forms 1094-B, I095-B, 1094-C and 1095-C.
The Forms 1095-B and 1095-C are information returns, which will also serve as a statement to individuals, and Forms 1094-B and 1094-C are transmittal forms used to send the information returns to the IRS. The “C forms” will be used by applicable large employers (ALEs) subject to the employer shared responsibility provisions of the ACA (commonly referred to as “play or pay”), and the “B forms” will be used by other coverage providers.
Summary of Code Sections 6055 and 6056
Code section 6055 requires providers of minimum essential coverage (MEC), to file an annual report with the IRS about the type and period of coverage participants are enrolled in. Code section 6056 requires employers subject to the employer shared responsibility mandate (applicable large employers, or ALEs) to report to the IRS certain health care coverage information offered to their full-time employees. They will also provide the government with information to administer other ACA mandates, such as the employer and individual mandates.
Code section 6055 and 6056 also require reporting entities to furnish a statement annually to individuals enrolled in MEC (Code section 6055) and full-time employees (Code section 6056). Among other things, this information will be used to determine whether employees can claim a premium tax credit on their tax returns for coverage purchased through the Marketplace.
Under Section 6055, every entity that provides MEC to an individual during a calendar year must file Forms 1094-B (a transmittal form) and 1095-B (an information return) with the IRS about the type and period of coverage provided to them. This includes health insurance issuers or carriers with respect to fully insured plans, sponsors of self-insured group health plans that are not subject to the employer shared responsibility mandate, sponsors of multiemployer plans, and providers of government-sponsored coverage (for example, Medicare, Medicaid, CHIP or TRICARE).
This information will be used by the IRS to determine liability for health care reform’s individual shared responsibility penalty (i.e., those individuals covered by MEC will not be assessed an individual shared responsibility penalty). ALEs that sponsor self-insured group health plans will report information about MEC coverage in Part III of Form 1095-C, instead of using Form 1095-B, for any individual enrolled for coverage in the employer’s plan.
Per the instructions, for each covered individual, information to be provided on the Form 1095-B will include name, social security number (or date of birth if not available), whether covered for all 12 months for at least one day (or the specific months covered for at least one day, if not all 12 months).
All ALEs subject to the employer play or pay rules must file Form 1094-C (a transmittal) and Form 1095-C (an information return) for each full-time employee for any month of the year.
Form 1094-C transmittal form is used to report summary information for each employer to the IRS and to transmit copies of Forms 1095-C to the IRS. The Form 1094-C instructions also describe the reporting requirements for employers relying on various forms of play or pay transition relief for 2015, such as the additional delay for employees with less than 100 full-time employees.
Form 1095-C is used to report information to the IRS about each full-time employee. If the plan is self-insured, the employer will also satisfy its Code Section 6055 reporting obligation by reporting actual coverage about each employee and family member who enrolls in employer-sponsored coverage. Allowing sponsors of self-insured health plans to combine their Code Section 6055 and 6056 reporting on Form 1095-C is intended to simplify their reporting obligations(1).
Although the form is filed annually, most of the information must be reported separately for each calendar month, unless an exception applies. Indicator codes will be used to describe many elements of the coverage offered by the ALE (Code Series 1) and to ascertain the ALE’s potential pay or play liability with respect to the offered coverage (Code Series 2), as reflected in the following table:
Indicator Code Series 1 (Offer of Coverage) and 2 (Pay or Play Safe Harbor Codes and Other Relief)
|1A||Qualifying Offer made: MEC providing 60%minimum value (MV) was offered to full-time employee with employee contribution for self-only coverage equal to or less than 9.5% mainland single federal poverty line and at least MEC offered to spouse and dependent(s)|
|1B||MEC providing MV offered to employee only|
|1C||MEC providing MV offered to employee and at least MEC offered to dependent(s) (not spouse)|
|1D||MEC providing MV offered to employee and at least MEC offered to spouse (not dependent(s))|
|1E||MEC providing MV offered to employee and at least MEC offered to dependent(s) and spouse|
|1F||MEC NOT providing MV offered to employee, or employee and spouse or dependent(s), or employee, spouse, and dependents|
|1G||Employee was not a full-time employee for any month of the year and enrolled in self-insured coverage for one or more months|
|1H||No offer of coverage to employee (or offer of coverage was not MEC)|
|1I||Qualified Offer Transition Relief for 2015- Employee (and spouse or dependents) received no offer of coverage, received an offer that is not a Qualified Offer, or received a Qualified Offer for less than 12 months|
|2A||Employee was not employed on any day of month|
|2B||Employee was not a full time employee|
|2C||Employee was enrolled in employer offered coverage|
|2D||Employee was in limited non-assessment period for purposes of Code Section 4980H(b) (also referred to as the Penalty B or $3,000 penalty):
|2E||Multiemployer interim rule relief applies|
|2F||Form W-2 affordability safe harbor used|
|2G||Federal poverty line affordability safe harbor used|
|2H||Affordability rate of pay safe harbor used|
|2I||Non-calendar year transition relief applies|
A Form 1094-C (transmittal form) must be attached to any Form 1095-C filed by an ALE. An ALE may submit multiple Forms 1094-C, each accompanied by Forms 1095-C, for some of its employees, provided that Forms 1095-C are filed for each employee for whom the ALE is required to file.
Employers Filing Multiple Forms 1094-C
ALEs must file a single Form 1094-C reporting aggregate employer-level data for all full-time employees, identifying the form, on line 19 of Part II, as the Authoritative Transmittal. One Authoritative Transmittal must be filed for each ALE, even if multiple Forms 1094-C are filed by and on behalf of the ALE (including in the case of a governmental unit that has delegated its reporting responsibilities for some its employees to another governmental unit). For example, if an employer has prepared a separate Form 1094-C for each of its two divisions to transmit Forms 1095-C for each division’s full-time employees, one of the Forms 1094-C filed must be designated as the Authoritative Transmittal and report aggregate employer-level data for all full-time employees (for both divisions).
One Form 1095-C for Each Full-time Employee
There must be only one Form 1095-C for each full-time employee of the ALE, representing employment with that employer. For example, if the ALE separately reports for the full-time employees of its two divisions, the ALE must combine the information for any employee who worked at both divisions during the year so that there is only a single Form 1095-C for that employee which reports information for all 12 months of the calendar year.
In contrast, a full-time employee who works for more than one employer that is a member of the same controlled group (a related entity) must receive a separate Form 1095-C from each related entity.
Any reporting entity that is required to file at least 250 returns under Section 6055 or 6056 must file electronically. The 250-or-more requirement applies separately to each type of return and separately to each type of corrected return. Reporting entities that are filing on paper will send paper returns to the address provided in the instructions, based on where their principal business, office or agency (or legal residence, in the case of an individual) is located.
Under both Code Section 6055 and Section 6056, the informational return and transmittal form must be filed with the IRS on or before February 28 (March 31, if filed electronically) of the year following the calendar year of coverage. However, if the regular due date falls on a Saturday, Sunday or legal holiday, entities should file by the next business day. For calendar year 2015, these forms must be filed by February 29, 2016 (or March 31, 2016, if filing electronically).
These forms are not required to be filed for 2014. However, in preparation for the first required filing (in 2016 for 2015 coverage), reporting entities may voluntarily file in 2015 for 2014 in accordance with the draft forms and instructions. More information about voluntary filing is available on the IRS website.
All entities reporting under Section 6055 or 6056 must furnish a copy of Form 1094-C or 1095-C, as applicable, to the person identified as the responsible individual named on the form. For employers combining their reporting responsibility (those sponsoring self-insured plans), in addition to furnishing a separate Form 1095-C to each of its full-time employees, the employer must also provide a copy of the Form 1095-C to all other employees also covered. A full-time employee who works for more than one ALE member of the same controlled group must receive a separate Form 1095-C from each ALE member.
Statements must be furnished by mail, unless the recipient affirmatively consents to receive the statement electronically
The statement must be furnished on or before January 31 of the year following the calendar year of coverage. The first statements are due to individuals by February 1, 2016.
The draft instructions and forms are available by accessing the applicable links below:
Form 1094-B: Transmittal of Health Coverage Information Returns
Form 1095-B: Health Coverage
Form 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Return
Form 1095-C: Employer-Provided Health Insurance Offer and Coverage
Instructions for Forms 1094-B and 1095-B
Instructions for Forms 1094-C and 1095-C
The IRS website for Q/As is located at www.irs.gov/uac/Questions-and-Answers-on-Information-Reporting-by-Health-Coverage-Providers-Section-6055 (Code Section 6055) and www.irs.gov/uac/Employer-Provided-Health-Coverage-Informational-Reporting-Requirements:-Questions-and-Answers< (Code Section 6056).
Our ACA Pathways discussing the final regulations to the employer reporting requirement is available at: www.burnhambenefits.com/affordable-care-act/2014/Final-Reporting-Regulations
(1) ALEs that sponsor self-insured plans will complete Form 1095-C, Parts I and III, for any individual (including any full-time employee, non-full-time employee, family members and others) who enrolled in the self-insured health plan. If the employee is full-time for any month, the ALE must also complete Part II. If the employee is not full-time for all 12 months of the calendar year, the ALE must complete only Part II, line 14, by entering code 1G in the “All 12 Months” column.
For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:
This ACA Pathways is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. The information contained in this ACA Pathways includes emerging health care news from a limited perspective and does not encompass all views. The information was selected from a wide range of sources selected on the basis of their potential impact on employers and/or their employee benefit plans. For more information, please contact Burnham Benefits.