ACA Pathways: IRS Finalizes 2016 Forms for ACA Reporting
October 06, 2016
The Internal Revenue Service (IRS) has recently released final forms and instructions for reporting under Internal Revenue Code (Code) Sections 6055 and 6056.
- Forms 1094-C and 1095-C (C- Forms), and related instructions, are used by applicable large employers (ALEs) to report under Code Section 6056, as well as for combined Section 6055 and 6056 reporting by ALEs who sponsor self-insured plans.
- Forms 1094-B and 1095-B (B-Forms), and related instructions, are used by entities reporting under Code Section 6055, including self-insured plan sponsors that are not ALEs, and thus, not subject to the Affordable Care Act (ACA)'s employer shared responsibility provisions, including the Code Section 6056 reporting requirements.
In addition, Publications 5164 (Test Package for Electronic Filers of Affordable Care Act (ACA) Information Returns (AIR) (Processing Year 2017)), and 5165 (Guide for Electronically Filing Affordable Care Act (ACA) Information Returns for Software Developers and Transmitters) (Processing Year 2017)), have also been released.
Only minor changes were made to the 2016 B-Forms and C-Forms from the 2015 versions. The instructions also included some clarifications. Of note are the following:
- Line 22, Box B ("Qualifying Offer Method Transition Relief") is indicated as "Reserved" because it doesn't apply to 2016 coverage.
- Part III, column (b) includes a new distinction, "Section 4980H" before "Full-Time Employee Count for ALE Member." This is intended to remind filers that only the Code Section 4980H definition of "full-time employee" should be used in this column. Thus, either the monthly or look-back measurement method definition, and no other definition, can be used.
- Heading. The language "Do not attach to your tax return. Keep for your records." was inserted under the title of the form to inform the recipient that Form 1095-C should not be submitted with the return. This change was also made to the Form 1095-B.
- Part II. The "Plan Start Month" box will remain optional for 2016, but is expected to be mandatory for 2017.
- Part II, Line 14. Two new codes were added to address conditional offers of coverage to an employee's spouse:
- Code 1J can be used if: (1) minimum essential coverage providing minimum value was offered to the employee; (2) minimum essential coverage was conditionally offered to the employee's spouse; and (3) minimum essential coverage was not offered to the employee's dependent(s).
- Code 1K can be used if: (1) minimum essential coverage providing minimum value was offered to the employee; (2) minimum essential coverage was conditionally offered to the employee's spouse; and (3) minimum essential coverage was offered to the employee's dependent(s).
- Part II, Line 14. To report enrollment of individuals in a self-funded plan who are not full-time employees, Code 1G should be used. The instructions clarify that Code 1G applies for the entire year or not at all.
- Part II, Line 15. The heading was revised to read "Employee Required Contribution (see instructions)." The instructions include a new definition of this term, as described below, which is intended to clarify the amount to be entered on this line.
- Part II, Line 16. Codes 1I and 2I are no longer applicable and have been reserved. The instructions also indicate that ALEs should not enter Code 2C for any month in which the employee is enrolled in coverage that is not minimum essential coverage (MEC), or use an affordability safe harbor code (Code 2F, 2G, or 2H) for any month in which they offer MEC to less than 95% of their full-time employees.
- Part III. Language regarding Part III, Covered Individuals, has been added to clarify that employers should enter information for all individuals enrolled in the self-insured coverage, including the employee.
The instructions for the C-Forms also contain the following clarifications or revisions:
- Transition Relief. References to transition relief that applied only in calendar year 2015 have been removed. Descriptions of the remaining forms of transition relief have been amended to clarify for which months in 2016 the transition relief applies.
- Aggregated ALE Groups. The instructions contain additional information on filing by ALEs that are part of an Aggregated ALE Group, including clarification that each member of the group must file regarding its own full-time employees. The instructions also include information and an example on filing related to employees who work for more than one member of an Aggregated ALE Group.
- Authoritative Transmittal. ALEs must designate one Form 1094-C as the Authoritative Transmittal. The instructions include information and examples on the Authoritative Transmittal requirements.
- Qualifying Offer Method. The instructions clarify that ALEs using the Qualifying Offer Method may, but are not required to enter a safe harbor code on Line 16 of the Form 1095-C when Code 1A is entered on Line 14. A Qualifying Offer is, by definition, treated as an offer that falls within an affordability safe harbor even if no code is entered on Line 16.
- COBRA and other Post-employment Coverage. Clarifying language has been added on how to report offers of COBRA and other post-employment (non-COBRA) coverage. Offers of COBRA or other post-employment coverage to former employees (and their family members) should not be entered as offers of coverage on Line 14. However, an offer of COBRA coverage to an employee who remains employed should be entered as an offer of coverage.
- Affordability. The instructions state that references to 9.5 percent related to the coverage affordability calculation are applied as indexed for purposes of the premium tax credit. The percentage, as adjusted, is 9.56 percent for 2015, 9.66 percent for 2016 and 9.69 percent for 2017.
- Employee Required Contribution. The instructions include a new definition of this term, which is intended to clarify the amount to be entered on Line 15 of Form 1095-C. The "Employee Required Contribution" is the employee's share of the monthly cost for the lowest-cost self-only minimum essential coverage providing minimum value that is offered to the employee by the ALE. The instructions clarify that the employee share is the portion of the monthly cost that would be paid by the employee for self-only coverage, whether paid through salary reduction or otherwise, and include information for calculating this amount.
- Substitute Statements. The instructions clarify that substitute statements furnished to individuals may be in portrait format. However, substitute returns filed with the IRS on paper must be printed in landscape format.
- Waivers from Electronic Filing. Reporting entities are encouraged to file Form 8508 requesting a waiver at least 45 days before the due date of the return, but no later than the return's due date. The instructions also note that the IRS does not process waiver requests until January 1 of the calendar year that the returns are due.
- Taxpayer Identification Number (TIN). Both Form 1095-B and Form 1095-C clarified that employers may report a Taxpayer Identification Number (TIN) instead of a Social Security number (SSN), or a truncated SSN may be used, for any covered individuals except for employees listed in Part I of Form 1095-C.
- Reporting Penalties. The 2016 instructions include adjusted penalty amounts for failures to file returns and furnish statements. The adjusted penalty amount is $260 per violation, with an annual maximum of $3,193,000.00. Penalty amounts can be increased or decreased, depending on the situation. Lower annual maximums continue to apply for small businesses. Penalties may be waived if the failure was due to reasonable cause and not willful neglect.
2016 Filing and Disclosure Deadlines
Forms 1095-B and 1095-C for the 2016 calendar year must be furnished to applicable employees by January 31, 2017, and filed with the IRS, accompanied with the respective Form 1094-B or 1094-C, no later than February 28, 2017 (March 31, 2017, if filing electronically).
The final forms and publications are available on the IRS website via the following links:
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.
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