With required reporting under the Affordable Care Act (ACA) looming, employers should be aware of the latest guidance from the IRS. As a reminder, information reporting requirements apply to all employers who are members of an "Applicable Large Employer" under the ACA, generally an employer with 50 or more full-time and full-time equivalent employees in the previous year (including employees of related companies), and small employers that self-insure coverage. The IRS recently released final instructions for Forms 1094-B and 1095-B and Forms 1094-C and 1095-C. The first required filing for these forms occurs in January 2016 with respect to coverage for 2015.
Background
As employers have no doubt discovered by now, complying with the
ACA reporting requirements is a complex task. In general, every
provider of "minimum essential coverage" to an individual
must file an information return reporting the coverage. In general,
insurers will use Form 1094-B to submit Forms 1095-B, and
applicable large employers will use Forms 1094-C and 1095-C to
report the information about offers of health coverage and
enrollment in health coverage for their employees. Applicable large
employer members offering self-insured group health coverage
generally will report information about the coverage on Form 1095-C
(Part III) instead of Form 1095-B. (An employer who offers
self-insured coverage to non-employees -- e.g. retirees, COBRA
participants, or non-employee directors -- may use Form 1095-B to
report coverage of any individual who enrolled in the coverage for
one or more months but who was not an employee for any month during
the year.) Information reported on the forms will be used to
enforce employer mandate penalties, as well as individual mandate
and tax credit eligibility rules.
A full discussion of the ACA reporting requirements is beyond the
scope of this alert. If you have questions regarding ACA reporting,
please contact any member of our Employee Benefits Group. In
addition, the IRS website contains a helpful page with links to information on the
ACA as it applies to employers.
The IRS previously released drafts of the forms and related
instructions. Employers and their advisors have been reviewing the
drafts while preparing to file the appropriate forms. Employers
will be relieved to know that the final forms and instructions
generally followed the drafts. However, employers should take note
of some changes in reporting for specific circumstances, discussed
below.
Changes in the Final Instructions
Changes in the final instructions primarily impact reporting for
COBRA coverage for terminated employees, multiemployer plan
coverage and health reimbursement arrangement (HRA) coverage.
COBRA coverage. Under the final
instructions, an offer of COBRA coverage to a participant who has
terminated employment is not considered an offer of coverage for
reporting purposes. All terminated COBRA participants are reported
the same: "1H" ("no offer of coverage") on Line
14, nothing on Line 15 and "2A" ("employee not
employed during the month") on Line 16. To report for the
actual month of termination of employment (when the employee was an
employee and covered for only part of the month) the employer puts
"1H" on Line 14 and "2B" ("employee not a
full-time employee") on Line 16. Under the draft instructions
for Form 1095-C and FAQs issued by the IRS, reporting COBRA
coverage for terminated employees for months after the termination
would have depended on whether the employee actually enrolled in
COBRA.
Multiemployer plan relief. An employer
is treated as offering coverage to an employee if the employer is
required by a CBA to make contributions for that employee to a
multiemployer plan regardless of whether coverage is actually
offered to the individual, provided certain conditions set out in
ACA regulations are met. The final instructions clarify that
employers claiming the relief should use code "1H"
("no offer of coverage") on Line 14 and "2E"
("Multiemployer interim relief") on Line 16 for any month
in which the employer claimed the benefit of the relief. The draft
instructions proved confusing because they implied that code
"2C" ("Employee enrolled in coverage offered")
trumped all other codes for Line 16. The final instructions clarify
that "2E" trumps "2C" for Line 16. IRS
officials are careful to note that the safe harbor is available
only if the employer can demonstrate that the multiemployer plan
offers, to individuals who meet the plan's eligibility
conditions, coverage that: (i) provides minimum value, (ii) is
affordable and (iii) covers dependents, in accordance with ACA
requirements.
HRA coverage. Lastly, the final
instructions eliminate potentially burdensome reporting for certain
types of integrated HRA coverage. An employer with a self-insured
plan and an HRA is required to report the coverage of an individual
enrolled in both types of minimum essential coverage in Part III of
Form 1095-C under only one of the arrangements. An employer with an
insured plan and an HRA is not required to report the HRA in Part
III of Form 1095-C HRA if the individual is eligible for the HRA
because the individual enrolled in the insured medical plan. IRS
officials are careful to point out that this reporting relief is
determined on an individual basis. For example, if an employee has
self-only insured coverage and a family HRA, the employer is still
required to report the HRA coverage for the non-employee family
members. (Although they note that such an arrangement may run afoul
of the integrated HRA exception to the prohibition on
lifetime and annual limits and cause more serious problems for the
sponsoring employer.)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.