ACA Reporting Due Early 2017

ACA DeadlinesBy Michael Berwanger, JD, Director, Quality Management & Compliance

In early 2017, employers and insurance carriers must report information to employees and the IRS about coverage offered to employees under employer-sponsored health plans during calendar year 2016.

Background

The Patient Protection and Affordable Care Act (ACA) requires self-funded employers to satisfy two reporting obligations under Sections 6055 and 6056 of the Internal Revenue Code, relating to health coverage offered to employees and about those employees who are covered under the plan.

The purpose of the reporting obligations is to allow the IRS access to data needed to monitor compliance with both the employer and individual mandates. The reporting also may be used by affected employees in assessing their own compliance with the individual mandate and/or in seeking subsidized coverage on the federal and state exchanges established under the ACA (as described in this blog post).

Section 60ACA reporting55 Reporting Compliance

Under Section 6055 of the Internal Revenue Code, all self-funded employers must annually report information to the IRS and to any individual who is covered under a health plan offered by the employer.

Currently, many employers do not have access to Social Security numbers for non-employed dependents, creating a fairly significant compliance burden to collect that data. The regulations require that employers exercise “reasonable collection efforts” to obtain that information. (Typically, an employer will satisfy that standard by documenting at least two efforts to request the data from those individuals). This same information must be reported to employees, along with basic contact information for the employer.

Section 6056 Reporting Compliance

The second reporting obligation, under Code Section 6056, applies only to “Applicable Large Employers.” Applicable Large Employers are those employers with at least 50 full-time equivalent employees and to whom the ACA’s employer mandate applies.

Unlike Section 6055 reporting, all of this information also must be provided separately to each employee, full-time, part-time, or otherwise. You can read helpful IRS guidance about 6056 reporting here.

IRS Forms 1094 and 1095

The compliance obligations are complex, and the IRS has developed forms (Forms 1094-B, 1095-B, 1094-C, and 1095-C) to provide consistency in reporting and to help simplify the process for employers.

Applicable Large Employers (ALEs) who offer coverage under a self-funded health plan may use Form 1095-C, which combines the reporting obligations of Sections 6055 and 6056 in a single form for reporting to both the IRS and individuals. When the forms are provided to the IRS, the Applicable Large Employer also must submit a transmittal form, Form 1094-C. Forms 1095-C and 1094-C, along with instructions, can be accessed here.

Small employers with fewer than 50 full-time equivalent employees are only required to meet one of the reporting obligations, the Minimum Essential Coverage reporting under Section 6055. Small employers may use Form 1095-B, with transmittal Form 1094-B. These forms, along with instructions, can be accessed onACA reporting the IRS web site here.

Changes from reporting year 2015 to 2016 for forms 1094-C and 1095-C can be found here.

Changes from reporting year 2015 to 2016 for forms 1094-B and 1095-B can be found here.

Compliance Deadline

Filings will begin in early 2017 for the 2016 calendar year.

*Form 1095-C must be provided to all employees (full-time, part-time, or otherwise) by March 2, 2017.

*All Forms 1095-C, along with the transmittal form, 1094-C, must be provided to the IRS by February 28, 2017 (if in paper form), or March 31, 2017 (if filed electronically). 

Note: Employers filing more than 250 information returns (Form 1095-C) must do so electronically.MedCost

To print this article, click on the title and scroll to “PRINT THIS PAGE” at the bottom.

What to Do If You Receive This Notice

By Michael Berwanger, JD, Director, Quality Management & Compliance

You may receive a notice from the Health Insurance Marketplace or an Exchange regarding former or current employees who received a tax credit on an exchange. (Click here to view a redacted notice example.)

If you receive such a notice, this communication summarizes the purpose of the notice, why you as an employer are receiving the notice, and what you may need to do in response to the notice. For more information, a detailed Question and Answer document has been provided by the IRS here.

What are the notices?

The notices from the Exchanges are in connection to the employer shared responsibility provisions, sometimes referred to as pay or play” tax provisions, and notify the employer about individual(s) who:

(1) have received a premium tax credit to purchase health insurance on the Exchange, and

(2) who reported the name of their employer during the tax credit application process.

These notices are part of the Exchange verification process under the Affordable Care Act (“ACA”) for determining eligibility for premium tax credits and reduced cost-sharing, and for exemption from the individual mandate tax.

Why would an employer receive these notices?

Tax form & glassesUnder the ACA, certain employers (those with at least 50 full-time employees or full-time equivalents, also known as applicable large employers) might have to pay an employer shared responsibility payment for any month that at least one full-time employee enrolled in Marketplace coverage and received an advanced premium tax credit, or cost sharing reduction. You can read about eligibility thresholds here.

Individuals are only eligible for tax credits on the Health Insurance Marketplace/Exchange if they do not have minimum essential coverage available through their employer, or they are not offered affordable minimum value employer coverage. (Additionally, they must meet specified income and US residency requirements). Thus, employees who have affordable employer coverage available should not qualify for subsidies to buy health insurance in the Exchange.

As part of the application process for a premium tax credit or cost-sharing reduction, an applicant may submit to the Exchange that their employer:

  • did not offer coverage to the employee while employed by the employer,
  • the employer provided coverage but it was not “affordable” or did not provide “minimum value”, or
  • the employee was in a waiting period and unable to enroll in health care coverage. (Please see IRS Notice 2012-58 for an explanation of waiting period rules).

If an Exchange determines that an applicant is eligible to receive an advanced premium tax credit or cost-sharing reduction, and that finding was based at least in part on the above factors, the Marketplace will likely investigate to determine if the employer must pay an employer shared responsibility payment.

Why should an employer pay attention to these notices?

In 2016, employers with at least 50 full-time employees or full-time equivalents are subject to “play-or-pay” penalties if at least one full-time employee receives a subsidy to buy insurance in an Exchange. These notices from the Exchanges alert employers that some of their employees have qualified for premium tax credits and the employer faces potential penalties. Please note that only the IRS, not the Marketplace, can determine whether an employer will owe an employer shared responsibility payment.

health insurance noticesThe notice provides a 90-day response window from the date stated on the notice. Thus, employers will want to respond to the Exchange if they did offer a particular employee coverage that was affordable and provided minimum value, or if the notice is otherwise inaccurate.

What should employers do if they receive a notice?

Employers are not required to respond to Exchange notices, but it will be in an employer’s best interest to respond if the notice is regarding a full-time employee who was actually offered coverage, or if the employee misreported information and was not actually entitled to coverage. If you choose to appeal the notice, you can do so here, at the HealthCare.gov website. Any responses must be made within the 90-day verification process time. Please note that it is likely Exchanges will send notices to whatever employer address the employee provided on his/her application for Exchange coverage.

How can an employer file an appeal?

Employers have 90 days from the date stated on the notice from the Marketplace to file an appeal. This appeal can be filed either by:

  • Completing the Employer Appeal Request Form or:
  • Submitting a letter with the following information:
    • Business name
    • Employer ID Number (EIN)
    • Employer’s primary contact name, phone number and address
    • The reason for the appeal
    • Information from the Marketplace notice received, including date and employee information

Mail the appeal request form or letter, along with a copy of the Marketplace notice, to the following address, or fax the documents to 1-877-369-0129:

Department of Health and Human Services
Health Insurance Marketplace
465 Industrial Blvd.
London, KY 40750-0061

Information supporting your appeal may be included.MedCost

This blog post should not be considered as legal advice. For more information, consult your broker, legal advisor or the Department of Health and Human Services.