Update for Employers on the New ACA Section 6055 and 6056 Reporting Requirements · 2015-04-29 ·...

1© 2015 Miller Johnson. All rights reserved.

Update for Employers on the NewACA Section 6055 and 6056

Reporting Requirements

Mary V. Bauman

Tripp W. Vander Wal

The materials and information have beenprepared for informational purposes only.This is not legal advice, nor intended to create orconstitute a lawyer-client relationship.Before acting on the basis of any information ormaterial, readers who have specific questions orproblems should consult their lawyer.

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The individual mandate penalty took effect last year

The employer pay or play penalty takes effect thisyear

Beginning in 2016 the IRS will require employerreporting to enforce the penalties

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Final Reporting Regulations

In March 2014, final regulations were issued regardingthe employer reporting requirements imposed by theAffordable Care Act (also known as Health CareReform)

In July 2014, the IRS released draft reporting formsand in August 2014, the IRS released draft instructionsto these draft reporting forms

In February 2015, the IRS released final versions of thereporting forms and instructions

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There are two types of reporting which will be required

Section 6055 reporting (individual mandate reporting)

Section 6056 reporting (pay or play reporting)

Section 6055 requires annual reporting to the IRS and“responsible individuals” whether coverage constitutesminimum essential coverage

This reporting is intended to assist the IRS to enforce theindividual mandate penalty under Health Care Reform

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All individuals (with certain exceptions) must beenrolled in health coverage which constitutesminimum essential coverage or pay a penalty

Section 6055 reporting applies to all employer grouphealth plans regardless of the employer’s size

There are no exceptions

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Who is responsible for the Section 6055 reportingwith respect to an employer group health plan?

If the plan is fully-insured, the insurer will assume thisreporting requirement on the employer’s behalf

If the plan is self-funded, the employer is responsible for the6055 reporting

Section 6055 reporting applies on a calendar yearbasis regardless of whether a health plan operates ona non-calendar year basis

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Section 6055 reporting is completed using Forms1094-B and 1095-B:

Form 1094-B is a transmittal form to be filed with the IRS(along with the employee statements) that requiresidentifying information about the entity submitting Forms1094-B and 1095-B

Form 1095-B is the “employee statement” to be provided toeach responsible individual and requires the followinginformation:

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Information about the provider of the minimum essentialcoverage (e.g., for fully-insured plans, this is the insurer and forself-funded plans, this is the employer)

Identifying information about the responsible individual

Identifying information about each covered individual(dependent)

SSN of primary insured and each enrolled dependent

DOB if SSN unavailable after reasonable efforts

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Section 6055 reporting is required on a calendar-yearbasis and is due by the following deadlines:

Form 1095-B must be provided to responsible individuals bythe first business day on or after January 31 of the calendaryear following the calendar year in which coverage isprovided

Forms 1094-B and 1095-B must be filed with the IRS by thefirst business day on or after February 28 of the calendaryear following the calendar year in which coverage isprovided (or March 31, if filing electronically)

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Example: For coverage provided in 2015 (the first year forwhich reporting is required), here are the applicable duedates:

Form 1095-B must be provided to responsible individuals byFebruary 1, 2016 (January 31, 2016 is a Sunday)

Forms 1094-B and 1095-B must be filed with the IRS by February29, 2016 (2016 is a leap year and February 28, 2016 is a Sunday)

However, if the Forms 1094-B and 1095-B are filed electronically,the due date is March 31, 2016

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Entities within a controlled-group of entities mustcomplete Section 6055 on an entity-by-entity basis, butan entity may assist other entities within the controlled-group complete Section 6055 reporting

Third parties may assist entities complete Section 6055reporting, but liability for penalties related to reportingfailures is not transferred to the third-party administrator

Most plan sponsors of self-funded plans will completeSection 6055 reporting on a combined basis with Section6056 reporting

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Section 6056 reporting only applies to largeemployers with 50 or more full-time employees andfull-time equivalent employees

The purpose of the 6056 reporting is to assist the IRS toenforce the employer pay or play penalty and to assistfull-time employees determine whether they are eligiblefor a premium credit

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Section 6056 reporting is not required with respect togroup health plans sponsored by small employers notsubject to the pay or play

Mid-size employers (50 to 99 FTEs) not subject to the payor play until 2016 must still report under Section 6056 for2015

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Section 6056 reporting applies on a calendar year basisregardless of whether a health plan operates on a non-calendar year basis

But if the large employer qualifies for transition relief it canreport FTEs as having been offered MEC before the 2015 planyear starts on Form 1094-C, Part III

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If the large employer’s plan is fully-insured the employerwill only be responsible for 6056 reporting

If the large employer’s plan is self-funded, the employerwill be responsible for both 6055 and 6056 reporting butthese reporting requirements generally may becompleted on a combined basis

Section 6056 reporting is completed using Forms 1094-Cand 1095-C

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Form 1094-C is a transmittal form again to be filed withthe IRS (along with the employee statements) thatrequires the following information: Part I: Identifying information about the employer submitting Forms 1094-C

and 1095-C

Part II: Whether the Form 1094-C is the “authoritative transmittal” Whether the employer is part of a controlled-group of entities Whether the employer qualifies for certain “transitional relief” from

the pay or play penalty or whether the employer qualifies foralternative simplified reporting

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Part III: Which months the employer offered minimum essential coverage

The number of full-time employees in each calendar month

The total number of employees in each calendar month

Whether the employer is part of a controlled-group of entities in eachcalendar month

Whether the employer qualifies for certain transitional relief from thepay or play penalty in each calendar month

Part IV: The names and EINs of each entity that was in the same controlled-

group of entities at any point in the calendar year

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Form 1095-C is the “employee statement” to be provided to each full-timeemployee and requires the following information: Part I: Identifying information about the full-time employee or responsible

individual Identifying information about the employer

Part II: Information about the employer’s offer of coverage Amount of the employee’s share of the lowest-cost monthly premium for

self-only coverage that also constitutes minimum value Whether the employee was enrolled in coverage or, if not, an indicator

code regarding whether the employee was offered affordable, minimumvalue coverage

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Part III:

Identifying information about any other covered individuals(plan sponsors of fully-insured plans are not required tocomplete this section)

Note: Non-employees enrolled in a self-funded employer’s healthplan may be issued either a Form 1095-B or Form 1095-C. If Form1095-C is used, Part II (i.e., information regarding the employer’soffer of coverage) can be completed with a special indicator code

Note: No need to complete Part III if 1095-B is issued to individuals(e.g., plan is fully-insured)

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Similar to Section 6055 reporting, Section 6056reporting is required annually during the first quarterof the calendar year after the calendar year to whichthe reporting relates

The first year for which reporting is required is 2015so the initial reporting will be due in the first quarterof 2016

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Entities within a controlled-group of entities mustcomplete Section 6056 on an entity-by-entity basis,but an entity may assist other entities within thecontrolled-group complete Section 6056 reporting

Third parties may assist entities complete Section6056 reporting, but liability for penalties related toreporting failures is not transferred to the third-partyadministrator

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There are 3 “simplified” reporting options:

Option One: Simplified reporting is available wherethe employer makes a “qualifying offer”

A “qualifying offer” is where the employer offers:

Employee-only coverage which is affordable (using 9.5% ofthe mainland federal poverty line) and of minimum value;and

Coverage to the employee’s spouse and dependents

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Employers who make qualifying offers may: Use an indicator code rather than including the amount of the

employee’s share of the lowest-cost monthly premium for self-only minimum value coverage on Form 1095-C, Part II

Provide each employee who received a qualifying offer for all 12months a statement that includes the following information(rather than a copy of Form 1095-C): Identifying information about the employer Contact information for an individual responsible for answering

questions about the employer’s health plan A statement that for all 12 months of the calendar year, the employee

and his or her dependents received a qualifying offer of coverage andare not eligible for a premium tax credit

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Employers that sponsor self-funded plans must provide theForm 1095-C to employees enrolled in the employer’s self-funded plan because the individual will not receive a Form1095-B (simplified reporting is not permissible)

Actual Form 1095-C for employees must still be filed with theIRS

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Option Two: For 2015 only, if the employer certifiesto the IRS that it has made a qualifying offer, asdescribed above to at least 95% of its full-timeemployees (even if not for all 12 months), there isadditional simplified reporting relief

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Employers who make these qualifying offers in 2015 may:

Use an indicator code rather than including the amount of theemployee’s share of the lowest-cost monthly premium for self-only minimum value coverage on Form 1095-C, Part II

Provide each employee a statement that includes the followinginformation (rather than a copy of Form 1095-C):

Identifying information about the employer

Contact information for an individual responsible for answeringquestions about the employer’s health plan

A statement that the employee and his or her dependents may beeligible for a premium tax credit in one or more months in 2015

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Similar to the qualifying offer simplified reporting,employers that sponsor self-funded plans must provide theForm 1095-C to employees enrolled in the employer’s self-funded plan because the individual will not receive a Form1095-B (again, simplified reporting is not permissible)

Actual Form 1095-C for employees must still be filed with theIRS

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Option Three: An additional simplified reportingmethod is available if a large employer certifies to theIRS that it offers coverage which is of minimum valueand affordable (using any affordability safe harbor) toat least 98% of its full-time employees

Employers who qualify for this simplified reportingmethod may omit the total number of the employer’sfull-time employees in each calendar month on Form1094-C

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In addition to potential pay or play penalties (the$2,000 and $3,000 penalties), employers can facepenalties of $100 per return for filing failures

However, there is a good faith standard for imposing2015 reporting penalties for incorrect or incompletefilings

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Next Steps:

Identify needed information

Part of controlled group?

Qualify for any transition relief?

Coverage of MV and affordable and if so, under which method?

Missing any information (e.g., dependent SSN)?

Source of information (e.g., payroll, health plan enrollmentrecords)?

Will you self-report or work with a third party?

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Calder Plaza Building250 Monroe Ave. NWSuite 800Grand Rapids, MI 49503-2250www.millerjohnson.com

Radisson Plaza Building100 West Michigan AvenueSuite 200Kalamazoo, MI 49007-3960www.millerjohnson.com

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Mary V. Bauman616.831.1704

[email protected]

Tripp W. Vander Wal616.831.1796

[email protected]

Update for Employers on the New ACA Section 6055 and 6056 Reporting Requirements · 2015-04-29 ·...

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