Feds Issue Health Care Reform Employer Shared Responsibility Information Reporting Rules
The forward march of health care reform means additional information reporting requirements for employers to understand and comply with.
On July 2, 2013, President Barack Obama’s administration delayed until 2015 the Patient Protection and Affordable Care Act (ACA) information reporting requirements for the employer shared responsibility mandate scheduled to go into effect in 2014. The Internal Revenue Service (IRS) has issued proposed regulations to provide guidance to employers required to report information regarding their compliance with the mandate.
The ACA generally requires “large” employers of 50 or more full-time (or full-time equivalent) employees to offer full-time employees the opportunity to enroll in an employer-sponsored minimum essential coverage health care plan that meets minimum value and affordability standards or be assessed a penalty for employees receiving a premium tax credit or cost-sharing reduction to obtain health care coverage.
The employer shared responsibility mandate also requires annual information reporting by large employers relating to the health insurance that the employer offers (or does not offer) to its full-time employees.
Transitional guidance issued by the IRS specifies that information reporting regarding health insurance is optional for employers for 2014, and employers are not subject to penalties for failure to comply with information reporting provisions for 2014. As a result of the information reporting postponement, the employer shared responsibility mandate will not be enforced until 2015, when information reporting is required.
On September 9, 2013, the IRS published proposed rules providing guidance to employers subject to the reporting requirements for 2015.
Employers Must File Information Returns and Provide Employee Statements
Employers subject to the shared responsibility mandate are required to file information returns with the IRS reporting information about the employer and its employees, as well as information about employer-offered health care coverage.
Employers must also provide their full-time employees with statements containing information that they can use to determine whether they are eligible for a premium tax credit to assist the employees in paying for health care coverage.
Information returns. Under the proposed rules, employers will report the following on the information returns:
- the name, address, and employer identification number (EIN) of the employer
- the name and telephone number of the employer’s contact person
- the calendar year for which the information is reported
- a certification as to whether the employer offered to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, by calendar month
- the number of full-time employees for each month during the calendar year
- for each full-time employee, the months during the calendar year for which coverage under the plan was available
- for each full-time employee, the employee’s share of the lowest cost monthly premium (self-only) for coverage providing minimum value offered to that full-time employee under an eligible employer-sponsored plan, by calendar month
- the name, address, and taxpayer identification number of each full-time employee during the calendar year and the months, if any, during which the employee was covered under an eligible employer-sponsored plan
- other information that the IRS may require
Employers may be asked to report certain information to the IRS (and to individual employees as well) by using an “indicator code” rather than by making available specific or detailed information. For example, a code may be used to report information about whether an employer offered minimum essential coverage meeting minimum value. According to the IRS, the use of codes is part of the effort to “simplify and streamline” the reporting process.
The IRS is currently considering various options it can implement to make information reporting less burdensome for employers. For example, a possible optional reporting method for employers outlined in the proposed rules is replacing employee statements with Form W-2 reporting of offers of employer-sponsored coverage.
Note that the IRS regulations are proposed. Therefore, changes are almost certain to be made to the rules for employer information reporting before the final regulations are put in place.
A separate return is prepared for each employee—Form 1095-C—and the employee returns are filed along with a Form 1094-C transmittal form, a process similar to other employer information report filing, such as filing Forms W-2.
And as is the case with other information returns such as Forms W-2, the proposed rules provide that these information returns must be filed with the IRS annually, no later than February 28—March 31 if filed electronically—of the year immediately following the calendar year to which the return relates. That means that for the first required reporting year of 2015, employers must file the Forms 1094-C and 1095-C on or before March 1, 2016 (February 28, 2016, is a Sunday, so the due date is Monday, March 1).
Employers filing 250 or more information returns annually must file electronically. Employers filing fewer than 250 returns have the option of filing electronically or on paper.
Employers should note that all information returns are aggregated for the purpose of applying the annual 250-threshold for electronic filing. For example, an employer filing 155 Forms W-2 and 100 Forms 1095-C annually is filing 255 information returns per year and must file electronically.
Employee statements. An employer required to file information reporting returns with the IRS must also provide each of its full-time employees with a statement that includes:
- the employer’s name, address and EIN
- the employee’s information required for the information return
Employers can fulfill the employee statement requirement by furnishing a copy of the relevant filed return information on Form 1095-C or by using a substitute employee statement that meets IRS requirements.
Again, similar to information returns such as Forms W-2, employee statements must be furnished annually to full-time employees no later than January 31 of the year immediately following the calendar year to which the statements relate. Therefore, the first employee statements for 2015 must be furnished on or before February 1, 2016, (January 31, 2016, falls on a Sunday, pushing the due date to February 1).
The proposed regulations permit electronic furnishing of employee statements if certain notice, consent, and hardware or software requirements are met, adopting by analogy the process currently in place for the electronic furnishing of Form W-2 employee statements.
Stay tuned for the changes and revisions sure to impact this major new compliance duty for employers.