IRS clarifies ACA reporting requirements for large employers

IRS clarifies ACA reporting requirements for large employers

ACA documentAffordable Care Act reporting requirements for applicable large employers begin in 2016, but many employers remain confused about requirements for certain employers with special circumstances. Prompted by industry questions and concerns, the IRS has issued updated guidance to clarify some these circumstances and the requirements employers will be expected to comply with.

Beginning next year, applicable large employers (ALEs) must report whether: an individual is covered by minimum essential coverage; and that an offer of minimum essential coverage that provides minimum value was made to each full-time employee.

Applicable large employers, generally meaning employers with 50 or more full-time employees (including full-time equivalent employees) in the preceding calendar year, use Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, to report the information required.

Having the ability to track and manage the required data should be happening now, according to Michael Weiskirch, a principal at EmployeeTech Inc. He says the requirements “have put benefit advisers and their clients at a crossroads and have created a small panic in selecting the ‘just right’ solution.”

The IRS May 28 issued guidance in the form of several Q&As for issues that may arise while employers prepare these forms.

“The IRS will use these forms to enforce the employer penalties, individual mandate and tax credit eligibility rules under the Affordable Care Act,” the Wagner Law Group cautions in a blog post about the new IRS guidance.

“With mandatory reporting for ALEs beginning in 2016, understanding the reporting requirements is critical. Accordingly, employers should give careful attention to this and all future IRS guidance as the reporting deadline rapidly approaches,”  the group adds.

Some of the Q&A clarifications include:

Clarification on ALEs that must report: An ALE with no full-time employees for any month of the year is not obligated to report unless the ALE sponsors a self-insured health plan in which any employee, spouse, or dependent is actually enrolled, the IRS says. In that case, the Wagner law group says, the ALE must still file Forms 1094-C and 1095-C even if it has no full-time employees. In addition, ALEs must file and furnish Forms 1095-C to all full-time employees regardless of whether they were offered coverage during the year.

Controlled groups: The guidance provides examples demonstrating how reporting differs when an ALE reports for separate divisions and when ALEs are part of a controlled group. In the former situation, the Wagner law group advises, employees working for multiple divisions must receive aggregated information on a single Form 1095-C; in the latter situation, employees must receive a separate Form 1095-C for full-time employment with each ALE in the controlled group.

Qualifying offer method of reporting: Under the qualifying offer method of reporting, ALEs are allowed to furnish a simplified employee statement to employees receiving qualifying offers for all 12 months of the year, the law firm says. The IRS guidance confirms that ALEs may not use simplified statements for employees who actually enroll in the ALE’s self-insured plan.

Delivery to employees: Forms 1095-C may be delivered to employees in any manner permitted for delivery of Forms W-2, according to the IRS guidance.

New hires and terminating employees: When reporting offers of coverage on Part II of Form 1095-C, ALEs may indicate that an offer of coverage was made for a month only if the offer would have provided coverage for every day of the month, the Wagner law firm says. Similarly, if a terminating employee’s coverage ends before the end date of the month of termination, the ALE must report that no coverage was offered for that month. However, when reporting coverage information under Part III of Form 1095-C, an employee should be reported as having coverage if the employee is enrolled on any day of the month.

Reporting offers of COBRA coverage: The guidance explains how ALEs that sponsor self-insured plans should report enrollment information for non-employee COBRA beneficiaries (i.e. ex-spouses) and gives several examples of reporting under various COBRA scenarios. Qualifying beneficiaries electing COBRA independently from the employee must receive separate forms, while those who receive COBRA due to an employee’s election should be included on the same form that is provided to the employee, the guidance says.

A COBRA offer made due to termination of employment is reported as an offer of coverage only if the former employee enrolls in COBRA coverage and the employee’s cost of coverage reflects the COBRA premium for the lowest-cost, self-only coverage providing minimum value. Conversely, a COBRA offer made to an active employee due to a reduction of hours must be reported as an offer of coverage on Form 1095-C even if the employee declines COBRA coverage.