United States: IRS Issues Final Employer ACA Reporting Rules

Despite the many Affordable Care Act (ACA) implementation delays, rules governing the healthcare law's various provisions have not stopped coming. On Wednesday, the IRS released two new rules related to ACA employer reporting requirements. The first rule, Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer-Sponsored Plans, implements the information reporting requirements under § 6056 of the Internal Revenue Code (IRC), while the second rule, Information Reporting of Minimum Essential Coverage, implements the requirements imposed by IRC § 6055. These reporting requirements become effective with respect to the 2015 calendar year.

Section 6056 Reporting

Section 6056 requires employers to provide information to the IRS about the type of health coverage offered to their full-time employees for purposes of the large employer "pay or play" insurance mandate. The section also requires employers to provide certain information to employees so they can determine whether they are eligible for the ACA premium tax credit to subsidize the purchase of health insurance through a health insurance "Exchange" or "Marketplace." Under the ACA, employees are not eligible for this credit if their employer offers minimal essential coverage that is considered affordable and provides minimum value. For purposes of the premium tax credit, an employer-sponsored plan is affordable if the employee's required contribution for the lowest-cost self-only minimum value coverage offered does not exceed 9.5% of the employee's household income. To this end, § 6056 information is required to make this determination.

Similarly, § 6055 requires employers that provider individuals with minimum essential health coverage to report to the IRS information concerning the type and period of coverage offered for the purposes of administering ACA's individual shared responsibility provisions.

The final rules describe the general reporting method employers will use, and offer alternative reporting methods in an effort to simplify the process. According to the final § 6056 rule's preamble, the rule adopts "non-substantive changes that were made to certain sections of the proposed regulations in order to increase consistency with the final regulations under § 6055 issued concurrently with these final regulations," and provides that "reporting entities must file § 6056 returns electronically if they file 250 returns under § 6056."

According to the IRS, several comments to the initial proposal suggested that the final rules allow the reporting under §§ 6055 and 6056 to be combined for applicable large employers (ALEs) that sponsor self-insured plans and must report under both sections. Accordingly, the final rule adopts this recommendation by providing a single combined form for all ALEs.

The final rules detail the specific information that needs to be reported, as well as the requirements in the proposed regulations that were omitted in the final rules. The final rule requires reporting of the following information: (1) the name, address, and employer identification number of the ALE member, and the calendar year for which the information is reported; (2) the name and telephone number of the ALE member's contact person; (3) a certification as to whether the ALE member 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; (4) the number of full-time employees for each calendar month during the calendar year, by calendar month; (5) for each full-time employee, the months during the calendar year for which minimum essential coverage under the plan was available; (6) for each full-time employee, the employee's share of the lowest cost monthly premium for self-only coverage providing minimum value offered to that full-time employee under an eligible employer-sponsored plan, by calendar month; and (7) 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. In response comments, the final rule requires that an ALE member report the social security number of the full-time employee only, not those of the employee's spouse or dependents.

If an employer meets certain conditions, it may be able to complete a simpler, alternative form under the final rule governing § 6056. To be eligible to use the alternative method, the ALE would need to certify that for all months during the year in which the employee was a full-time employee, the ALE member (1) offered minimum essential coverage providing minimum value at an employee cost for employee-only coverage not exceeding 9.5% of the federal poverty line to one or more of its full-time employees, and (2) offered minimum essential coverage to the employee's spouses and dependents.

Solely for 2015, an employer can use an alternative method of reporting if the employer certifies that it has made a qualifying offer to at least 95 percent of its full-time employees and to their spouses and dependents. The employer will be treated as reporting the required section 6056 information to the IRS if it files with the IRS Form 1095-C, providing the employee's name, social security number, and address, and indicates, using an indicator code, either that a qualifying offer was made for all 12 months or the specific months of the calendar year or it was not, and provides a simplified statement to the employee. The statement will be in a format prescribed by the IRS and the form of the statement may vary depending on whether the employee received a qualifying offer from the employer for all, some, or none of the months of the calendar year.

The final rule also includes a method by which certain employers are allowed to use the simplified reporting method without having to identify or specify their number of full-time employees. According to the rule's preamble, the agency understands "that some employers offer minimum essential coverage to all or nearly all of their employees, and are able to accurately represent that the only employees not offered coverage are also not full-time employees." Therefore, the final rule sets forth certain criteria that will allow ALEs to use the simplified method without first identifying all full-time employees. Specifically, an employer must certify that it offered affordable, minimum value coverage to at least 98% of the employees on whom it reports in its § 6056 return. The IRS states that this "98% standard helps avoid the need for excessive inquiries to employers as to whether particular employees claiming a premium tax credit were full-time employees."

The IRS ultimately rejected a possible alternative reporting method outlined in the proposed rule method that would have allowed employers in certain circumstances to report offers of minimum value coverage on Form W-2 instead of reporting the offers to the IRS on a section 6056 return or furnishing a section 6056 employee statement to the employee.

Section 6055 Reporting

With respect to the final rule covering minimal essential coverage reporting, the agency clarifies that "wellness programs that are an element of other minimum essential coverage (such as wellness programs offering reduced premiums or cost-sharing under a group health plan) do not require separate § 6055 reporting." In addition, minimal essential coverage "that supplements a primary plan of the same plan sponsor or that supplements government-sponsored coverage (such as Medicare) are supplemental coverage not subject to reporting."

The regulations apply for calendar years beginning after December 31, 2014.

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.

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