United States: IRS Releases Draft ACA Reporting Form Instructions

On August 28, the Internal Revenue Service (IRS) released draft instructions for completing health insurance reporting forms required under the Affordable Care Act (ACA). The release of the instructions comes a month after the IRS released the draft forms employers and insurers must use to report information regarding health care coverage. 

Section 6056 of the Internal Revenue Code, as added by the ACA, requires "applicable large 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" mandate. Applicable large employers are those with 50 or more full-time employees and full-time equivalent employees. Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, is to be used to report the information required under Section 6056, and Form 1094-C is to be used to transmit the 1095-C return to the IRS.  The IRS will use Forms 1094-C and 1095-C to determine  whether the employer owes payments under the employer shared responsibility provisions under section 4980H. Form 1095-C will also be used to determine eligibility of employees for premium tax credits. 

Section 6055 of the ACA requires health insurance issuers and employers that sponsor self-insured health plans that provide individuals with "minimum essential coverage" to report to the IRS information concerning the type and period of coverage offered for the purposes of administering the ACA's individual shared responsibility provisions. Form 1095-B is to be used to report the information required under Section 6055, and Form 1094-B is to be used to transmit the 1095-B return to the IRS. Self-insured applicable large employers must report the information required under both Sections 6055 and 6056 on a single combined Form 1095-C. 

The recently released instructions for Forms 1094-C and 1095-C provide some long-awaited direction on how to comply with the new ACA reporting obligations that become effective with respect to the 2015 tax year. Employers must file a Form 1095-C (or a substitute form) for each employee who was a full-time employee of the employer for any month of the calendar year. An employer that provides health coverage through an employer-sponsored self-insured health plan must also complete Form 1095-C, Part III, for any individual (including any full-time employee, non-full-time employee, employee's family members, and others) who enrolled in the self-insured health plan. If an employer is providing health coverage in another manner, such as through an insured health plan or a multiemployer health plan, the issuer of the insurance or the sponsor of the plan providing the coverage will provide the information about their health coverage to any enrolled employees, and the employer will not complete Form 1095-C, Part III, for such employees.

The instructions also describe how an employer can use the "qualifying offer method" to report information on employees who received a "qualifying offer" of health coverage for all 12 months. Employers that made a Qualifying Offer for one or more months of calendar year 2015 to at least 95% of its full-time employees can use a code rather than inserting the dollar amount of the employee contribution for lowest-cost employee-only coverage providing minimum value.  If an employer certifies that it offered affordable, minimum value coverage to at least 98% of the employees on whom it reports in its Form 1095-C form, then employer is not required to identify which of the employees for whom it is filing were full-time employees, and is not required to provide the full-time employee count. 

An employer must file Forms 1094-C and 1095-C by February 28 if filing on paper (or March 31 if filing electronically) of the year following the calendar year to which the return relates. An employer must furnish a Form 1095-C to each of its full-time employees by January 31 of the year following the year to which the Form 1095-C relates. The first Forms 1095-C are due to individuals by February 1, 2016. For employees that received a "qualifying offer" for 12 months, the employer can either furnish the employee with the Form 1095-C or a statement containing specified information.   The instructions for Forms 1094-B and 1095-B also provide direction for health insurers, self-insured employers who are not subject to the ACA "play-or-pay" mandate, and other entities that offer minimum essential coverage. The instructions for Forms 1094-B and 1095-B are relatively straight-forward compared the reporting requirements for Forms 1094-C and 1095-C.  

Despite the IRS's efforts to streamline reporting requirements for applicable large employers, the new obligations remain complex and cumbersome. The IRS also released a set of FAQs on reporting of offers of health insurance employers as well as minimum essential coverage reporting requirements under Section 6055. The FAQs state that the IRS will not impose penalties under sections 6721 and 6722 on applicable large employers that can show that they have made good faith efforts to comply with the information reporting requirements with respect to returns and statements filed and furnished in 2016 to report offers of coverage in 2015 for incorrect or incomplete information reported on the returns. The Agency is soliciting comments on the draft forms.

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