United States: The Affordable Care Act's Reporting Requirements For Carriers And Employers: The Basics (Part 3 Of 24)

Last Updated: August 5 2015
Article by Alden J. Bianchi

Alden Bianchi, Chair of Mintz Levin's Employee Benefits & Executive Compensation Practice, will provide a weekly installment on the complex reporting obligations outlined by the Affordable Care Act for health insurance carriers and employers. In this 24-week series, Alden will explain key requirements as he counts down to the January 2016 ACA reporting deadlines. This is the third installment of the series.

The purpose of IRS Form 1095-C is to furnish information to the IRS about an applicable large employer's compliance with the Affordable Care Act's (ACA) employer shared responsibility rules. The form also solicits information that the IRS will use to track both compliance by employees and their dependents with the Act's individual mandate and their eligibility for premium tax subsidies. Much of the required data is provided in responses to lines 14, 15 and 16 (Part II) of the form. An understanding of what is reported in these three lines and how they interact, therefore, is essential to an understanding of Internal Revenue Code § 6056, which Form 1095-C supports.

Background

As we reported in the first post of this series, the ACA's employer shared responsibility rules require applicable large employers to furnish statements (and transmit copies to the IRS along with certain transmittal information) to each individual who was a full-time employee for at least one month during the year. Employers must disclose whether each full-time employee and his or her spouse and/or dependents were offered health coverage, and, if so, report the lowest cost of individual coverage available to the employee. Similar information must also be reported with respect to part-time employees who are offered and who accept coverage. (For a comprehensive treatment of these and related requirements please see  Information Reporting Under the Affordable Care Act: I.R.C. §6055 and §6056.)

Form 1095-C Part I

The information to be provided to covered individuals is included on new Form 1095-C. Part I of the form (consisting of lines 1 through 13) asks for information about the employee and the reporting entity. The Act's employer shared responsibility rules apply to applicable large employers, which may consist of multiple legal entities under common control (e.g., a parent company and a series of wholly-owned subsidiaries). Final regulations implementing Code § 6056 impose reporting obligations on each legal entity in the controlled group, which the regulations refer to as the "applicable large employer member" (or "ALE Member"). Thus, each ALE Member will be responsible for its own transmittals on Form 1094-C.

Form 1095-C Part II

Form 1095-C Part II includes lines 14, 15 and 16. In each instance, the requested information is reported month-by-month. There is an option in each case, however, to apply a single response covering all 12 months where the information is the same for all 12 months.

  • Line 14

Line 14 asks about the coverage, if any, offered to the employee and his or her spouse and/or dependents. The employer's response is made in the form of a code, which are set out and defined in the instructions to the Form 1095-C (available here).

The ACA's employer shared responsibility rules establish two layers of penalties.

Under the first, an employer has the choice to either offer health insurance coverage to substantially all of its full-time employees or to pay a potentially large fine. This penalty is imposed under Code § 4980H(a), with which line 14 is unconcerned. Information about compliance with Code § 4980H(a) is instead provided in Part III of Form 1094-C. The second layer of penalty, under Code § 4980H(b), does concern line 14 and arises in instances in which an employer has made an offer of coverage sufficient to comply with Code § 4980H(a) but the coverage is either unaffordable or fails to provide minimum value. (A plan that provides minimum value is roughly synonymous with a major medical plan.) It is anticipated that the Code § 4980H(b) penalty will be much less than the penalty imposed under Code § 4980H(a).

A preventive-services-only plan is an example of a plan that fails to provide minimum value. An offer of such a plan qualifies as an offer of coverage for Code § 4980H(a) purposes. It does not prevent exposure to penalties under Code § 4980H(b), however. An offer of a preventive-services-only plan would be reported on line 14 using code 1F ("Minimum essential coverage NOT providing minimum value offered to employee, or employee and spouse or dependent(s), or employee, spouse and dependents").

If the employer offers a minimum value plan that includes the option to include spouses and dependents, the offer would be reported using code 1A ("Minimum essential coverage providing minimum value offered . . .") or 1E ("Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse"), as appropriate.

An employer need not offer coverage to a spouse in order to avoid Code § 4980H penalties. But a spouse that is included in the employer's offer may, as a consequence, be rendered ineligible for premium subsidies from a public exchange, i.e., "firewalled" as explained below. Here, information that is unnecessary for Code § 4980H purposes is being used to assess compliance with Code § 36B, which relates to premium subsidies.

For purposes of responding to line 14, an employer is deemed to offer health coverage for a month only if it offers health coverage that would provide coverage for every day of that calendar month. Thus, in the case of an employee terminated mid-month, the line 14 reporting code is code 1H (No offer of coverage). This might appear contrary to the final Code § 4980H regulations under which an employer is treated as having offered the employee health coverage for the month if the employee would have been offered health coverage for the entire month had he or she been employed for the entire month. This apparent inconsistency is accommodated in line 16 (explained below).

The rule in Part II, line 14 reporting (requiring coverage to be provided for every day of the calendar month) stands in marked contrast to other reporting. Form 1095-C, Part III applies to sponsors of self-funded plans. (Sponsors of fully-insured plans do not fill out Part III.) For Part III purposes, an employer reports an individual as having coverage under the plan for the calendar month if the individual was covered for any day of the calendar month. The difference is that Part III reports offers of minimum essential coverage that would ordinarily appear on Form 1094-C and reports compliance with the ACA's individual mandate. For individual mandate purposes, coverage on any day of the month is sufficient to escape a penalty under Code § 5000A.

  • Line 15

Line 15 requires the employer to provide the employee's share of the lowest cost monthly premium for self-only coverage under an employer-sponsored group health plan that provides "Minimum Value." The IRS wants to know this because a low- or moderate-income employee who might otherwise qualify for subsidized coverage from a public exchange or marketplace is rendered ineligible if he or she has an offer of employer coverage that provides minimum value and that is affordable. (Such an employee is sometimes said to be "firewalled" from receiving a premium subsidy.) Line 15 enables the IRS to determine whether coverage is affordable and, as a consequence, whether the employee is firewalled. In combination with line 14, it also enables the IRS to determine whether a spouse or dependent is also firewalled.

  • Line 16

Line 16 asks for a safe harbor or other code that would excuse the ALE Member from making an offer of coverage. An ALE Member is not necessarily exposed to Code § 4980H(b) penalties in each instance in which it fails to make an offer of coverage to a full-time employee and his or her dependents. The final regulations under Code § 4980H(b) set out a series of instances in which an employer will not incur a penalty despite failing to offer coverage. These instances are referred to as "limited non-assessment periods." (Please see our previous post on the subject of limited non-assessment periods). In instances in which there is no offer of coverage in a particular month, line 16 provides the employer with the opportunity to explain why it is not subject to a penalty. For example, in the line 14 example above relating to mid-month terminations, the line 14 reporting of "no offer of coverage" would be balanced by the code 2B ("[E]mployee is a full-time employee for the month [and] whose offer of coverage (or coverage if the employee was enrolled) ended before the last day of the month solely because the employee terminated employment during the month . . ."). Another common example involves waiting periods, for which the appropriate code is 2D ("Employee in a section 4980H(b) Limited Non-Assessment Period").

———————

In the weeks that follow, we will consider how Form 1095-C, Part II would be completed for some common situations involving progressively different and more challenging facts. We will also consider issues involving third party offers of coverage (including coverage provided by staffing firms, PEOs, multi-employer plans and MEWAs), COBRA, and reporting in the case of mid-year mergers, acquisitions, and other corporate reorganizations.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Alden J. Bianchi
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions