United States: The Affordable Care Act's Reporting Requirements For Carriers And Employers (Part 4 Of 24): Highlights From The Draft 2015 Instructions For Forms 1094-C And 1095-C

Last Updated: August 11 2015
Article by Alden J. Bianchi

The IRS recently issued draft 2015 Instructions for Forms 1094-C and 1095-C ("2015 Instructions"). These are the forms that employers with 50 or more full-time employees (including full-time equivalent employees) in the previous year—i.e., Applicable Large Employers ("ALEs")—use to report their compliance with the Affordable Care Act's ("ACA") rules governing employer shared responsibility. Where an ALE consists of more than one commonly controlled entity, reporting is required at the level of the controlled group member (or "ALE Member"). The employer shared responsibility rules are codified in § 4980H of the Internal Revenue Code ("Code"), and the corresponding reporting requirements are set out in Code § 6056.

The draft 2015 Instructions do not deviate radically from the 2014 Instructions. They do, however, contain some important clarifications. This post examines the highlights. (For a comprehensive treatment of the ACA reporting-related requirements please see Information Reporting Under the Affordable Care Act: I.R.C. §6055 and §6056.)

(1) Extensions and Waivers

The Code § 6056 compliance deadline is fast approaching. While this reporting requirement mirrors the reporting and transmittal of wages scheme of Forms W-2 and W-3, respectfully, the reporting rules under Code § 6056 are exponentially more complicated. Moreover, while wage reporting relies on data from payroll, reporting under Code § 6056 requires ALE Members to access and collate information from multiple sources, including payroll, HRIS, COBRA administration, and leave-of-absence administration.

It gets worse. As we reported in the second installment of this series, the IRS has announced that it will not impose penalties where ALE Members can show that "they have made good faith efforts to comply with the information reporting requirements." The relief is available, however, only where compliance is timely. (Other relief is available in the case of untimely compliance, but is less generous and less certain.) Thus timeliness is of the essence.

The 2015 Instructions clarify that:

"You can get an automatic 30-day extension of time to file by completing Form 8809, Application for Extension of Time To File Information Returns. . . . However, you must file Form 8809 by the due date of the returns in order to get the 30-day extension. Under certain hardship conditions you may apply for an additional 30-day extension. See the instructions for Form 8809 for more information."

Similar relief is provided in the case of requests for extensions of time to furnish statements to recipients.

(2) Increased Penalties

As we reported previously, the Trade Preferences Extension Act of 2015 includes a provision that increases penalties for incorrect information returns, including those required by the ACA, to $250 per day (from $100 per day) with an annual cap of $3,000,000 (up from $1,500,000). The 2015 Instructions reflect this change.

(3) Clarification of 98% Offer Method

Eligibility for the "98% Offer Method" as an alternative to the general method requires an employer to certify that the employer offered affordable health coverage providing minimum value to at least 98% of its employees "for whom it is filing a Form 1095-C employee statement, and offered minimum essential coverage to those employees' dependents." The benefit of this method is that the employer is not required to identify which employees (for whom it is filing) were full-time employees.

There has apparently been some confusion about how to apply the 98% Offer Method relating to how one treats an employee in a limited non-assessment period. For example, assume ALE Member offers affordable minimum value coverage to all of its employees, full-time and part-time, and to their dependents in each month from January 2015 to July 2015. On August 15, ALE Member hires 5 new full-time employees to whom coverage is offered as of December 1, 2015 following the plan's waiting period (or "limited non-assessment period" in the parlance of the Code § 4980H final regulations). Is the 98% Offer Method available in this instance? That is, does this ALE Member offer coverage to 98% of its employees from August to November? The 2015 Instructions answer this question in the affirmative, saying:

"To be eligible to use the 98% Offer Method, an employer must certify that taking into account all months during which the individuals were employees of the employer and were not in a Limited Non-Assessment Period, the employer offered, affordable health coverage providing minimum value to at least 98% of its employees for whom it is filing a Form 1095-C employee statement, and offered minimum essential coverage to those employees' dependents."

To drive the point home, the 2015 Instructions offer the following example of an arrangement that complies with the 98% Offer Method:

"Employer has 325 employees. Of those 325 employees, Employer identifies 25 employees as not possibly being full-time employees because they are scheduled to work 10 hours per week and are not eligible for additional hours. Of the remaining 300 employees, 295 are offered affordable minimum value coverage for all periods during which they are employed other than any applicable waiting period (which qualifies as a Limited Non-Assessment Period). Employer files a Form 1095-C for each of the 300 employees (excluding the 25 employees that it identified as not possibly being full-time employees). Employer may use the 98% Offer Method because it makes an affordable offer of coverage that provides minimum value to at least 98% of the employees for whom Employer files a Form 1095-C. Using this method, Employer does not identify whether each of the 300 employees is a full-time employee. However, Employer must still file a Form 1095-C for all of its full-time employees. . . ."

(4) "Plan Start Month" Indicator Box

On Form 1095-C, there is a new box, entitled "Plan Start Month," that is optional for 2015. This box is required to take account of a difference in the manner in which affordability is determined for purposes of an individual's eligibility for premium tax credits versus affordability for purposes of Code § 4980H. The issue is explained in a previous post. For purposes of determining an individual's eligibility for premium tax credits, the indexing of the ACA's original 9.5% affordability threshold is done on the basis of the plan year, not the calendar year (see IRS Revenue Procedure 2014-37, § 5.02). Thus, the IRS needs to know the plan year for purposes of enforcing the premium tax credit rules.

(5) Multiemployer Plan Relief

The 2014 Instructions direct ALE Members to not enter a code in Part II, line 14 of Form 1095-C (offers of coverage) for health coverage that is not actually offered. Line 14 must instead reflect the coverage actually offered to the employee. The multiemployer safe harbor provided under the Code § 4980H final regulations, though available for purposes of Form 1094-C, Part III, column (a) (relating to whether the employer offered minimum essential coverage to at least 70% of its full-time employees (95% after 2015)) does not apply here.

Getting enrollment and disenrollment information from the multiemployer plan to the employer requires a level of cooperation heretofore rarely encountered in the multiemployer plan environment. And even if the multiemployer plan is willing to provide the information, the HIPAA privacy rules may prevent them from doing do. Enrollment and disenrollment information has something of a tortured history under HIPAA. It is protected health information or "PHI," except when it isn't. Overgeneralizing, enrollment and disenrollment is not PHI in the hands of an employer, but it is PHI in the hands of a plan/covered entity. While making this call is not always easy, in the multiemployer plan context it's pretty simple: The information is in the plan's hands, so it is in all likelihood PHI. (The extent to which this result is counterintuitive is beyond the scope of this post.) Nor do there appear to be any available exemptions under which the multiemployer plan could obtain this information, short of getting signed authorizations from each and every plan participant and beneficiary.

Recognizing the reporting challenges that employers and multiemployer plans face, the 2015 Instructions provide transition relief. For reporting offers of coverage involving multiemployer arrangements for 2015, an ALE Member is directed to:

"[E]nter code 1H on line 14 for any month for which the employer enters code 2E on line 16 (indicating that the employer was required to contribute to a multiemployer plan on behalf of the employee for that month and therefore is eligible for multiemployer interim rule relief)."

Thus, under this transition rule, Code 1H may be entered without regard to whether the employee was eligible to enroll in coverage under the multiemployer plan. This solution had previously been proposed by a handful of software vendors who are developing expert systems to assist with compliance. This relief is both welcome and necessary.

(6) Offers of COBRA Coverage

Following the recent revisions to its FAQs relating to reporting under Code § 6506 (see Q&As 16, 17 and 18), the 2015 Instructions provide rules for handling offers of COBRA coverage. Generally, an offer of COBRA coverage that is made to a former employee upon termination of employment is reported as an offer of coverage only if the former employee enrolls in the coverage. If the former employee does not enroll in the coverage (even if a spouse or dependent of the former employee independently enrolls in the coverage), the ALE Member is directed to use code 1H (no offer of coverage) for any month for which the offer of COBRA continuation coverage applies. An offer of COBRA continuation coverage that is made to an active employee (e.g., in the case of a reduction in the employee's hours that resulted in the loss of plan eligibility) is reported in the same manner.

(7) Smoothing of Employee Premiums

Where minimum value coverage is offered, an employer using the general reporting method reports on Form 1095-C, line 15 "the amount of the employee share of the lowest-cost monthly premium for self-only minimum essential coverage providing minimum value that is offered to the employee." The 2015 Instructions clarify that, for purposes of determining the monthly employee contribution, "an employer may divide the total employee share of the premium for the plan year by the number of months in the plan year to determine the monthly employee contribution for the plan year." The 2015 Instructions offer the following example:

"For example, if the plan year begins January 1, the employer may determine the amount to report for each month by taking the total annual employee contribution for all 12 months and dividing by 12. If the plan year begins April 1, the employer may determine the amount to report for January through March, 2015 by taking the total annual employee contribution for the plan year ending March 31, 2015, and dividing by 12, and may determine the amount to report for April through December, 2015 by taking the total annual employee contribution for the plan year ending March 31, 2016, and dividing by 12."

(8) ALE Determination Transition Rule

The 2015 Instructions include an express reference to a transition rule set out in Section XV.D.3 of the preamble to the Code § 4980H final regulations. For 2015, an employer may determine its status as an ALE by reference to a period of at least six consecutive months during 2014 rather than the entire 2014 calendar year.

(9) Breaks in Service/Leaves of Absence

The treatment of unpaid leaves of absence received little attention in the Code § 4980H final regulations other than in the relatively narrow context of special unpaid leaves. The 2015 Instructions change that by enunciating the following broad principle:

"In certain circumstances, an employee may have a break in service (including a break in service due to a termination of employment) during which the individual does not earn hours of service, but upon beginning to earn hours of service again the employer must treat the individual as a continuing employee rather than a new hire for purposes of certain rules under the section 4980H regulations."

We addressed the underlying issues in a previous post. Consistent with the Code § 4980H final regulations, the 2015 Instructions emphasize that "[t]hese rules do not impact whether the individual was an employee during the break in service, so the individual should only be treated as an employee during the break in service for purposes of reporting if the individual remained an employee during that period (and had not terminated employment with the employer)." Thus, for example, an employee on unpaid leave during the break in service would be treated as an employee for reporting purposes during the break in service, while a former employee whose employment had been terminated during the break in service would not.

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