Affordable Care Act Updates: 6055 and 6056 Reporting

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November 08, 2015

A. 6055 Reporting (IRS Form 1095-B): 
The ACA added § 6055 of the Internal Revenue Code which, beginning in calendar year 2015 (extended from 201457) now requires every “health insurance issuer, sponsor of a self-insured health plan, government agency that administers governmentsponsored health insurance programs, and other entity that provides minimum essential coverage” to collect and file an annual return with the IRS and the individual receiving coverage containing certain detailed information regarding the health insurance coverage.  The purpose of the form is to provide the IRS information it needs to regulate the individual health insurance mandate (e.g. determine whether individuals have obtained the requisite health insurance coverage in order to avoid IRS penalties).  The return is due to the individual by January 31st following year-end and is due to the IRS by February 28th following year-end (March 31st, if filing electronically with the IRS).  The information will be reported to the IRS on IRS Form 1095-B.

The information provided on Form 1095-B will include: 

i) the name, address, and employer identification number (EIN) of the reporting entity that must file the return (the health insurance issuer);

ii) the name, address, and taxpayer identification number (TIN) of the individual named on the application who enrolls the individuals covered; this “responsible individual” may be the primary insured, the employee, a former employee, a uniformed services sponsor or a parent or other related person.  Note that the date of birth may be used if the TIN is not available after “reasonable efforts.”  Also, the reporting entity is not required to report the TIN of a responsible individual who is not enrolled in the coverage.  

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iii) the name, address, and TIN (or date of birth if the TIN is not available) of each individual covered under the policy;  iv) the months in which the individuals were covered for at least one day and entitled to receive benefits; and v) details about the health insurance coverage and other information specified in forms, instructions, or published guidance. Also, if the Form 1095-B relates to employer-provided group health insurance coverage, the following information must also be provided:  i)  the name, address, and EIN of the sponsoring employer; ii) whether the coverage is a qualified health plan enrolled in through the Small Business Health Options Program (SHOP) and the SHOP's unique identifier; and iii) details about the premium and other information about the coverage required by form instructions.

Noteworthy details regarding 6055 Reporting are as follows:

1)      Not Required for Non-Enrolled Employees: The Form 1095-B is not required to be provided to employees who are not enrolled in coverage, irrespective of whether or not they are full-time employees. 

2)      Not Required for HSAs, FSAs, HRAs:  Reporting is not required for arrangements that are not minimum essential coverage such as HSAs, health FSAs that qualify as excepted benefits, and HRAs that supplement minimum essential coverage. 

3)      Employers that Offer Full-Insured Health Plans Do Not Prepare: Employers that offer fully insured health plans are not required to prepare Form 1095-B (the health insurance issuer prepares it).  Also employers that offer fully insured health plans are only required to complete Form 1095-C (6056 reporting, discussed below) if the employer is a “large employer” for the year in question.  

4)      Streamlined Reporting for Self-Insurers: Employers that offer self-insured health plans are required to complete 6055 reporting regardless of whether the employer is considered a “large employer.” Also, if the employer self-insures and is a large employer, the employer will be permitted to complete one consolidated Form 1095-C in order to meet both the employer’s 6055 and 6056 reporting obligation.  The combined form will have two sections: the top half includes the information needed for section 6056 reporting, while the bottom half includes the information needed for section 6055 reporting 

B. 6056 Reporting: For calendar year 2015 (extended from 201458) and thereafter, employers that are “large employers,” as defined above, will be required to submit reports to the IRS and to all full-time employees, describing whether or not each full-time employee had access to affordable, qualifying health insurance coverage under the employer’s health plan.  The reporting is accomplished on IRS Form 1095-C and will require employers to certify whether the employer offered each full-time employee and their dependents the opportunity to enroll in minimum essential coverage under an employer sponsored plan by calendar month.  The new requirement is sometimes called “6056 Reporting” after the section of the Internal Revenue Code containing the new rule.  The purpose of 6056 Reporting is to provide the IRS with information by which to enforce the employer mandate, described above (e.g. information about whether the employer offered each fulltime employee affordable health insurance providing minimum value) and to provide employees with information by which to determine eligibility for premium assistance tax credits on their individual income tax returns (individuals are only eligible for premium assistance tax credits if they do not have an offer of affordable, qualifying health insurance from their employers).   Beginning with the 2015 calendar year, employers that are “large employers” will be required to furnish a copy of IRS Form 1095-C to each full-time employee by January 31st following year-end (e.g. the first IRS Form 1095-C will be due to employees January 31, 2016).  Employers will be required to submit copies of the form to the IRS by February 28th following year-end (or March 31st if filing electronically).  

The information provided on Form 1095-C will include:

1)      The name and Employer Identification Number (EIN) of the applicable large employer, along with the contact information of the contact person regarding the plan (may be an employee or agent of the employer);

2)      A certification as to whether the large employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan by calendar month;

3)      The number of full-time employees for each calendar month of the calendar year;

4)      For each full-time employees the months during the calendar year for which minimum essential coverage was available under the plan;

5)      For each full-time employee, the employee’s share of the lowest cost monthly premium by calendar month for the lowest cost option self-only coverage option offered in plan offering minimum value; and 

6)      For each full-time employee, the name, address, and taxpayer identification number of the employee (but not the dependent or spouse) and the months (if any) during which the full-time employee (or any dependent(s)) were covered under the eligible employer-sponsored plan. 

Noteworthy details regarding 6056 Reporting are as follows: 

1)      Only “Large Employers”: 6056 Reporting is only required for employers offering fully insured health plans that are “large employers” for the year in question (“large employer” status is discussed above).

2)      Control Group Filing: If a group of entities are part of a controlled group of employers (with certain common ownership characteristics determined under section 414(b), 414(c), 414(m), or 414(o) under the Internal Revenue Code), 6056 reporting requirements apply to each entity member.   IE: Parent Co has 25 full-time employees and owns 100% of the stock of Subsidiary Co 1, with 15 full-time employees, and Subsidiary Co 2, with 16 full-time employees.  The group of companies is considered one applicable larger employer and each company has a 6056 reporting obligation.  The group may designate one of the three entities to facilitate filing returns.  

3)      No Reporting for Part-Time Employees: A Form 1095-C is not required to be furnished to employees that are not full-time employees under the ACA.  

4)      Delivery: Electronic delivery is permitted provided rules similar to the rules for electronic delivery of an employee’s Form W-2 are met and the employee consents to electronic delivery.  Also, the Form W-2 and Form 1095-C may be combined in 1 mailing to the employee.  

5)      Electronic Filing: Electronic filing with the IRS is required if the reporting employer files 250 or more forms.  

6)      Third Party Reporting Permitted: Employers are permitted to arrange for third parties to prepare the form but the employer will still be required to file the authoritative transmittal form.  An agent may be listed as the contact person on Form 1095-C.  However, the employer would still be ultimately responsible for any failure to file, or related IRS penalties.

7)      Truncated TIN: For 1095-C may identify the employee using a truncated TIN rather than a social security number. 

8)      No Transition Relief for Non-Calendar Year Health Plans: The Form 1095-C is due to the employee  by January 31, 2016, for the 2015 calendar year, even if the employer uses a non-calendar year health plan. 

9)      No Transition Relief for 2015 For Mid-Sized Employers: Although certain qualifying mid-sized employer with between 50 and 99 full-time employees (discussed above) are no longer subject to employer shared responsibility penalties for 2015, these employers are still subject to 6056 reporting for 2015.

c. 6056 Alternative Reporting: 

In an attempt to alleviate/limit the burden on employers in connection with 6056 reporting, the final regulations include optional streamlined reporting procedures.  An employer is permitted to mix and match which streamlined procedures it wishes/is eligible to use, meaning it can use regular 6056 reporting procedures for some groups of full-time employees and certain streamlined procedures for other groups of employees.  A brief discussion of each available streamline procedures follows:

1) Qualifying Offer 9.5% of FPL: 

An employer will be able to complete a simplified IRS Form 1095-C in which the employer must only:

a)      identify the employee’s name, social security number (or truncated number),  address and

b)      indicate that a “qualifying offer” of coverage, as described below, was made to the employee using a standard indicator code, rather than providing monthly information required under the standard general reporting procedure describe above. 

For purposes of this streamlined reporting procedure a “qualifying offer” of coverage means the employer offered:

(a) the employee self-only health insurance coverage that provides minimum value at a cost to the employee of no more than 9.5% of mainland federal poverty line ($1,100 in 2015) and

(b) minimum essential coverage to the employee’s spouses and dependents.  For employees that received a “qualifying offer” for only part of the year, the employer will be able to report streamlined information for those months using an indicator code but would report under the general reporting method for those other months.   

If a qualifying offer was made for 

2) 95% Qualifying Offer -2015 Only:

For calendar year 2015 only, any employer that makes a “qualifying offer” (described above) to at least 95% of its full-time employees, the employer will be able to meet its 6056 reporting requirements by filing a simplified statement, instead of Form 1095-C, with each full-time employee, by January 31, 2016, indicating that such an offer was made and that the employee is therefore is not eligible for premium reduction tax credits for any insurance purchased on the exchange.  If the offer was not made to certain fulltime employees for all 12 months, the statement will indicate that the employee and his/her spouse/dependents may be eligible for premium reduction tax credits for those particular months.  The statement provided to each employee will include contact information for who the employee may contact at the employer, or the employer’s third party administrator, for additional information concerning the offer of health coverage.  Any employer taking advantage of this relief will provide a streamlined Form 1095-C to the IRS for each such full-time employee listing the employee’s  name, social security number, address, and IRS-indicator code stating such an offer was made for all 12 months or, if applicable, certain months during the year.  

3) 98% Offer – 2015 and Beyond:

The final regulations under 6056 allow for a further streamlined Form 1095-C reporting for any large employer that offers affordable health insurance coverage that provides minimum value to 98% or more of its full-time employees.  Qualifying employers may indicate on the Form 1095-C transmittal form that such an offer was made and avoid having to actually identify each full-time employee.  For example, if an employer provides the requisite, affordable health insurance coverage to all of its employees that work 20 hours or more per week, the employer could utilize this streamlined reporting procedure and avoid having to identify which employees are in fact full-time and must be provided Form 1095-C.  In order to qualify for this streamlined reporting procedure, an employee’s health insurance will be considered affordable if the offer complies with any of the affordability safe harbors contained in the final regulations under Code section 4980H (the Rate of Pay Safe Harbor, W-2 Safe Harbor, Federal Poverty Line Safe Harbor). Example: Employer has 1,000 employees who are expected to work at least 25 hours per week.  Employer does not want to determine which employees are in fact full-time (regularly provide 30 or more hours of service per week).  Employer makes a offer of coverage that is affordable and provides minimum value to 990 of the employees.  As a result the employer is not required to report either the total number of full-time employees or whether a particular employee was full-time for any calendar month during the year.  The employer still prepares a Form 1095-C for all 1,000 employees.  

Cadillac Tax

Beginning January 1, 2018, an excise tax will be imposed on the issuer of health insurance providing an “excess benefit.”59  This requirement is sometimes called the excise tax on “Cadillac Health Plans.”  FThe good news is that for an employer sponsoring a fully-insured health plan (as opposed to an employer that self-insures), any excise tax will be assessed on the health insurance issuer not the employer sponsoring the health plan.60  However, if an excise tax is assessed on the health insurance issuer, the issuer will likely pass along the cost to the employer through increased health insurance premiums.   Also, for an employer that self-insures, the excise tax is imposed on the employer.  The tax is calculated as an excise tax of 40% of the amount by which the cost of the health insurance plan, as determined under rules for assigning COBRA premium costs, exceeds certain threshold amounts.   

For 2018, the threshold amount is set to be $10,200 for a health coverage for an individual and $27,500 for other coverage (e.g. family plans, etc).  Also, any employer contributions to an HSA, as well as employee salary reduction contribution to an FSA must be included in the calculation.  For example, if a health insurance issuer issued an individual health insurance policy costing $11,200, the excise tax on the policy would be $400 (40% x [$11,200-$10,200]).  Provided the health insurance is a fully insured health plan, the excise tax would be assessed on the company issuing the health insurance policy, not the employer.  However, if an employer sponsored a self-insured health plan, the excise tax would be assessed on the employer sponsoring the plan. If the employer also contributed $1,000 to an HSA for the benefit of the individual the excise tax would be $800 ($12,200 - $10,200).   

Employers should examine their employment contracts and collective bargaining agreements to determine the cost of health insurance provided under these agreements.  Employers should compare the cost of these health plans to the excess benefit thresholds that are scheduled to apply beginning January 1, 2018 ($10,200 for a policy covering an individual and $27,500 for other policies) and consider inserting language allowing for flexibility in changing health benefits prior to January 1, 2018 in the event that the existing health plans offered would trigger the new excise tax. 

57 IRS Notice 2013‐45.

58 IRS Notice 2013‐45.  

59 26 U.S.C. § 4980I(a).

60 26 U.S.C. § 4980I(c)(2). 

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