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IRS Issues Proposed PPACA Rules on Employer-Information Reporting

Originally posted September 6, 2013 by Stephen Miller on https://www.shrm.org

On Sept. 5, 2013, the U.S. Department of the Treasury and the Internal Revenue Service issued two proposed rules intended to streamline the information-reporting requirements for certain employers and insurers under the Patient Protection and Affordable Care Act (PPACA or ACA).

The PPACA requires information reporting under Internal Revenue Code (IRC) Section 6055 by self-insuring employers and other health coverage providers. And under IRC Section 6056, information reporting is required of employers subject to the employer “shared responsibility” provisions, also known as the employer mandate—meaning those with 50 or more full-time equivalent workers, who must provide coverage for employees working an average of at least 130 hours per month (or 30 or more hours per week) looking back at a standard measurement period of not less than three but not more than 12 consecutive months—or pay a $2,000 penalty for each full-time worker above a 30-employee threshold. The shared-responsibility mandate, which was set to take effect in January 2014, has been delayed until January 2015.

One proposed rule, “Information Reporting of Minimum Essential Coverage,” pertains to IRC Section 6055, while the other proposed rule, “Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer-Sponsored Plans,” pertains to IRC Section 6056.

“These reporting requirements serve distinct purposes under the ACA,” Timothy Jost, a professor at the Washington and Lee University School of Law in Virginia, explained in a commentary about the proposed rules posted on the journal Health Affairs’ blog. “The large-employer reporting requirement is necessary to determine whether large employers are complying with the employer-responsibility provisions of the ACA and will also help identify individuals who are ineligible for premium tax credits because they have been offered coverage by their employer. The minimum-essential-coverage reporting requirement will assist the IRS in determining whether individuals are complying with the ACA’s individual-responsibility requirement and also whether they are eligible for premium tax credits because they lack minimum essential coverage.”

Once the final rules have been published, employers and insurers will be encouraged to report the specified information in 2014 (when reporting will be optional), in preparation for the full application of the reporting provisions in 2015.

“The absence of these rules was the reason given by the IRS for delaying the employer mandate until 2015,” Jost noted. “The IRS is encouraging voluntary reporting by employers and insurers, subject to the requirements for 2014, and should have no trouble getting the final rules in place for mandatory reporting in 2015.”

Statutory Requirements

Specifically, the PPACA calls for employers, insurers and other reporting entities to report under IRC Section 6055:

  • Information about the entity providing coverage, including contact information.
  • A list of individuals with identifying information and the months they were covered.

And under IRC Section 6056:

  • Information about the applicable large employer offering coverage (including contact information for the company and the number of full-time employees).
  • A list of full-time employees and information about the coverage offered to each, by month, including the cost of self-only coverage.

Proposed Reporting Options

The proposed rules describe a variety of options to potentially reduce or streamline information reporting, such as:

  • Replacing Section 6056 employee statements with Form W-2 reporting on offers of employer-sponsored coverage to employees, spouses and dependents.
  • Eliminating the need to determine whether particular employees are full time if adequate coverage is offered to all potentially full-time workers.
  • Allowing organizations to report the specific cost to an employee of purchasing employer-sponsored coverage only if the cost is above a specified dollar amount.
  • Allowing self-insured group health plans to avoid providing employee statements under Sections 6055 and 6056 by furnishing a single substitute statement.
  • Allowing limited reporting by certain self-insured employers that offer no-cost coverage to employees and their families.
  • Permitting health insurance issuers to forgo reporting, under Section 6055, on individual coverage offered through a government-run health care exchange, or marketplace (set to launch in October 2013), because that information will be provided by the marketplace.
  • Permitting health insurance issuers, employers and other reporting entities, under Section 6055, to forgo reporting the specific dates of coverage (instead reporting only the months of coverage), the amount of any cost-sharing reductions, or the portion of the premium paid by an employer.

According to Jost, the IRS is attempting to avoid duplication and collecting unnecessary information. “Large employers need only report the employee’s share of the lowest-cost monthly premium for self-only coverage, since a determination as to whether employer coverage is affordable for adjudicating eligibility for premium tax credits is based on the cost of self-only, rather than family, coverage,” he wrote. “Entities that must report minimum essential coverage can report birthdates, rather than Social Security numbers, for dependents if they are unable to secure the Social Security numbers after reasonable efforts.”

The IRS is soliciting comments on the Section 6055 and 6056 proposed rules through Nov. 8, 2013. The agency will take the public comments into account when developing final reporting rules on further simplifications.

Separately, the process to challenge an insurance exchange’s finding that an employer’s plans are unaffordable or fail to provide minimum essential coverage (thereby triggering penalties against the employer) is presented in a final rule published in the Federal Register on Aug. 30, 2013, by the U.S. Department of Health and Human Services.