17 Oct New ACA Reporting Guidance
Just as employers are settling down after a hectic and often frustrating year of Affordable Care Act (ACA) reporting compliance, the IRS is gearing up for next year, and just released the 2016 draft forms and instructions. Employers should spend a few moments becoming familiar with the proposed changes and clarifications since early preparation is key to successful (and less stressful) reporting.
As background, applicable large employers (ALEs) must self-report information relevant to IRS assessment of employer shared responsibility penalties on Forms 1094-C and 1095-C, including whether full-time employees were offered (or not offered) minimum value and affordable health coverage. Small employers who offer self-insured plans are considered coverage providers and must also report coverage information for employees and dependents relevant to assessing the individual shared responsibility mandate by filing Forms 1094- B and 1095-B. An ALE that is self-insured is also considered a coverage provider, but reports information relevant to the individual mandate for employees and dependents on Part III of Forms 1094-C and 1095-C. (Note: Health reimbursement arrangements (HRAs) are considered minimum essential coverage for reporting purposes and may require an employer sponsoring an HRA integrated with an insured plan to report coverage as a selfinsured employer.)
The more notable updates for employers relate to Forms 1094-C and 1095-C. ALEs reporting on those forms should note the following changes and clarifications.
- Transition Relief. In 2015, the IRS provided various transition relief from the Section 4980H requirements to provide affordable and minimum value coverage (ALEs with 50 to 99 full-time equivalent employees (FTEs) were generally exempt, and ALEs with 100 or more FTEs were afforded reduced compliance obligations and penalties). The 2016 Form 1095-C and instructions reflect the expiration of this relief for plan years beginning on or after January 1, 2016, but cautions those employers with non-calendar year plans that may rely on the transition through the last day of the plan year ending in 2016 that reporting is still required for all 12 months. Presumably, this is aimed at small ALEs that mistakenly assumed the transition relief from penalties included transition relief from reporting. The IRS also eliminated the “Qualifying Offer Method Transition Relief” for 2016 reporting, and ALEs may use the Qualifying Offer Method for simplified 1095-C compliance if an employee received a “qualifying offer” for all 12 calendar months.
- Authoritative Transmittal Clarification. When an ALE submits more than one transmittal of Forms 1095-C to the IRS, the ALE must file an “authoritative transmittal” that includes data on all of the Forms 1095-C filed for that ALE. This requirement generated a lot of confusion in 2015 for employers that are part of an aggregated ALE (a group of employers under common control) – especially when the ALE members all participated in a common plan with a single ALE member responsible for the reporting. The draft instructions clarify that the “authoritative transmittal” requirement applies on an Employer Identification Number (EIN) basis and should not be used for submitting Forms 1095-C on behalf of more © 2016 Fisher & Phillips, LLP, and United Benefit Advisors, LLC. All rights reserved. 8 than one ALE member of a controlled group of employers. Thus, each employer with a separate EIN should have a separate Form 1094-C designated as the authoritative transmittal for submitting Forms 1095-C to the IRS. The instructions also clarify how to report employees that transfer between or are shared by ALE members in an aggregated group.
- Full-Time Employee Definition. The draft instructions emphasize to employers that when reporting “full-time employees,” employers must use the definition of full-time employees in Section 4980H and related regulations regardless, of the employer’s classifications of employees under its personnel policies or plan eligibility. Remember that the ACA definition of “fulltime” is not always consistent with an employer’s eligibility policies for full-time employee benefits.
- Form 1095-C Coding Changes. Clarifications and changes to the codes on Form 1095-C have been made, including the addition of Codes 1J and 1K for Line 14 to reflect “conditional offers of spousal coverage,” which are offers subject to one or more reasonable, objective conditions such as an offer to make spousal coverage available only if the spouse is not eligible for other coverage.
- Employee Required Contribution. A new term, “employee required contribution,” is added for Line 15 affordability reporting and generally means the employee’s share of the monthly cost for the lowest-cost, self-only minimum essential coverage providing minimum value that is offered to the employee by the ALE member. In determining the employee required contribution, employers need to incorporate IRS guidance regarding the impact of flex credits and opt-out payments that may increase the employee required contribution for affordability purposes.
- Continuation Coverage. New COBRA reporting instructions are included for employees who terminated employment. In addition, the instructions clarify that offers of post-employment coverage other than COBRA to a former employee should not be reported as an offer of coverage.
Stay tuned for future updates and issuance of the final forms and instructions for 2016. In the meantime, copies of the proposed 2016 Forms and Instructions are available from the IRS website.
Content included in the Summer 2016 Benefits and Employment Briefing provided by our partner, United Benefit Advisors.