At about the same time as last year, the IRS has released draft ACA coverage information reporting Forms and Instructions to be used early next year. There are many small differences and one HUGE difference. The IRS decided not to enforce the 2014 reporting requirements, essentially giving covered employers a practice year, if they wanted to take it. Few did. With penalties more than doubled by Congress this summer, the IRS will enforce 2015 reporting rules beginning in early 2016. You are encouraged, by offered penalty relief, to do your best, but to do it timely.
For 2015 reporting, the IRS will not impose penalties on a filer for reporting incorrect or incomplete information if the filer can show that it made good faith efforts to comply with the information reporting requirements for 2015. No relief is provided in the case of reporting entities that cannot show a good faith effort to comply with the information reporting requirements or that fail to timely file an information return or furnish a statement. However, consistent with the existing information reporting rules, reporting entities that fail to timely meet the requirements still may be eligible for penalty relief if the IRS determines that the standards for reasonable cause under section 6724 are satisfied.
To refresh, only small (under 50 full-time employees in an average 2014 month, on a controlled-group basis) employers are exempt, and only if they offered no group health plan or only a fully-insured group health plan in 2015. Small self-insured employers must report as insurers, on Forms 1094-B and 1095-B. “Applicable Large Employers” report on Forms 1094-C and 1095-C, regardless of 2015 coverage offerings. Every person who was an ALE’s full-time employee in any 2015 month must be furnished a Form 1095-C by February 1, 2016 (January 31 being a Sunday). The deadline for filing all such Forms, along with a Form 1094-C transmittal, is February 29 (if in paper) or by March 31 (if electronic).
We expect few to be able to get this right without IT tools and support services that have been developed and brought to market in the last eighteen months. It’s already late in the game to be shopping for those tools and services.
Now, we turn to the changes that lept off the page at us. Space here only allows us to hit the highest of the highlights. If you want to see the Forms and Instructions before reading our analysis – yeah, we’re that way, too – here are the links.
http://www.irs.gov/pub/irs-dft/i109495b–dft.pdf
http://www.irs.gov/pub/irs-dft/i109495c–dft.pdf
http://www.irs.gov/pub/irs-dft/f1095b–dft.pdf
http://www.irs.gov/pub/irs-dft/f1095c–dft.pdf
http://www.irs.gov/pub/irs-dft/f8809–dft.pdf
Form 8809?
You have not read previously about Form 8809 here. Form 8809 is filed to request automatic 30-day extensions of time for certain kinds of information reporting – Forms W-2 and 1099, for example. As amended (again, these are draft Forms), 8809 also may be used to request extension of the Form 1095-B or Form 1095-C filing deadline. So what about the earlier deadline to furnish the same Forms to employees? Says Form 8809: “The automatic extension of time to file and any approved requests for additional time will only extend the due date for filing the information returns with the IRS. It does not extend the due date for furnishing statements to recipients.”
However, the 2015 Form 1095-C Instructions say this:
Extensions of time to furnish statement to recipients. You may request and extension of time to furnish the statements to recipients by sending a letter to Internal Revenue Service, Information Returns Branch, Attn: Extension of Time Coordinator, 240 Murall Drive, Mail Stop 4360, Kearneysville, WV 25430. The letter must include (a) filer name, (b) filer TIN, (c) filer address, (d) type of return, (e) statement that extension request is for providing statements to recipients, (f) reason for delay, (g) the signature of the filer or authorized agent. Your request must be postmarked by the date on which the statements are due to recipients. If your request for an extension is approved, generally you will be granted a maximum of 30 extra days to furnish the recipient statements.
That does not sound to us like an automatic, guaranteed, extension. Best make your request early and persuasively.
Multiemployer Plan Relief . . . Finally . . . Probably
Knock and the door will be opened. Actually, bang, hard, and keep it up until they realize you’re not going away. We and others have asked for many months for IRS guidance about how an ALE Member should report, and thus claim § 4980H credit for, coverage offers made to leased workers by their leasing firm employers. More specifically, we have asked for confirmation that employers must enter Code 2E on Line 16 of Form 1095-C. We take these additions to the 2015 Form 1095-C Instructions as our answer.
Regarding Line 14:
For reporting offers of coverage for 2015, an employer relying on the multiemployer arrangement interim guidance should enter 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). For reporting for 2015, Code 1H may be entered without regard to whether the employee was eligible to enroll in coverage under the multiemployer plan. For 2016 and future years, reporting for offers of coverage made through a multiemployer plan may be reported in a different manner.
And regarding Line 16:
Codes 2F through 2H: Although employers may use the section 4980H affordability safe harbors to determine affordability for purposes of the multiemployer interim guidance, an employer eligible for the relief provided in the multiemployer interim guidance for a month for an employee should enter code 2E (multiemployer interim rule relief), and not a code for the section 4980H affordability safe harbors (codes 2F, 2G, or 2H).
Technically speaking, those are directions for choosing which of multiple “correct” codes should be entered on a line for a particular month. However, we read them in context of this carried-over comment from the 2014 Instructions:
An employer offers health coverage to an employee if it, or another employer in the Aggregated ALE Group, or a third party such as a multiemployer or single employer Taft-Hartley plan, a multiple employer welfare arrangement (MEWA), or, in certain cases, a staffing firm, offers health coverage on behalf of the employer.
Emphasis ours. Read together, they seem to us to support our view that an ALE Member claims §4980H credit for a staffing firm’s coverage offer by entering Code 1H on Line 14, and Code 2E on Line 16 of Form 1095-C for that month. That may change next year. Again, these are draft Forms and Instructions for 2015 only.
Full-Time Employee Tracking – How ’bout “No”?
An employer gets streamlined reporting requirements if it qualifies for and uses the “98% Offer Method.” Ok, but that forces you to make a “98% Offer” certification, under penalty of perjury. You must know your total number of ACA “employees” – i.e., all who are, in each month, your “common law employees,” even if not on your W-2 payroll. Come up short on that count and you may make a false certification. Also, the 2014 Instructions were not entirely clear about how the employer should count employees in a Limited Non-Assessment Period for a particular month. On the LNAP, we got better guidance, plus an example, as part of the Form 1094-C Instructions.
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. The employer is not required to identify which of the employees for whom it is filing were full-time employees, but the employer is still required, under the general reporting rules, to file Forms 1095-C on behalf of all its full-time employees who were full-time employees for one or more months of the calendar year. To ensure compliance with the general reporting rules, an employer should confirm for any employee for whom it fails to file a Form 1095-C that the employee was not a full-time employee for any month of the calendar year. (For this purpose, the health coverage is affordable if the employer meets one of the section 4980H affordability safe harbors.)
Example. 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. Employer chooses to file a Form 1095-C on behalf of all 300 employees, including the five employees to whom it did not offer coverage, because if one or more of those employees was, in fact, a full-time employee for one or more months of the calendar year, Employer would be required to have filed a Form 1095-C on behalf of those employees.
Note. If an employer uses this method, it is not required to complete the “Full-Time Employee Count” in Part III, column (b).
COBRA Clarification
We also got clearer instructions about how to report offers of COBRA coverage.
An offer of COBRA continuation coverage that is made to a former employee upon termination of employment is reported as an offer of coverage using the appropriate indicator code on line 14 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), code 1H (No offer of coverage) should be entered 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 (for instance, an offer of COBRA continuation coverage that is made due to a reduction in the employee’s hours that resulted in the employee no longer being eligible for coverage under a plan) is reported in the same manner and using the same code as an offer of that type of coverage to any other active employee.
“And, In Conclusion . . .”
When you hear that, you know it’s gone on too long already, as this has. This is our first, once-over review. As we spot more items of interest, we’ll circle back.
