IRS Business Reporting Requirements for the Affordable Care Act

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As you may know, in July, 2013, the Obama administration delayed the implementation of the Affordable Care Act’s “employer mandate” for one year, until January 1, 2015. Part of the reason for the delay was to give the IRS time to issue regulations on the mandate’s reporting requirements. The IRS recently issued 100-plus pages of such regulations setting forth the applicable reporting requirements. These requirements are a tool for the IRS to track compliance with individual and employer mandates, determine individuals’ eligibility for the premium tax credit, and assess tax penalties when necessary. Below is a brief description of the regulations.

Beginning in 2015, employers with 50 or more full-time equivalent employees, and all self-insured employers, must annually report detailed health insurance information to the IRS and their employees in two ways:

  • They must file a form with the IRS stating the employers’ coverage options for their full-time employees. This form will report, things such as, the number of employees, the plan(s) offered and the cost of coverage to employees. The regulations instruct employers to track this information on a monthly basis, and to file a separate return with the IRS for each of its full-time employees.
  • Affected employers must provide a written statement to each full-time employee whose name is listed in the IRS return and containing essentially the same data as the IRS return. This information is expected to help individuals file their own tax returns and claim the premium tax credit when it is available.

Affected employers must submit electronic returns to the IRS by March 31 (paper returns by February 28) of the year following that being reported, and it must provide individual statements to employees by January 31 of the same year. For example, for calendar year 2015, electronic returns must be filed with the IRS by March 31 of 2016, and individual statements must be provided to employees by January 31 of 2016.

Planning Ahead
The expansive scope of these reporting requirements underscores the need for employers to build into their compliance infrastructure the ability to track employee coverage and income information on a month-to-month basis. It is unclear from the proposed regulations whether an employer’s look-back period[1] will be part of the final reporting requirements. In our view, however, the look-back period will be a complicated but useful tool for many employers to comply with the employer mandate while controlling costs.

[1] In Notice 2012-58, the IRS established a safe harbor under which employers may use a “look-back” period of up to 12 months to determine which of their employees is full-time. Under this safe harbor, an employer is deemed to comply with certain of the ACA’s coverage requirements if it offers coverage to all employees who average 30 hours per week or more during the look-back period.