Authors, Eleanor Banister, Atlanta, +1 404 572 4930, ebanister@kslaw.com and Emily Meyer, Atlanta, +1 212 556 2132, emeyer@kslaw.com

In September, the Internal Revenue Service (the "IRS") issued proposed regulations under Sections 6055 and 6056 of the Internal Revenue Code (the "Code") that establish annual health coverage information reporting and individual statement requirements related to the individual coverage and employer "pay-or-play" mandates under the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the "Affordable Care Act"). The proposed requirements are burdensome and duplicative and will likely present a significant compliance challenge for employers that sponsor self-insured group health plans. Reporting is encouraged for 2014, but will be mandatory (and penalties will apply) for 2015.

Section 6055 Reporting

Code Section 6055 provides that every "person" that provides "minimum essential coverage" to an individual during a calendar year must file an information return and distribute a statement to each covered individual to whom such coverage is provided. The return will provide the IRS with information necessary to enforce the individual coverage mandate, while the statement will allow individuals to establish that they had qualifying health coverage during a calendar year (and therefore do not have to make an individual shared responsibility payment). Under the proposed regulations, the list of "persons" required to report includes health insurance issuers and employers that sponsor self-insured group health plans. "Minimum essential coverage" (or "MEC") generally includes all group health insurance coverage and self-insured group health plans. As proposed, the reporting and statement requirements apply on an employer by employer, rather than a controlled group, basis.

The proposed regulations provide that employers that sponsor self-insured group health plans must submit a return (the "MEC return") that includes:

• The name, address and employer identification number ("EIN") for the person filing the return and the employer sponsoring the plan;
• The name, address and taxpayer information number ("TIN"), or date or birth if a TIN is not available, for the "responsible individual" (i.e., the employee or primary insured);
• The name and TIN (or date of birth if a TIN is not available) for each covered individual and a list of the calendar months during which such covered individual was enrolled in MEC for at least one day; and
• A declaration that the coverage is or is not a qualified health plan enrolled in the Small Business Health Options Program.

Employers must also furnish a statement to each covered individual (the "MEC statement") that:

• Contains all of the information reported to the IRS with respect to the covered individual and the reporting entity; and
• Provides a contact phone number for the employer.

Section 6056 Reporting

Code Section 6056 establishes a reporting requirement that will enable the IRS to assess compliance with the employer shared responsibility requirements and an individual statement requirement that will enable employees to determine whether they can claim a premium tax credit. (An employee is not eligible for a premium tax credit if the employee is offered affordable coverage under an employer-sponsored plan that provides minimum value.) Every "applicable large employer" subject to the "pay-or-play" mandate must file an information return and distribute a statement to each full-time employee.

In "applicable large employer" is defined in the Affordable Care Act as an employer that employed a monthly average of at least 50 full-time or full-time equivalent employees during the prior calendar year. The proposed regulations, however, expand the information return and individual statement requirements to apply to each "applicable large employer member" (or "ALE member"), which they define as a person that, alone or with other persons, is treated as an applicable large employer. The preamble to the proposed regulations specifies that, although a third party administrator or controlled group member may file returns and furnish employee statements on behalf of an ALE member, each ALE member must sign the return filed on its behalf and is subject to any liability associated with failure to properly file its return or furnish its statements. This expansion will likely be burdensome for related employers that administer payroll and employee benefits on a controlled group basis.

Under the proposed regulations, the Section 6056 information return (the "employer mandate return") must include:

• The name, address and EIN of the ALE member;
• The name and telephone number of a contact person for the ALE member;
• A certification as to whether the ALE member offered its full-time employees and their dependents the opportunity to enroll in minimum essential coverage;
• A list of the calendar months during the calendar year for which coverage under the plan was available;
• A list, by calendar month, of each full-time employee's share of the monthly premium for the lowest cost self-only coverage providing minimum value offered to that employee;
• A list, by calendar month, of the number of full-time employees; and
• A list of each full-time employee's name, address and TIN and the calendar months, if any, during which the employee was covered under the plan.

According to the preamble to the proposed regulations, the IRS is considering whether to require that the employer mandate return also include:

• Whether the coverage offered to employees and their dependents meets minimum value and whether the employee had the opportunity to enroll his or her spouse;
• A list, by calendar month, of the total number of employees (in addition to the number of full-time employees);
• Whether an employee's effective date of coverage was affected by a waiting period;
• Whether the ALE member was not conducting business during any particular calendar month;


• Whether the ALE member expects that it will not be an ALE member the following year;
• The names and EINs of the other ALE members in the controlled group; and
• Whether the ALE member contributes to a multiemployer plan on behalf of any full-time employees.

ALE members must furnish a statement to each full-time and full-time equivalent employee (the "employer mandate statement") that includes all of the information shown on the employer mandate return with respect to the employee as well as the ALE member's name, address and EIN. The proposed regulations provide that these individual statements may be made by furnishing a copy of the employer mandate return and that a truncated TIN may be used in lieu of the TIN appearing on the information return.

Because the MEC return and statement and the employer mandate return and statement requirements are duplicative, the IRS may provide in future regulations for one or more of the following simplified reporting methods:

• Allowing self-insured employers to furnish combined MEC and employer mandate statements.
• For employees employed for the entire calendar year whose lowest-cost self-only contribution remains constant, allowing the employer to report minimum value coverage on Form W-2 instead of the employer mandate statement. (The employer would still have to file the employer mandate return.)
• If the required monthly employee contribution is below a specified threshold, permitting the employer to report zero as the employee cost. (If the annual cost of self-only coverage is $800 or less, the employee will not be eligible for a premium tax credit.)
• Based on a certification that the only employees excluded were not full-time employees, waiving the requirement to list all full-time employees. (The employer may later be asked to confirm the status of an employee who claims a premium tax credit.)
• If minimum value coverage is provided to an employee and his or her spouse and dependents at no cost, waiving the employer mandate statement requirement with respect to those individuals.

Filing Information Returns and Providing Individual Statements

Under the proposed regulations, the MEC and employer mandate returns (the "information returns") must be filed electronically. (An exception applies to persons or ALE members required to file fewer than 250 returns of any type during the year.) The MEC and employer mandate statements (the "individual statements") may be provided electronically only after a number of requirements are fulfilled, which, according to the preamble to the proposed regulations, "adopt by analogy" the requirements for electronic furnishing of Form W-2.

The filing deadlines are the same that apply to Form W-2: the information returns must be filed on or before March 31, or February 28 if not filed electronically, of the year following the year to which they relate. The individual statements must be furnished on or before January 31 of the year following the year to which they relate.

Effective Date

Although taxpayers are "encouraged" to voluntarily comply with the information reporting requirements for 2014, the proposed effective date for the information reporting and individual statement requirements is 2015, which means that individual statements must be provided no later than January 31, 2016 and information returns must be filed by March 31, 2016 (or February 28, 2016 if not filed electronically). The information return and individual statement requirements are subject to the penalties for failure to file correct returns and failure to furnish correct information statements.