Final IRS Forms and Instructions for Reporting Health Coverage Clarify Large Employer Requirements for 2015 and Beyond

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On February 8, 2015, the IRS released final forms and instructions for reporting health coverage pursuant to Code Sections 6055 and 6056, which were added by the Health Care Reform Act. As stated below, large employers and self-insured employers (both small and large) must begin this annual reporting in early 2016 for health coverage offered or provided in 2015.

Summary of Reporting Requirements

Starting in 2016, Code Section 6055 requires all entities providing “minimum essential coverage” (MEC) to submit information to the IRS concerning each individual provided MEC in the preceding calendar year. Section 6055 also requires these entities to furnish statements containing equivalent information to certain covered individuals.

Starting in 2016, Code Section 6056 requires all large employers to report to the IRS information regarding health coverage, if any, offered to full-time employees in the preceding calendar year. Large employers are also required to furnish statements containing similar information to each full-time employee.

For more information on Code Sections 6055 and 6056 reporting, please see our October 24, 2014, SW Benefits Update, “Section 6055 Reporting of Health Plan ‘Minimum Essential Coverage’ for Small and Large Employers,” and our October 28, 2014, SW Benefits Update, “Section 6056 Reporting of Health Coverage Information for Large Employers.”

Final Forms for Reportings

The IRS released the final version of Form 1095-B, along with final versions of the applicable instructions and the transmittal Form 1094-B, which provides aggregate data to the IRS. Form 1095-B will be used by those entities that provide MEC to comply with Code Section 6055. This includes insurers and employers who sponsor self-insured health plans, both large and small. However, as explained below, self-insured large employers may satisfy Code Section 6055 by completing an additional portion (Part III) of Form 1095-C for each individual enrolled in self-insured coverage.

The IRS also released the final version of Form 1095-C, along with the final versions of the applicable instructions and the transmittal Form 1094-C. Parts I and II of Form 1095-C will be used by large employers to comply with Code Section 6056, reporting on offers of health coverage, if any, made to each full-time employee. Part III may be used by self-insured large employers to comply with Code Section 6055, reporting on all individuals enrolled in the self-insured health plan, thereby satisfying both Code Sections 6055 and 6056 by completing just Form 1095-C.

Technically, these forms and instructions are considered “final” only for those employers and insurers who participate in voluntary reporting, pertaining to coverage offered or provided in 2014 and reported in 2015. However, it is likely that these forms will remain largely unchanged for the required reporting in 2016 for coverage offered or provided in 2015, since these forms have been minimally revised since the initial draft forms were released in August 2014.

Noteworthy Revisions to IRS Instructions

While the forms remain largely unchanged, the final instructions contain meaningful revisions, offering further insight into large employer reporting requirements for 2015 and beyond. Some of these meaningful revisions are discussed below.

Combined Reporting for Self-Insured Large Employers – Non-Employees

Previous draft instructions only permitted self-insured large employers to use Form 1095-C (Part III) to report on employees (and their dependents and spouses) enrolled in self-insured health coverage. The final instructions provide that self-insured large employers can use Form 1095-C when reporting on employees or non-employees (e.g., partners, directors, COBRA recipients and retirees). This eases the administrative burden for self-insured large employers, because they can now focus solely on Form 1095-C and can disregard Form 1095-B.

New Method for Counting Number of Employees

Large employers must submit Forms 1095-C for each full-time employee, and at least one transmittal Form 1094-C, which acts as a cover letter providing aggregate information to the IRS. Form 1094-C requires the employer to provide monthly totals of all employees (part-time and full-time employees). The previous draft instructions provided that employers could either use employee counts from the first or last day of each calendar month, so long as it is consistently applied throughout the calendar year. In addition to these two counting methods, the final instructions permit employers to use the first day or last day of the first payroll period that starts during each month (provided that for each month that last day falls within the calendar month in which the payroll period starts), which must also be consistently applied throughout the calendar year.

Qualifying Offer Alternative Reporting – Complications for Self-Insured Employers

Code Section 6056 and its implementing regulations provide large employers with alternative reporting methods (see our previously referenced SW Benefits Update for more information on alternative reporting). One such method, called the “Qualifying Offer” method, permits large employers to furnish a simplified, condensed statement to full-time employees, instead of providing a copy of Form 1095-C to the employee. However, the final instructions make clear that self-insured large employers using Form 1095-C to report MEC cannot issue this simplified statement, and must provide a copy of the Form 1095-C to each employee. This may make the Qualifying Offer method much less appealing for self-insured large employers.

Deemed Offers of Coverage

In 2015, large employers must offer MEC to 70 percent of their full-time employees (i.e., employees working 30 or more hours per week) and dependents to avoid tax penalties (unless transitional relief applies). For 2016 and subsequent years, this increases to 95 percent. For more information on the large employer shared responsibility provisions, please see our February 25, 2014, checklist, “Health Care Reform’s Employer Shared Responsibility Penalties: A Checklist for Employers (Revised February 20, 2014).

Form 1094-C requires large employers to attest, by checking a box, whether they have complied with this requirement for each month. An employee who is treated as having been offered health coverage for purposes of Code Section 4980H (even though not actually offered coverage) is treated as offered MEC for this purpose. For example, for the 2014 and 2015 plan years, for an employee who was not offered dependent health coverage during the 2013 or 2014 plan years, an employer may treat, solely for purposes of Code Section 4980H, an offer of health coverage to a full-time employee but not his or her dependents, as an offer of health coverage to the full-time employee and his or her dependents, if the employer takes steps during the 2014 or 2015 plan year to extend coverage under the plan to dependents not offered coverage during the 2013 or 2014 plan year. These “deemed” offers to dependents will be treated as offers of MEC for purposes of this attestation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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