Employee Benefits & Executive Compensation

Action Items: The IRS has finalized and clarified the ObamaCare health care coverage reporting requirements for “applicable large employers.” The reporting requirements are effective for 2015. Major system changes will likely be necessary in order to track all of the information that is required to be reported.

The Internal Revenue Service has released a lengthy set of questions and answers regarding the reporting requirements under the Affordable Care Act (“ACA”) for “applicable large employers” under section 6056 of the Internal Revenue Code. Section 6056 requires applicable large employers to report whether they offer health coverage to each full-time employee and information relating to such coverage. The guidance may be accessed at http://www.irs.gov/uac/Questions-and-Answers-on-Reporting-of-Offers-of-Health-Insurance-Coverage-by-Employers-Section-6056. Final regulations were issued in March 2014. The Q&As summarize and clarify the regulations.

In general, employers with 50 or more employees across a control group must file certain information returns beginning in early 2016 (for 2015). Although the 50-employee threshold is determined on a control group basis, the reporting obligation is imposed individually on each member of the control group. It is therefore essential for this purpose that control group employers determine which entity employs each full-time employee in order for that entity to properly report the offering of coverage.

Form 1095-C must be provided to each full-time employee, reporting for each month of the year the employer health coverage, if any, offered to the employee and the employee’s family members. Information regarding the amount of employee premiums, the employee’s share of the total premiums, and whether the coverage provides “minimum value” must also be provided. The IRS’s preliminary draft of Form 1095-C is available at http://www.irs.gov/pub/irs-dft/f1095c--dft.pdf. All of the 1095-Cs must be transmitted by the employer to the IRS using Form 1094-C. The IRS’s preliminary draft of Form 1094-C is available at http://www.irs.gov/pub/irs-dft/f1094c--dft.pdf, and the instructions for both forms are available at http://www.irs.gov/pub/irs-dft/i109495c--dft.pdf.

Employers with fewer than 50 employees do not file Forms 1094-C and 1095-C. If they self-insure, they must report such coverage under section 6055 of the Code on Forms 1094-B and 1095-B.

The information provided in the Forms 1094-C and 1095-C and 1094-B and 1095-B is provided to other governmental entities that are responsible for enforcing the ACA and also to the state exchanges. This information is important for the IRS to determine whether an employer is subject to the “shared responsibility” excise tax regime of section 4980H of the Internal Revenue Code and whether an individual is subject to the individual mandate excise tax, and for the exchanges to determine whether individuals are entitled to the premium tax credit.