New Draft Instructions Released for ACA Information Reporting

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As explained in my previous blog, Code Sections 6055 and 6056, added by the Affordable Care Act (“ACA”), require all employers (even small employers) sponsoring self-funded health plans and large employers to file information returns with the IRS and furnish statements to employees concerning the health coverage offered or provided to these employees and their dependents.  Mandatory reporting begins in 2016 with respect to 2015 coverage. Reporting 2014 coverage in 2015 was voluntary.

On August 6, 2015, the IRS released the 2015 draft instructions for mandatory reporting. The 2015 draft instructions contain several changes from the 2014 instructions for voluntary reporting. Below I summarize a few of these changes.

Increased Penalties

 In a previous blog, I explained the increased penalties for ACA information reporting. The increased penalties have been incorporated into the 2015 draft instructions. The penalties generally include $250 per failure for failing to file an information return with the IRS (with a maximum aggregate penalty of $3 million) and $250 per failure for failing to provide a correct employee statement (with a maximum aggregate penalty of $3 million).

A “failure” includes an untimely submission as well as inaccurate or incomplete forms.  The $250 penalty applies separately for each failure to file with the IRS and each failure to furnish an employee statement, meaning that the penalty is doubled (i.e., $500) if an employer fails to report on a required employee altogether.

The 2015 draft instructions also explain that short-term relief from penalties in 2016 is available if the filer can demonstrate a good faith effort to comply with these new reporting requirements.

Extensions

A filer may get an automatic 30-day extension of time to file the information returns with the IRS by completing Form 8809. Form 8809 must be filed by the due date of the returns in order to get the 30-day extension. An additional 30-day extension may be requested for certain hardships.

The 2015 draft instructions do not contain an identical automatic extension for furnishing employee statements. The instructions require a filer to provide the IRS with requested information, including a reason for the delay, in order to get an extension. 

Corrections

The 2015 draft instructions provide information regarding corrected returns. The instructions warn that failure to file corrected returns and statements may lead to penalties. Corrections are required for multiple reasons, including inaccurate statements concerning premium amounts, coverage offers to employees, and full-time employee counts.

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

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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