Employers are going to need a strong benefits administration platform. The Pay or Play rules of the Affordable Care Act (ACA) require applicable large employers (ALE’s); employers with an average of 50 full-time employees; to report to the IRS employee and dependent health care coverage offered. On July 24, 2014, the IRS released draft informational returns which employers will use to report this health insurance coverage in accordance with Section 6055 and 6056 of the Internal Revenue Code.
Section 6056 requires every applicable large employer (ALE) to file a return with the IRS that reports the terms and conditions of the health care coverage offered to the employer’s full-time employees during the year. Form 1095-C is to be used to satisfy this requirement. Reports must include and identify each employee who was full-time for 1 or more months and include details of any health care coverage offered. This form will be required of employers with either a fully insured or self-funded plan. Form 1094-C is to be used to transmit these returns to the IRS.
Applicable large employers that sponsor self-insured plans are required to report the information required under both Sections 6055 and 6056 on a single combined form using Form 1095-C.
The draft Form 1095-C features three rows of monthly information for each full-time employee, along with draft Indicator codes.
Row 1: The first series of codes relate to offers of coverage, and indicate whether coverage is offered to the employee, the employee’s spouse and dependents during each month in the year and the type of coverage offered. Code 1A, for example, identifies employees that receive a qualified offer, which is minimum essential coverage (MEC) providing minimum value with employee contribution for self-only coverage equal to or less than 9.5% of the mainland single federal poverty line, as well as MEC offered to spouse and dependent(s). Other codes denote whether MEC providing minimum value was offered to the employee only; the employee and dependent(s); the employee and spouse, or to all. Additional codes identify whether MEC offered did not provide minimum value; whether coverage was offered to an employee who was not a full-time employee, or whether a full-time employee was not offered coverage.
Row 2: Provides for monthly reporting of the employee’s share of the lowest-cost monthly premium for self-only minimum value coverage.
Row 3: Used to report whether the employer is exempt from the employer shared responsibility mandate for a particular month because the employer qualified for safe harbor relief provided by the IRS in regulations. Examples of “safe harbor” codes include:
* Not employed during the month
* Not a full-time employee
* Employee enrolled in coverage offered
* Section 4980H(b) limited non-assessment period
* Affordability Form W-2 safe harbor
* Affordability federal poverty line safe harbor
* Affordability rate-of-pay safe harbor
Section 6055 requires every health insurance issuer, sponsor of a self-insured health plan, and other entities that provide minimum essential coverage to file annual returns reporting each covered individual and dependents and their respective months of coverage. Form 1095-B is to be used to comply with Section 6055 and goes to employees by January 31st of the year following the coverage. Form 1094-B is to be used to transmit these returns to the IRS.
The IRS is accepting comments on the draft forms. Comments may be submitted on the Comment on Tax Forms and Publications page on IRS.gov. Although no comment deadline is identified, comments should be submitted as soon as possible as final forms are expected to be posted by the end of the year. Instructions were not released today, but it is anticipated that they will be issued in draft form sometime in August.
- Form 1094-B: Transmittal of Health Coverage Information Returns
- Form 1095-B: Health Coverage
- Form 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Return
- Form 1095-C: Employer Provided Health Insurance Offer and Coverage
BTR encourages you to consult with appropriate legal and/or tax advisors for advice specific to your entity’s requirements.