By Danielle Capilla
Chief Com­pli­ance Offi­cer at Unit­ed Ben­e­fit Advisors

IRSUnder the Patient Pro­tec­tion and Afford­able Care Act (ACA), indi­vid­u­als are required to have health insur­ance while applic­a­ble large employ­ers (ALEs) are required to offer health ben­e­fits to their full-time employ­ees. In order for the Inter­nal Rev­enue Ser­vice (IRS) to ver­i­fy that (1) indi­vid­u­als have the required min­i­mum essen­tial cov­er­age, (2) indi­vid­u­als who request pre­mi­um tax cred­its are enti­tled to them, and (3) ALEs are meet­ing their shared respon­si­bil­i­ty (play or pay) oblig­a­tions, employ­ers with 50 or more full-time or full-time equiv­a­lent employ­ees and insur­ers will be required to report on the health cov­er­age they offer. Report­ing will first be due ear­ly in 2016, based on cov­er­age in 2015. All report­ing will be for the cal­en­dar year, even for non-cal­en­dar year plans. Mid-size employ­ers (those with 50 to 99 employ­ees) will report in 2016, despite being in a peri­od of tran­si­tion relief in regard to hav­ing to offer cov­er­age. The report­ing require­ments are in Sec­tions 6055 and 6056 of the ACA. Draft instruc­tions for both the 1094‑B and 1095‑B and the 1094‑C and 1095‑C were released in August 2015.

Draft 2015 Instructions

Fol­low­ing the June release of the draft forms, the IRS has issued draft 2015 instruc­tions, which include a vari­ety of changes from the 2014 instruc­tions. For the 1094‑C and 1095‑C forms, the fol­low­ing impor­tant clar­i­fi­ca­tions were pro­vid­ed: (1) who must file, (2) infor­ma­tion on exten­sions and waivers, (3) how to cor­rect returns, (4) an exam­ple and fur­ther infor­ma­tion on the 98% offer method, (5) infor­ma­tion on the new plan start month box, (6) mul­ti­em­ploy­er plan report­ing, (7) offers of COBRA cov­er­age, (8) report­ing on employ­ee pre­mi­ums, and (9) break in ser­vice infor­ma­tion. For the 1094‑B and 1095‑B forms there were few­er updates, with infor­ma­tion regard­ing penal­ties for not report­ing and how to file for an extension.

There is no tar­get date for the final ver­sions of either the forms or instruc­tions, how­ev­er it is gen­er­al­ly antic­i­pat­ed they will be released in the fall of 2015.

Who Must File

The draft instruc­tions clar­i­fy that all ALEs (employ­ers with 50 or more employ­ees) must file one more 1094‑C forms (includ­ing the des­ig­nat­ed author­i­ta­tive trans­mit­tal) and a 1095‑C for each employ­ee who was a full-time employ­ee for any month of the year.

Exten­sions and Waivers

The draft instruc­tions pro­vide infor­ma­tion on request­ing exten­sions and waivers. Auto­mat­ic 30-day exten­sions will be giv­en to enti­ties fil­ing Form 8809, and no sig­na­ture or expla­na­tion is need­ed. Form 8809 must be filed by the due date of returns in order to be grant­ed the 30-day exten­sion. Waivers may be request­ed with Form 8508, and are due at least 45 days before the due date of the infor­ma­tion returns.

Cor­rec­tions to Forms 1094‑C and 1095‑C

The draft instruc­tions pro­vid­ed detailed instruc­tions on cor­rect­ing returns. Sep­a­rate instruc­tions are giv­en for cor­rect­ing author­i­ta­tive 1094‑C and 1095‑C forms. Steps are giv­en for a vari­ety of mis­takes, includ­ing incor­rect full time employ­ee counts, pre­mi­um amounts, and cov­ered indi­vid­ual information.

Exten­sions to Fur­nish State­ments to Employees

Employ­ers may request an exten­sion of time to fur­nish state­ments to recip­i­ents by mail­ing a let­ter to the IRS with infor­ma­tion includ­ing the rea­son for the delay. If the request is grant­ed, the max­i­mum exten­sion that will be giv­en is 30 days.

Penal­ties

The draft instruc­tions incor­po­rate the new penal­ties for fail­ing to file infor­ma­tion returns, which are now $250 for each return that an employ­er fails to file. The IRS again not­ed that, for 2015 report­ing, penal­ties will not be imposed for fil­ing incor­rect or incom­plete infor­ma­tion so long as the employ­er can show it made a good faith effort to com­ply with the require­ments. The “grace peri­od” does not apply to employ­ers who fail to file or who file late.

98 Per­cent Offer Method

The draft instruc­tions pro­vid­ed clar­i­fi­ca­tion of the 98 per­cent offer method. This method requires employ­ers to cer­ti­fy that they offered afford­able health cov­er­age pro­vid­ing min­i­mum val­ue to at least 98 per­cent of their employ­ees. The instruc­tions clar­i­fy how to report on an employ­ee in a lim­it­ed non-assess­ment peri­od. The instruc­tions make clear that an indi­vid­ual in a lim­it­ed non-assess­ment peri­od does not count against the employ­er’s 98 per­cent calculation.

Plan Start Month Box

The draft instruc­tions pro­vide infor­ma­tion on the new “plan start month” box, which is option­al for 2015. This box is intend­ed to pro­vide the IRS with infor­ma­tion used to cal­cu­late an indi­vid­u­al’s eli­gi­bil­i­ty for pre­mi­um tax cred­its, which is based on the employ­er plan’s afford­abil­i­ty, cal­cu­lat­ed by plan year.

Mul­ti­em­ploy­er (Union) Plan Relief

The 2014 instruc­tions had told ALEs not to enter a code in Part II, Line 14 of Form 1095‑C for cov­er­age that is not actu­al­ly offered, as the infor­ma­tion must reflect the cov­er­age offered to the employ­ee. In 2015 ALEs with mul­ti­em­ploy­er plans are instruct­ed to enter code 1H on line 14 for any month in which an employ­er enters code 2E on line 16. Code 2E indi­cates an employ­er is required to con­tribute to a mul­ti­em­ploy­er plan on behalf of the employ­ee for that month, and is eli­gi­ble for mul­ti­em­ploy­er inter­im relief. This is intend­ed to assist with report­ing chal­lenges for mul­ti­em­ploy­er plans.

COBRA Cov­er­age

The draft instruc­tions pro­vide infor­ma­tion on how to han­dle offers of COBRA cov­er­age. If COBRA is offered to a for­mer employ­ee upon ter­mi­na­tion, it is only report­ed as an offer of cov­er­age if the employ­ee enrolls in cov­er­age. If the for­mer employ­ee does not enroll (even if his or her spouse or depen­dents enroll), employ­ers should use code 1H (no offer of cov­er­age) for any month in which the COBRA offer applies. If an employ­ee is offered COBRA (due to loss of eli­gi­bil­i­ty), that cov­er­age is report­ed in the same way and with the same code as an offer of cov­er­age to any oth­er active employee.

Line 15 Calculations

The draft instruc­tions clar­i­fy how to cal­cu­late employ­ee con­tri­bu­tions: by divid­ing the total employ­ee share of the pre­mi­um for the plan year by the num­ber of months in the plan year to deter­mine the month­ly premium.

Break in Service

The draft instruc­tions note that in cer­tain cir­cum­stances an employ­ee may have a break in ser­vice (which may be due to ter­mi­na­tion) dur­ing which he or she does not earn hours of ser­vice, but upon begin­ning ser­vice, is treat­ed as a con­tin­u­ing employ­ee rather than a new hire. The instruc­tions clar­i­fy that the indi­vid­ual should only be treat­ed as an employ­ee dur­ing the break in ser­vice for report­ing pur­pos­es if the indi­vid­ual remained an employ­ee (was not ter­mi­nat­ed). An employ­ee on unpaid leave would be treat­ed as an employ­ee for report­ing purposes.

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