This is the 41st in a series of WorkCite articles concerning the Patient Protection and Affordable Care Act and its companion statute, the Health Care and Education Reconciliation Act of 2010 (referred to collectively as the Act). This article discusses two information reporting requirements for employers that were added by the Act as Sections 6056 and 6055 of the Internal Revenue Code (Code).
Section 6056 requires employers that are subject to the Act’s employer “shared responsibility” requirements to report information to the Internal Revenue Service (IRS) and to employees regarding compliance with the employer shared responsibility requirements as well as the coverage provided under the employer’s health plan. Section 6055 requires employers that provide self-insured health coverage (as well as insurers and certain others providing health coverage) to report information to individuals regarding “minimum essential coverage.”
As a result of the announcement last year delaying the effective date of the employer shared responsibility requirements until 2015, the reporting requirements are optional for 2014 and are mandatory beginning in 2015.
The Treasury Department and the IRS have published proposed regulations (Regulations) for implementing the new reporting requirements. Employers have the option of voluntarily complying with these requirements for 2014 based on the Regulations (and any future guidance that may be issued).
This article provides an overview of the Regulations and summarizes some of the ways that they may be altered when they are finalized for mandatory implementation of the reporting requirements for 2015.
Section 6056 Reporting
Section 6056 directs certain employers to file a return with the IRS that reports information for each individual who was a full-time employee for one or more months during the calendar year. In addition, the employer must furnish each such individual with a related statement by Jan. 31 each year. The return and employee statements are designed to assist with the following:
- administration of, and monitoring of an employer’s compliance with, the shared responsibility requirements;
- determining eligibility for the premium tax credit under Code Section 36B; and
- administration of the Act’s individual mandate to maintain health insurance.
The employer’s return is required to include information about whether the employer offers its employees and their dependents the opportunity to enroll in minimum essential coverage, the period an employee must wait to become enrolled and information regarding the employees enrolled in such coverage.
Who Must File?
The Section 6056 reporting requirement is imposed on “applicable large employers,” meaning employers that had on average 50 or more full-time employees for the preceding calendar year. Where the applicable large employer consists of multiple entities, each member of the group (an “applicable large employer member”) is separately responsible for satisfying reporting requirements as to its employees.
What Information Must Be Reported?
The Regulations generally require an applicable large employer member to file a Section 6056 return as to its full-time employees. The return would consist of a separate notice for each full-time employee (Form 1095-C) accompanied by a single transmittal form to the IRS (Form 1094-C). Similar to current Form W-2 reporting, much of the reporting would be done through indicator codes (i.e., numbers or letters that correspond to specific statements or information). Drafts of the forms have not yet been issued.
The Regulations streamline some of the information that was originally contemplated to be provided. For example, there is no requirement to report (1) the length of any waiting period; (2) the employer’s share of the total allowed costs of benefits provided under the health plan; (3) the monthly premium for the lowest-cost option in each of the enrollment categories (such as self-only coverage or family coverage) under the plan; or (4) the months, if any, during which any of the employee’s dependents were covered under the plan.
Under the Regulations, the information that must be reported to the IRS under Section 6056 includes:
- The name, address and employer identification number (EIN) of the applicable large employer member;
- The name and telephone number of the applicable large employer member’s contact person;
- The calendar year for which the information is reported;
- A certification as to whether the applicable large employer member offered to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, by calendar month;
- The months during the calendar year for which coverage under the plan was available;
- Each full-time employee’s share of the lowest cost monthly premium (self-only) for coverage providing minimum value offered to that full-time employee under an eligible employer-sponsored plan, by calendar month;
- The number of full-time employees for each month during the calendar year; and
- The name, address and taxpayer identification number (TIN) of each full-time employee during the calendar year and the months, if any, during which the employee was covered under the plan.
The individual employee notices must include the name, address and EIN of the applicable large employer member and the information required to be shown on the Section 6056 return described above. Such statements could be furnished electronically, but only if the recipient affirmatively consents.
When Must the Returns and Notices Be Filed or Furnished?
The Regulations require that a return be filed with the IRS on or before Feb. 28 (March 31 if filed electronically) of the year following the calendar year to which the return relates. Returns must be filed electronically unless the applicable large employer member is filing fewer than 250 returns of any type (including Section 6056 returns, Forms W-2 and other information returns) during the calendar year.
The individual employee notices must be furnished to all full-time employees on or before Jan. 31 of the year following that calendar year. Such statements could be furnished electronically, but only if the recipient affirmatively consents.
Code Section 6055 Reporting
Section 6055 requires that a person providing minimum essential coverage to an individual during a calendar year must file a return with the IRS providing information regarding that coverage. This information includes the names of the individuals with such health coverage and the dates of health coverage. In general, the Section 6055 reporting requirement is designed to assist individuals and the IRS with verifying the months (if any) in which the individuals were covered by minimum essential coverage and monitor compliance with the Act’s individual mandate.
Who Must File?
Reporting is required by “reporting entities.” These include health plan sponsors, insurance issuers and governmental agencies. The reporting consists of an annual information return filed with the IRS and the furnishing of a written statement to each covered individual (with a copy provided to the IRS).
In the case of a self-insured group health plan covering employees of related entities or unrelated entities, each employer (i.e., each controlled group member or multiple employer welfare arrangement member) is separately responsible for reporting for its employees, even though other members of the employer group or third parties may file returns and furnish statements on behalf of all group members.
What Information Must Be Reported?
The information that must be reported to the IRS under Section 6055 includes:
- The name, address and EIN for the person required to file the return;
- The name and TIN, or date of birth if a TIN is not available, of each covered individual; and
- For each covered individual, the months for which, for at least one day, the individual was enrolled in coverage and entitled to receive benefits.
For fully insured group health coverage, the reporting entity must also report the name, address and EIN of the employer sponsoring the plan, and whether the coverage is a qualified health plan through the Small Business Health Options Program (SHOP) and the SHOP’s unique identifier.
No reporting would be required for health savings accounts and health reimbursement arrangements that supplement minimum essential coverage.
When Must the Returns and Notices Be Filed or Furnished?
Under the Regulations, returns and transmittal forms (on a new Form 1095-B, or an acceptable substitute) must be filed on or before Feb. 28 (March 31 if filed electronically) of the year following the calendar year in which the reporting entity provided minimum essential coverage to an individual. Written statements must be provided to responsible persons by Jan. 31 of the year following the reporting year.
As with the Section 6056 reporting, the Regulations generally require the recipient’s affirmative consent for the statement to be provided electronically.
Alternative Reporting Methods under Consideration
The Regulations note that the Treasury and the IRS are considering certain ways in which these reporting requirements could be simplified. Some of the alternatives under consideration are as follows:
Include Employee Information on Form W-2
The IRS has acknowledged that because full-time employees typically are employed and have the same health coverage throughout an entire year, Section 6056 reporting may be more easily accomplished through using Form W-2. Thus, the IRS is considering whether Form W-2 should be adapted to also cover the Section 6056 reporting requirement. However, reporting on Form W-2 would not be available for employees who are not employed on a full-time status for the entire year.
Simplify Reporting for Employers Offering Minimum Essential Coverage to All Full-Time Employees
Another simplification under consideration is for employers that offer coverage to all or nearly all of their employees and that can represent that any employees without coverage are limited to those who are not full-time employees. Such employers might be permitted to merely provide as certification that all of its employees to whom it did not offer coverage were not full-time employees or were otherwise ineligible for coverage, instead of having to determine the full-time status of each employee prior to filing the return.
Eliminate Employee Statements for Self-Insured Employers Offering Mandatory No-Cost Minimum Value Coverage
Employers that provide mandatory minimum value coverage under a self-funded group health plan to all employees, spouses and dependents with no employee contribution might be able to report that fact on Form W-2 and by providing the summary information provided in the Section 6056 transmittal form, in addition to providing the required reporting under Section 6055. This would be in lieu of having to report the full information required under Section 6056.
Allow Voluntarily Reporting of Section 6056 Elements During or Prior to the Year of Coverage
Another simplification would permit employers to voluntarily report information about the coverage they offer their employees prior to the end of a coverage year, such as at open enrollment or before the open enrollment at the health insurance exchanges established under the Act. Such earlier Section 6056 reporting could lead to greater efficiency in the employer verification system used by the exchanges to determine eligibility for premium tax credits.
Eliminate Reporting for Employees Unlikely to Qualify for the Premium Tax Credit
The premium tax credit is unavailable if an employee’s household income is greater than 400 percent of the federal poverty level. Such employees are therefore unlikely to benefit from receiving a Section 6056 statement. The IRS has indicated that it may consider establishing a wage base for determining when an employee would be unlikely to qualify for the premium tax credit and thus would not be required to receive a Section 6056 statement.