IRS Issues Drafts of Individual and Employer Responsibility Reporting Forms

The IRS must verify that individuals and employers are meeting their shared responsibility obligations under the ACA and that individuals who request premium tax credits are entitled to them.  Employers and insurers must report on the health coverage they offer. The first reporting will be due early in 2016, based on coverage in effect in 2015.

On July 24, 2014, the IRS published drafts of several of the forms that will be used to provide the required reporting in order to give employers and insurers advance information on what will be required.  Instructions for completing the forms, however, were not included with the draft forms.  The IRS states it will issue drafts of the instructions in August and that the final forms and instructions will be available by the end of 2014.

Employers with fewer than 50 full-time equivalent employees (including its controlled group) who offer only fully insured medical plans will not need to report.  Their insurers will do the required reporting for them.

All other employers, including employers with 50-99 employees, will have at least some reporting.  This is because the IRS needs this reporting to determine whether individual employees owe penalties or are eligible for premium subsidies.

Employers with 50 or more full-time or full-time equivalent employees in their controlled group – whether the coverage offered is fully insured or self-funded – will need to complete both Part I and Part II of IRS Form 1095-C.  This form will be required for each employee, regardless of whether the employee is eligible for medical coverage.  Part I includes basic identifying information.  Part II will be used to determine whether minimum essential, minimum value and affordable coverage was offered and accepted.  This data will be used to determine whether the employer owes penalties for not offering minimum essential coverage (these are sometimes referred as the “A” penalty or the $2,000 penalty) or for not offering affordable, minimum value coverage (these are sometimes referred to as the “B” penalty or the $3,000 penalty) and if the employee is eligible for premium subsidies.

The employer will use one of several codes to report whether it offered coverage to the employee, and the extent of the coverage it offered.  The employer also will report the employee’s share of the lowest cost monthly premium for self-only minimum value coverage for which the employee is eligible.

Finally, the employer will enter codes that the IRS will use when determining if a penalty is owed. Those codes address whether the employee was eligible for coverage during the month, including whether the employee was employed, classified as full-time, in a waiting period or covered. If the employee was covered during the month, the employer will report whether coverage was affordable and which affordability safe harbor was used.

In addition, employers with self-funded plans will complete Part III of Form 1095-C. Part III information will be used to determine whether the employee’s family met its requirement to have minimum essential coverage.

Information that is similar to the information provided on Part III of Form 1095-C will be provided by the insurer to the employee using IRS Form 1095-B. Form 1095-B will report whether the employee and the employee’s spouse and children had minimum essential coverage for each month. This means that an employee who works for a mid-size or large employer that provides coverage on a fully insured basis will receive two forms: Form 1095-B from the insurer and Form 1095-C from the employer.

Employers with 50 full-time and full-time equivalent employees in their controlled group also will need to file IRS Form 1094-C, with a copy of the Form 1095-C it issued to each employee. Employers that are part of a controlled or affiliated service group also must enter the name and EIN of all other employers that were part of the group during the calendar year. Each employer in a controlled or affiliated service group must file a separate report, although one member of the controlled group may complete the form on behalf of other members. In certain circumstances, government plans may report on a single form through a “designated government entity.”

The reporting will occur with the same timing and process as W-2 and W-3 reporting. Even though these forms are not final, employers may want to study them as they begin to determine whether they are currently collecting, and will be able to retrieve, the information needed to complete the forms.

For a summary of the draft IRS employer and insurer reporting forms, download UBA’s PPACA Advisor, “IRS Issues Drafts of Individual and Employer Responsibility Reporting Forms.”

Content for post is contributed by Linda Rowings.

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