Of the many components to the Affordable Care Act (ACA), one of the more complex and confusing is just around the corner: new reporting requirements under Internal Revenue Code Sections 6055 and 6056.
“Under these new reporting rules, certain employers must provide information to the IRS about the health plan coverage they offer (or do not offer) to their employees,” says Aaron Ochs, consultant and project manager at JRG Advisors.
Smart Business spoke with Ochs on the new reporting requirements and their impact.
What are some of the new reporting requirements?
On Feb. 8, the IRS released final versions of forms and related instructions that employers may use to report under Sections 6055 and 6056 for 2014. These forms are not required to be filed for 2014, but reporting entities may voluntarily file them in 2015 for 2014 coverage. Forms and instructions for 2015 reporting have not yet been released.
One of the changes permits an Applicable Large Employer (ALE) to use either the first or last day of the first payroll period that starts during each month, or the first or last day of each month, when determining the total employee count.
An ALE is defined as having employed an average of at least 50 full-time employees on business days during the preceding calendar year. A full-time employee generally must have worked 30 hours in a week or meet the definition of full-time equivalents (FTE) as defined by the FTE calculation requirements.
All ALEs will be required to file Form 1094-C (a transmittal) and Form 1095-C (an information return) for each full-time employee. Form 1094-C is used to report employer summary information to the IRS and to transmit Forms 1095-C to the IRS. Form 1095-C is used to report information about each employee.
What is the purpose of these forms?
These forms help the IRS determine whether an ALE owes penalties under the employer shared responsibility rules and to determine whether an employee is eligible for premium tax credits.
Form 1095-C will generally be used by ALEs to satisfy both the Section 6055 and 6056 reporting requirements, as applicable. If an ALE sponsors a self-insured plan they will complete all sections of Form 1095-C to report the information required under both Sections 6055 and 6056; therefore, these ALEs will be able to use a single form to report information regarding whether an employee was covered. In turn, each full-time employee, as defined by the ACA, will receive a copy of Form 1095-C.
The final instructions for Forms 1094-C and 1095-C include a new option for ALEs reporting information for nonemployees (such as nonemployee directors, retirees or nonemployee COBRA beneficiaries).
The final instructions for Forms 1094-C and 1095-C also made several changes to the alternative methods of reporting under Section 6056. Two alternative methods of reporting are available under Section 6056 — the Qualifying Offer Method (and the Qualifying Offer Method Transition Relief for 2015), and the 98 Percent Offer Method.
What about deadlines and any penalties?
It is important to be aware of the deadlines established for reporting. These forms must be filed with the IRS annually, no later than Feb. 28 or March 31, if filed electronically, of the year following the calendar year in which it provided coverage. Any ALE that files at least 250 returns under Section 6055 or 6056 must file electronically. ALEs will be required to furnish statements annually to full-time employees on or before Jan. 31 of the year immediately following the calendar year to which the statements relate.
An ALE that fails to comply with Section 6055 or Section 6056 reporting requirements may be subject to the general reporting penalties. The penalty is generally $100 for each return, up to $1.5 million per calendar year. Penalties may be waived, however, if the failure is due to reasonable cause and not to willful neglect.
All ALEs need to pay attention to the new reporting requirements as they apply to them. Now is the time for companies to begin to track the data that will be needed and decide how best to get this data by discussing this with their payroll provider, tax adviser and benefits consultant.
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