The following is a summary of draft instructions. Some of this information may change when the final forms and instructions are released.
In order for the Internal Revenue Service (IRS) to verify that individuals have the required minimum essential coverage, individuals who request premium tax credits are entitled to them, and large employers are meeting their shared responsibility (play or pay) obligations, employers and insurers will be required to report the health coverage they offer. Reporting will first be due early in 2016, based on coverage in 2015.
The reporting requirements are in Sections 6055 and 6056 of the Patient Protection and Affordable Care Act (PPACA); IRS Form 1095-B is basically used to meet the Section 6055 minimum essential coverage requirement and IRS Form 1095-C is basically used to meet the Section 6056 large employer play or pay requirement and to help determine if an individual is eligible for a premium tax credit.
On August 28, 2014, the IRS issued draft instructions for completing the forms; drafts of the forms were issued on July 24, 2014. The IRS has said that the final forms and instructions will be available by the end of 2014. While there will probably be a few changes between the draft and final versions of the requirements, the reporting requirements are becoming clear enough for employers to begin planning to meet this requirement. The IRS has also issued a Q and A on Section 6055 Reporting and a Q and A on Section 6056 Reporting. Both the instructions and Q and A documents contain detailed information that employers may find very helpful.
Although reporting will not begin until 2016, the reporting will reflect coverage offered and elected during the 2015 calendar year (regardless of whether the plan is a calendar year or non-calendar year plan). Employers with 50 or more employees should soon begin assessing their data gathering and systems to be sure they will be able to access and report the needed information when reporting begins. An employer’s reporting obligation varies by its size, its funding method (self-funded or fully insured), and whether it is part of a controlled group.
Employer with Fully Insured Plans and Fewer than 50 Full-Time and Full-Time Equivalent Employees in its Controlled Group
An employer will not have any reporting requirement if it had fewer than 50 full-time and full-time equivalent employees in its controlled group during the prior calendar year and it sponsors a fully insured medical plan. The insurer will provide reporting to each covered employee using IRS Form 1095-B – this form will report which months the employee and any dependents had minimum essential (basic medical) coverage. If an employer sponsors the plan, that also will be reported on the form.
Employer with Self-Funded Plan and Fewer than 50 Full-Time and Full-Time Equivalent Employees in Controlled Group; Self-Funded Multiemployer Plans of All Sizes
An employer with fewer than 50 full-time and full-time equivalent employees in its controlled group and which sponsors a self-funded medical plan will provide reporting to each covered employee using IRS Form 1095-B. Likewise, the plan sponsor of a self-funded multiemployer plan (such as its board of trustees or committee) will be responsible for providing a completed Form 1095-B to each covered member, regardless of how large the multiemployer plan is. This form describes which months the employee or member and any dependents had minimum essential (basic medical) coverage. See Appendix A for details.
The plan sponsor also will file a Form 1094-B transmittal form with a copy of each Form 1095-B it provided to a participant.
Employer with Fully Insured Plan and 50 or More Full-Time and Full-Time Equivalent Employees in its Controlled Group
An employer that had 50 or more full-time and full-time equivalent employees in its controlled group during the prior calendar year and that sponsors a fully insured medical plan will be required to complete several parts of IRS Forms 1095-C and 1094-C to report its compliance with the play or pay requirements. Although the play or pay requirements do not apply to many employers with 50 to 99 employees for 2015, reporting is still required for 2015 to help the IRS administer the individual requirements and premium tax credit eligibility. A series of codes will be used by the mid-size employer to alert the IRS to its status as an employer in the 50 to 99 employee group, and that penalties therefore are not due for 2015.
Form 1095-C will be used to determine whether an employee, spouse and children were offered minimum essential coverage, and if so, whether the coverage offered to the employee was affordable and met minimum value. This information will be used to help determine whether the employee or dependent is eligible for a premium tax credit, and whether penalties apply to the employer. Extensive information must be reported, generally by calendar month. See Appendix B for details on the information that likely will need to be provided. Form 1095-C must be provided to any employee who worked full-time for the employer at any time during the year – even if the person only worked for one month, or was never eligible for coverage. Therefore, the form will need to be provided to an individual who retired during the year.
Note: The insurer will provide reporting to each covered employee using IRS Form 1095-B. This form will describe which months the employee and any dependents actually had minimum essential (basic medical) coverage that satisfies the individual mandate. As a result, employees will receive forms from both the employer and the insurer.
Employer with a Self-Funded Plan and 50 or More Full-Time and Full-Time Equivalent Employees in its Controlled Group
An employer with 50 or more full-time or full-time equivalent employees in its controlled group during the prior calendar year and which offers a self-funded plan is responsible for completing all parts of Form 1095-C and much of Form 1094-C. Extensive reporting will be needed, by employee by calendar month, as to whether minimum essential coverage was offered, whether minimum essential coverage was actually in effect, and whether affordable, minimum value coverage was offered. See Appendices B and C for details on what must be reported.
Form 1095-C must be provided to any employee who worked full-time for the employer at any time during the year – even if the person only worked for one month, or was never eligible for coverage. The form will need to be provided to an individual who retired during the year. The employer also must provide a Form 1095-C to any employee who received coverage during the year, even if the employee is not full-time.
An employer may only file one Form 1095-C per employee, which means, for example, that if different divisions have different benefits, and an employee moves between divisions during the year, the employer will need to consolidate data onto one 1095-C form.
The employer also will file a Form 1094-C transmittal form with a copy of each Form 1095-C. Form 1094-C also requires information about the employer’s workforce. Multiple Form 1094-Cs may be filed if that is easier, but one must be designated as the “authoritative transmittal.”
Employer in a Controlled Group with 50 or More Full-Time and Full-Time Equivalent Employees
An employer that is in a controlled group (basically, a situation in which an individual, group of individuals or company owns a significant part of more than one entity) must list all of the employers in its controlled group (or the 30 largest if there are more than 30 employers in the controlled group) on Form 1094-C. Each employer within the controlled group must file its own Forms 1095-C and 1094-C, although one entity can prepare all of the forms for the group. See Appendix D for details on the information that will be needed.
Due Dates and Privacy
The individual’s Form 1095 will first be due on February 1, 2016. The employer’s “roll-up” and other reporting using an IRS Form 1094 will first be due on February 29, 2016, if filing with paper and by March 31, 2016, if filing electronically.
An employer that is concerned about maintaining and transmitting Social Security numbers may use truncated numbers (XXX-XX-1234) on Form 1095-C it provides to the employee, but not on the version it provides to the IRS. Substitute forms will be permitted.
An employer must make three attempts to obtain the Social Security number of the individual. One attempt must be made when the person first becomes covered, with additional attempts the following calendar years.
In summary, the reporting requirements are:
Employees who receive a premium tax credit/subsidy through the Marketplace will file an IRS Form 8962 with their federal income tax return, using information provided on Form 1095-A. Employees who claim an exemption from the individual-shared responsibility requirement will use Form 8965 to claim the exemption.
The IRS will match information provided on the various forms to determine whether the employer or individual owes a penalty and if premium tax credits were made in the correct amount. Employer penalties are expected to be assessed during the summer of the year in which reporting occurred. Individual penalties will be applied to any refund due the employee. Any needed adjustment to a premium tax credit will be made as an additional income tax refund or amount due from the employee when the employee files his federal income tax return.