By Tulay Turan, JD
Swooping into 2016 along with the cold air and New Year’s resolutions are the reporting requirements under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Although much has been written about the requirements, it’s not always easy to decipher exactly what employers must do and when they must do it. To cut through the clutter, Wolters Kluwer contacted R. Pepper Crutcher, Jr., Partner at Balch & Bingham LLP, who has been tackling—and blogging about—ACA issues for several years.
WK: What is the first reporting deadline in 2016 for the ACA-related IRS forms and who must report what?
Crutcher: The deadline for furnishing to individuals the 2015 Form 1095-B, Health Coverage, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, has been pushed from February 1, 2016, to March 31, 2016.
By March 31, 2016, 2015 Applicable Large Employers (based on 2014 employment data) must furnish Form 1095-C (or its permissible equivalent) to people who were ACA “full-time employees” in any 2015 month.
Form 1095-C reports most of the information that the IRS will need to assess employer mandate and individual mandate taxes in 2016.
The deadline for filing the 2015 Form 1094-B, Transmittal of Health Coverage Information Returns, the 2015 Form 1095-B, Health Coverage, the 2015 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, has been extended from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically.
[WKNote: IRS Notice 2016-4, issued on December 28, 2015, provides as follows:
In view of these extensions, the provisions regarding automatic and permissive extensions of time for filing information returns and permissive extensions of time for furnishing statements will not apply to the extended due dates. Employers or other coverage providers that do not comply with these extended due dates are subject to penalties under section 6722 or 6721 for failure to timely furnish and file. However, employers and other coverage providers that do not meet the extended due dates are still encouraged to furnish and file, and the Service will take such furnishing and filing into consideration when determining whether to abate penalties for reasonable cause. The Service will also take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting the required information to the Service and furnishing it to employees and covered individuals, such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the Service, or testing its ability to transmit information to the Service. In addition, the Service will take into account the extent to which the employer or other coverage provider is taking steps to ensure that it is able to comply with the reporting requirements for 2016.]
WK: What are some aspects of the forms that could cause confusion or be tricky?
Crutcher: Most of them. Few “smaller large” – i.e., 50 to 100 - employers seem to understand that the IRS has offered to waive their 2015 employer mandate assessments if, but only if, they file their Forms 1094-C and 1095-C, checking Box C on Form 1094-C to claim that “transition relief.”
The Form 1095-C codes that should populate lines 14 and 16 will be especially challenging for employers with high turnover. More than one code may be applicable for a given month and the employer must apply ordering rules to decide which of the applicable codes to use, because each cell may have only one code. In my experience, this takes between two minutes and two hours per Form. Vendors offering helpful IT tools are struggling to meet demand.
WK: How should an employer report health reimbursement arrangements?
Crutcher: Guessing that you’re interested in Form 1095-C Part III reporting of covered individuals by self-insured employers, I’ll quote (p. 11) the 2015 Instructions for Forms 1094-C and 1095-C:
An ALE Member with a self-insured major medical plan and a health reimbursement arrangement (HRA) is required to report the coverage of an individual enrolled in both types of minimum essential coverage in Part III under only one of the arrangements. An ALE Member with an insured major medical plan and an HRA is not required to report in Part III HRA coverage of an individual if the individual is eligible for the HRA because the individual enrolled in the insured major medical plan. An ALE Member with an HRA must report coverage under the HRA in Part III for any individual who is not enrolled in a major medical plan of the ALE Member (for example if the individual is enrolled in a group health plan of another employer (such as spousal coverage)).
WK: Do seasonal workers count for Forms 1094-C and 1095-C?
Crutcher: The same person may be both a “seasonal worker” and a “seasonal employee,” but those terms are used to discuss separate ACA subjects. This has caused great confusion.
The term seasonal worker means a worker who performs labor or services on a seasonal basis as defined by the Secretary of Labor, including (but not limited to) workers covered by 29 CFR 500.20(s)(1), and retail workers employed exclusively during holiday seasons.
“Seasonal employee” status relates to separate issues, including plan eligibility, waiting period compliance and coverage offer reporting. “The term seasonal employee means an employee who is hired into a position for which the customary annual employment is six months or less.”
When discussing Forms 1094-C and 1095-C, refer to “seasonal employees,” not “seasonal workers.” So, the question is when, if ever, a “seasonal employee” is a full-time employee under the Code Sec. 4980H rules. In those months, the employee has the same status for coverage offer reporting purposes.
That brings us to the 2015 Instructions for Forms 1094-C and 1095-C, where we finally get some help. The “Limited Non-Assessment Period” (LNAP), during which a seasonal (or variable, or part-time) employee working full-time hours may be treated as not yet a full-time employee, includes, “the initial measurement period for that employee and the administrative period immediately following the end of that initial measurement period,” if the employer is using the look-back measurement method to determine the “full-time” status of seasonal employees. Instructions, p. 14, right column. However, the corresponding Form 1095-C, line 16 code is “2D” (Limited Non-Assessment Period), rather than “2B,” (not a full-time employee).
The specific instructions for Form 1094-C (p. 8) tell an ALE Member completing Form 1094-C to exclude from the Column (b) count employees in a LNAP but to include those employees in the Column (c) count.
In other words, a seasonal employee who has ACA “full-time” status under the Code Sec. 49809H rules for a given month has the same status for Form 1095-C purposes. Most often, this should depend on whether the ALE Member was using the look-back measurement method, rather than the monthly measurement method (the default option), to determine full-time status of seasonal employees. If the initial measurement period is six months or longer, truly seasonal employees shouldn’t remain on the payroll until their eligibility date. But that option is available only for annual employment of six months or less. Someone hired to work full-time hours for an expected nine-month project was never a “seasonal employee.”
WK: What are the penalties for failure to file the IRS forms?
Crutcher: Congress amended Code sections 6721 and 6722 last year to raise the penalties substantially. See my article: Form 1095 C Penalties More Than Doubled… In a Trade Bill?
Subject to a $3,000,000 cap, employers may owe $250 for each Form 1095-C that they fail to furnish to the employee and another $250 for failing to file the Form with the IRS.
Attorneys: R. Pepper Crutcher, Jr. (Balch & Bingham, LLP)
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