Prelude Section 6055 MEC Reporting Section 6056 ALE Reporting Information Applicable to Both 6055 and 6056 The IRS Forms Takeaways Questions

Transcription

1 Presented by: Frances Horn, JD,PHR Employee Benefits Compliance Officer Prelude Section 6055 MEC Reporting Section 6056 ALE Reporting Information Applicable to Both 6055 and 6056 The IRS Forms Takeaways Questions 2 1

2 Information reported to assist the IRS with the administration of the Individual Mandate, Premium Tax Assistance and Employer Mandate o Individual Mandate--Internal Revenue Code (IRC) Section 5000A o Exchange Subsidy Eligibility---Internal Revenue Code (IRC) Section 36B o Employer Mandate Internal Revenue Code (IRC) Section 4980H 3 Individual Mandate--Internal Revenue Code (IRC) Section 5000A o Every U.S citizen required to be covered with Minimum Essential Coverage (MEC) or pay a penalty o Some may be exempt from requirement, some may receive assistance with coverage o Penalty is for each month of non-compliance o 2015 penalty is the greater of $325 or 2% of applicable income o 2016 penalty is the greater of $695 or 2.5% of applicable income o Liability is capped at 5 individuals per family $1,035 for Not yet determined. 4 2

3 Exchange Subsidy Eligibility---Internal Revenue Code (IRC) Section 36B o Help eligible individuals and families with low or moderate income afford health insurance purchased through the Marketplace Exchange o Can be paid in advance to lower payments, or at end of year as a tax credit o Those whose income if between 100% and 400% of the federal poverty level may be eligible for premium tax credit o Not able to get affordable coverage through an eligible employer plan that provides minimum value o Not eligible for coverage through a government program 5 Employer Mandate Internal Revenue Code (IRC) Section 4980H o Two separate nondeductible penalties 4980 H(a) 4980H(b) 6 3

4 Employer Mandate Internal Revenue Code (IRC) Section 4980H (a) o Sometimes referred to as the offering requirement (also the Sledgehammer penalty) o General rule: An Applicable Large Employer (ALE) must offer Minimum Essential Coverage (MEC) to 95% of its full-time employees and their children up to age 26 or risk a penalty equal to (i) $2,080 multiplied by (ii) the number of full-time employees minus 30 For 2015 the offer was for 70% of full-time employees and reduction was 80 Penalty is determined on a monthly basis 2016 Penalty is $2,160 annualized o Penalty can only be triggered if a full-time employee enrolls in Exchange coverage and receives a premium tax credit o Coverage is not required to be affordable or provide minimum value o No requirement to offer spousal coverage 7 Employer Mandate Internal Revenue Code (IRC) Section 4980H (b) o Sometimes referred to as the affordability requirement (also the Tackhammer penalty) o General rule: Even if an employer avoids the A penalty, if the employer fails to offer affordable and minimum value coverage to a full-time employee and dependents, it can risk a B penalty equal to $3,120 per year for that employee Penalty is determined on a monthly basis 2016 penalty is $3,240 o Penalty can only be triggered if a full-time employee enrolls in Exchange coverage and receives a premium tax credit o Affordability is measured against the lowest self-only coverage options that is MEC and provides minimum value Affordability safe harbors 8 4

5 Information reporting obligations beginning in 2016 o Reporting 2015 health care coverage Section 6055 (MEC) assists with administration of individual shared responsibility by reporting Minimum Essential Coverage o Helps individuals prove 2015 compliance with individual mandate (no penalty can be imposed) o Use Form 1095-B and Form 1094-B (IRS transmittal form) for compliance Section 6056 (ALE) shows satisfaction of employer mandate, avoiding penalties and also helps individuals prove individual mandate compliance o Use Form 1095-C and Form 1094-C (IRS transmittal form) for compliance 9 Reporting plan provided Minimum Essential Coverage o To any individual actually covered during the calendar year o Coverage reported on a monthly basis Actual reporting is only done annually Individual is only required to be covered for at least one day in the month o Forms go to an individual and to the IRS Health Insurers report for individuals covered under a fully insured plan o If employer is fully insured no worries about this reporting Self-insured employers for employers under 50 employees o Self-insured ALEs will use Form 1095-C instead of 1095-B Government employer if self-insured can designate another governmental entity to complete 10 5

6 What is MEC? o Any employer sponsored coverage Includes: coverage for retirees, COBRA participants, skinny plan Does not include: dental, vision, health FSA, EAP, onsite medical clinics o Governmental sponsored covered and insured plans in the individual market Medicare, Medicaid, TRICARE 11 Do employers report for every benefit plan providing health care? o No, don t report for: Health Saving Accounts (HSAs) Wellness programs that are an element of other MEC Example: Employer has a POS plan which includes a tobacco cessation wellness program---don t report wellness program 12 6

7 Also, DON T report for coverage if there is more than one type of MEC (IRS see-saw guidance on HRAs in 2015) o If an individual is covered by more than one type of MEC provided by the same provider, the provider only reports one type of coverage; Example: If covered by a self-insured major medical plan with an Health Reimbursement Arrangement (HRA) with the same employer, reporting under only one arrangement required o A provider of MEC is not required to report coverage for an individual if covered by other MEC for which reporting is required Both types of coverage are provided by the same employer Example: Employer with fully-insured major medical coverage has an HRA for which an individual is eligible due to medical enrollment o If individual is covered by major medical and HRA of two separate plan sponsors: each must report the coverage provided 13 What is actually reported to individuals and IRS? o Name, address and EIN of reporting entity o Name, address, and SSN of each responsible individual o Name and SSN of each covered individual (spouse and dependents) o Months of coverage during calendar year o Name and phone number of contact person at reporting entity Form 1094-C to the responsible individual Form 1094-B to the IRS (with copies of 1094-Cs issued) 14 7

8 Reporting Responsibility o Employers that are an Applicable Large Employer (ALE) An employer who employed on average 50 FT/FTE employees during the preceding calendar year Regardless of whether self-insured or fully-insured When determining size, an employee who is covered under TRICARE or Vets Administration not counted (only for determining size) o Determination of whether an entity is an ALE is based on common control group theories Each employer member in the control group has its own reporting obligation Example: Joe Owner has a pizza shop with 20 FT employees, a bakery with 20 FT employees and a tire shop with 20 FT employees All three of Joe s companies are under common control. They are an aggregated ALE and each business is considered an ALE member because in total, they have 60 FT employees (more than 50) Each company is responsible for the Section 6056 ALE reporting 15 What about employers that are sized employees? o Eligible for transitional relief (if meeting certain conditions) as to the employer mandate May be able to comply with employer mandate in 2016 instead of 2015 NO transitional relief for mid-size large employers in 2016 o Must still report as an ALE for 2015 Even if not offering coverage, must still report 16 8

9 Forms 1095-C and 1094-C o Large employers use these forms to report information about offers and enrollment of health coverage for fulltime employees o Self-insured large employers use Form 1095-C to report information about individuals who are covered by MEC Even if MEC is the only coverage offered Form 1095-C to full-time employees Form 1094-C to IRS (with copies of 1095-C issued) 17 General reporting method o Employer information o Name, address and SSN of each full-time employee o By month, coverage that was offered, monthly premium cost under the lowest cost basic plan offered, whether it was minimum value Lots of information required so indicator codes will be used on the forms Alternative reporting methods o Qualifying Offer Method o 2015 Qualifying Offer Method Transition Relief o Section 4980H Transition Relief o 98% Offer Method 18 9

10 Providing employee/individual statements o Can be distributed in same manner as W-2 delivery First class mail to last known address In-hand delivery or intra-office mail May, but not required, to provide upon request at termination Electronically if employee has consented to electronic distribution Can include in same envelope as W-2 19 Missing Social Security Numbers o When reporting MEC must include SSN of all those covered o Can use birthdate, if do not have SSN for family members, after reasonable attempts are made Initial request is made at the time the individual first enrolls or, if already enrolled as of September 17, 2015, the next enrollment period; The second request is made at a reasonable time thereafter ; and The third request is made by December 31 of the year following the initial request o NOTE: Reporting a date of birth in one year does not relieve the need to make the necessary follow-up requests in subsequent years 20 10

11 Form and Due Dates o Reporting is done on a calendar year basis o If due date falls on a Saturday, Sunday or o legal holiday, must be filed by the next business day Form 1095-B Form 1095-C In 2017 and after Individual return/employee statement for whom MEC is provided Individual return/employee statement for FT employee as to offer of coverage Due to employee by January 31 Form 1094-B Form 1094-C In 2017 and after Transmittal form of employer data for IRS Due February 28 if filing paper Due March 31 if electronic filing (required if filing 250 returns) 21 Form and Due Dates for 2016 o Notice extended filing deadlines for 2016 Form 1095-B Form 1095-C Extended until March 31, 2016 instead of February 1, 2016 Form 1094-B Form 1094-C Filing paper: extended until May 31,2016 instead of February 29, 2016 Filing electronically: extended until June 30, 2016 instead of March 31,

12 If having more than 250 of one Form must file electronically o Pub Affordable Care Act (ACA) Information Returns (AIR) Guide for Software Deliverables o Transmitters outline the communications procedures, transmission formats, business rules, and validation procedures for returns filed electronically through the AIR system. o Pub. 5164, Test Package for Electronic Filers of Affordable Care Act Information Return 23 Reporting Penalties o Apply for failure to file an information return to IRS and failure to file individual statements o Generally, up to $250 per return, with a maximum of $3 million IRS tax adjustments for 2016 penalty is $260, maximum is approx. $3.1 million o May be waived if due to reasonable cause and neglect o Relief for 2015 return due in 2016 if incomplete or incorrect information Must timely file Must show good faith efforts to comply 24 12

13 1095-B and 1094-B Application 25 Fully insured employers, regardless of size, do not report using these Forms. Carrier will report Small employers (less than 50 employees) who are selfinsured Large employers may use to report MEC coverage for nonemployees (instead of 1095-C) o COBRA qualified beneficiaries o Retirees o Business owners who are not employees 26 13

14 Part I: Identification o Name of covered responsible covered individual Employee, former employee, parent Social Security Number Date of Birth Mailing address of responsible individual Letter identifying coverage code B employer sponsored coverage 27 Part I: Identification Name of Responsible Individual (Policy Holder) Policy Origin (Sample Codes Included in Instructions) 28 14

15 Part II: Employer Sponsored Coverage o If entering code B for self-insured coverage, skip Part II and go to Part III Part III: Other Coverage Provider (self-insured) o Name, EIN, complete mailing address of sponsor of self-insured employer plan o Telephone number to call for additional information 29 Part II Employer Sponsored Coverage (Part II NOT completed by sponsors of self-insured plans 30 15

16 Part III Other Coverage Provider (self-insured) Name of Issuer or Other Coverage Provider EIN Contact Number 31 Part IV: Covered Individuals o Column (a) Name of each covered individual o Column (b) SSN (or TINI) for each covered individual o Column (c): Date of birth of covered individual, in if column (b) is blank Remember must make attempts to obtain SSN o Column (d): Check if individual was covered at least one day per month for all 12 months of the calendar year o Column (e): If individual not covered for all 12 months, check applicable boxes for months the individual was covered 32 16

17 Part IV: Covered Individual Identification Name of Covered Individual SSN DOB (If SSN Not Provided) Fully-insured employers do not complete Coverage = Twelve Months (Check Only One) Coverage < Twelve Months (Check Each Month of Coverage) 33 This is the transmittal Form 1094-B provided to the IRS including 1095-Bs issued and is used by: o Small employers who are self-insured o Insurers for fully-insured Fully-insured employers do not complete 34 17

18 Filers complete name Employer Identification Number (EIN) Name and telephone number of person responsible for answering questions Filer s complete address for accepting correspondence Total number of Forms 1095-B being transmitted with Form 1094-B 35 Filer s name EIN Number of 1095-Bs 36 18

19 1095-C and 1094-C Application 37 Large employers use these forms to report information required under Section 6056 about offers and enrollment of health coverage for full-time employees Self-insured large employers use Form 1095-C to report information about individuals who are covered by MEC and not responsible for the individual mandate Control Groups o Each employer member of an aggregated ALE (control group) has its own reporting obligation o One Form 1095-C per ALE Member for each full-time employee Two divisions-same ALE Member-one Form Two ALE Members-two Forms 38 19

20 One form for each full-time employee Part I-Employee and Employer o Name of employee o SSN o Complete mailing address o Name of employer o Employer Identification Number (EIN) o Ale s complete mailing address o Phone number of person to contact for questions 39 Part I Identifying I Identifying Employee and Employer Employee Name Employee SSN Employer Name Employer EIN Employee Information Employer Information 40 20

21 Part II-Employee Offer and Coverage o Line 14: Enter applicable code from Code Series 1 (if the same for all 12 months, check all 12 months ) Code must be entered for each calendar month, even if not fulltime Do not enter a code for the employee being treated as offering coverage, but coverage wasn t offered---use another code Example: Union employee covered under the union plan Reminder: coverage is offered for a month only if it is for every day in the calendar month o Exception for employment termination resulting in coverage termination before the end of the month 41 Code on Line 14 Definition of Code Information Comes From Spouse Dependents (Children) 1A Qualifying offer MEC and MV offered to employee meeting FPL affordability Offered at least MEC Offered at least MEC 1B* MEC & MV offered to employee only Not offered Not offered 1C MEC & MV offered to employee Not offered At least MEC 1D* MEC & MV offered to employee At least MEC Not offered 1E MEC & MV offered to employee At least MEC At least MEC 1F* 1G MEC NOT providing MV offered to employee, or employee & spouse or dependent(s), or employee, spouse and dependents Offer of coverage to a non-full time employee in any month and enrolled in selfinsured coverage for one or more months N/A N/A 1H* No offer of coverage or coverage that is not MEC N/A N/A 1I Qualifying Offer Transition Relief 2015: No offer of coverage, received offer that is not a qualifying offer, or received qualifying offer for less than 12 months *Codes will reflect potential penalties to employer MEC = Minimum Essential Value Employer sponsored health coverage; may nor may not be bronze/mv MV = Minimum Value Bronze Level, 60% actuarial value 42 21

22 Guidance based on 2015 Instructions COBRA offer made to former employee upon termination is not reported as an offer of coverage on line 14 o Use Code 1H (no offer of coverage) in any month for which the offer of COBRA applies to a terminated employee o COBRA offer made to an active employee (such as going from fulltime to part-time) is reported in the same manner and using the same Code that is applicable to any other similar active employee 43 Part II Employee Offer and Coverage o Line 15: Only if Code 1B, 1C, 1D, or 1E is entered on line 14 in either the all 12 months or in any of the monthly boxes Only report on line 15 if MEC provides minimum value offered to employee Enter employee s share of premium for lowest cost, self only coverage Regardless of the type of coverage the employee elects No rounding, include any cents If employee has no contribution, enter 0.00 DO NOT complete line 15 if using code 1A in line 14 o To determine monthly employee contribution, employer can divide the total employee share of the premium for the entire plan year by the number of months in the plan year Employer takes employee contribution out weekly or 26 times a year 44 22

23 Part II Employee Offer and Coverage o Line 16: Enter applicable code from Code Series 2 (if same for all 12 months, enter the code in all 12 months Only one code per month If no code applies, leave blank 45 Code on Line 16 2A 2B 2C 2D Definition of Code Employee not employed during the month: do not use if employee on any day or in month terminated Employee not a full time employee and did not enroll in MEC coverage: also if employee was enrolled and coverage ended before the last day of month due to employment termination Employee enrolled in coverage offered this code trumps all other codes Employee is in a limited non-assessment period* 2E Multiemployer (union) interim rule relief (do not use codes 2F, 2G or 2H for this situation) 2F 2G 2H 2I Affordability Form W-2 Safe Harbor must be used for all months Affordability Federal Poverty Level Safe Harbor Affordability Rate of Pay Safe Harbor Non-calendar year transition relief applies to this employee *Employee in initial measurement period, employee in waiting period, 3 months after variable hour employee promoted to full time status during first year of employment, or employee in first month of employment pg

24 So, what if two codes apply for a month? o Code 2C-employee enrolled in MEC trumps all other codes Do not enter 2C if Code 1G is entered in all 12 months in line 14 Do not enter 2C in line 16 for any month in which a terminated employee is enrolled in COBRA (enter 2A) o Code 2D employee in a limited non-assessment period Not 2B--- employee not a full-time employee o Code 2E use when an employer is eligible for multiemployer interim relief, and not 2F, 2G or 2H There will be several new codes introduced for filing due in Part II Employee Offer and Coverage 4980H Safe Harbor Offer of Coverage Employee Premium Same Code Applies for All 12 Months Enter One Code Per Calendar Month- Leave Blank if No Code Applies 48 24

25 Covered employees or non-employees Part III Covered Individuals Fully insured ALE s do not complete this Part This reporting MEC and the carrier reports for fully insured Just an FYI----who is a non-employee? o Non-employee directors o Retiree receiving coverage who not an active employee during any month of the year o A non-employee COBRA beneficiary o Terminated employee receiving COBRA coverage who was not an active employee during any month of the year 49 Part III Covered Individuals Name of Covered Individual SSN DOB (If SSN Not Provided) X the box Coverage = Twelve Months (Check Only One) Use Code 1G for non-employee Coverage < Twelve Months (Check Each Month of Coverage) One or the other is used, not both 50 25

26 This is the transmittal Form 1094-C provided to the IRS including 1095-Cs issued and is used by: o Large employer completes whether fully insured or self-insured 51 Part I Applicable Large Employer Member Employer s complete name Employer Identification Number (EIN) Filer s complete address for accepting correspondence Name and telephone number of person responsible for answering any questions Total number of Forms 1095-C being transmitted with Form 1094-C When using the Form as the Authoritative Transmittal check the box and continue with completion of Part II o Each Employer Member in a control group must file an Authoritative Transmittal 52 26

27 Part I Applicable I Large Employer Member EIN 1095-C Total Count Authoritative Transmittal 53 Part II ALE Member Information Lines should be completed only on the Authoritative Transmittal Line 20: Total number of 1095-Cs being filed Line 21: Check yes if you were a member of an Aggregated ALE group during any month of the calendar year o If checking yes, complete Part III (column d) and Part IV Line 22: Check each applicable box as to Offer Methods and Transition Relief o A: Qualifying Offer Method o B: 2015-Qualifying Offer Method Transition Relief o C: Section 4980H Relief o D: 98% Offer Method 54 27

28 Part II Line 22 Certification of Eligibility Qualifying Offer Method o Qualifying offer is MEC, MV, and affordable based on federal poverty level o Offer at least MEC to spouse and dependents o Alternative reporting may be available Cannot use if self-insured since Form 1095-C still required for MEC reporting and reporting to IRS o Qualifying offer not provided for 12 months requires general reporting 55 Part II Line 22 Certification of Eligibility 2015 Qualifying Offer Method Transition Relief o Qualifying offer to at least 95% of full-time employees, spouses and dependents In determining 95% do not include employees in a limited nonassessment period o Can provide a statement in lieu of Form 1095-C o Cannot use if self-insured since Form 1095-C still required for MEC reporting and reporting to IRS 56 28

29 Part II Line 22 Certification of Eligibility Section 4980H Transition Relief o full-time/full-time equivalent employees in 2014 Could not reduce headcount Could not eliminate or reduce health plan below minimum value Cannot change eligibility or reduce contributions Could not change plan year to a later date o Calculation of assessable payments of offer requirements (reduction of 80 employees) for employers with 100+ employees 57 Part II Line 22 Certification of Eligibility 98% Offer o Still required to report for full-time employees o Do not have to report full-time employees on monthly basis o Certify offered MEC, MV and affordable to at least 98% 58 29

30 Part II ALE Information 1095-C Total Count ALE Control Group Qualifying Offer Qualifying - Transitional 4980 Transition Relief 98% Offer Certifies Offer Method and/or Transition Relief 59 Part III ALE Monthly Information Lines 23-35: Numbered for all 12 months and January- December o Column (a): If offering MEC to at least 95% of FT employees and dependents for entire calendar year, enter X in the box Can check yes if offered coverage to at least 70% of FT employees or qualify for non calendar plan year relief o Column (b): Enter number of FT employees for each month, don t include those in a non-assessment period o Column (c): Enter total number of employees for each calendar month First or last day of the month First or last day of the first payroll period starting in the month 12 th day of the month 60 30

31 Part II Line 22 Certification of Eligibility Lines 23-35: Numbered for all 12 months and January- December o Column (d): if yes checked on line 21, check each applicable box the employer was a member of an Aggregated ALE group o Column (e): If on line 22, box C was checked, enter Code A for the relief, enter Code B for 100 or more relief 61 Part III ALE Monthly Information MEC Offer Full-time Employee Count Total Employee Count Aggregate Control Group A = Transition Relief (ALE with fewer than 100 FTEs) B = 100+ Transition Relief (ALE with more than 99 FTEs) 4980H Transition Relief Codes 62 31

32 Part IV Other ALE Members If checking yes on line 21, enter the name and EIN of all the other Aggregated ALE Members in the group o If more than 30 members, enter the 30 with the highest monthly average full-time employees If a single employer that is not part of a control group, do not check yes on line Part IV Other ALE Members ALE Member Name Member EIN 64 32

33 If errors are made, corrections are required o As soon as possible upon discovery of error o Instructions for forms outline how to make corrections based on the error and the form o 2015 Instructions for Forms 1094-C and 1095-C: 65 What if you need an extension? o IRS Notice extended filing due dates for 2016 o 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. Any extensions already requested will not be formally granted o Employers or other coverage providers who do not comply with extended due dates are subject to penalties for failure to timely furnish and file o Still file, abatement of penalties may still be possible

34 What if you need an extension for filings due in 2017 and after? o Automatic 30 day extension for forms filed with IRS (1094-B and C) Submit Form 8809 on or before the due date of the required form No signature or explanation required Second extension available Not automatic o Must request 30 day extension for forms provided to individuals (1095-B and C) Submit written request to IRS Letter must be postmarked no later than the date on which statements are due (January 31) Must include: Filer name, EIN, address, type of return and a statement requesting an extension with a reason for the delay signed by the filer Not automatic, if an extension is not granted by IRS, then filing must be timely or penalty can be imposed 67 Documentation o Rules do not provide specific record maintenance o Obligation exists to maintain records that substantiate information reported o Suggested records: Support of determination that an entity is or is not part of a common control group (Aggregated ALE group) Information that supports an employer met the alternative reporting requirements Information that demonstrates that an offer of coverage was made Information showing that coverage was affordable and minimum value Demonstrating who actually was or was not a full-time employee Dates of hire, termination, and rehire Limited non-assessment periods 68 34

35 Determine ALE status o Consider common control situations Decide who was a full-time employee for at least one month of the year o Consider common control situations Determine types of coverage offered and how each type should be reported Know how to report COBRA coverage Be aware of the penalties for not filing timely Develop a plan to file IRS reports and furnish statements to individuals Extended due dates: take advantage of additional time provided by IRS

36 Frances K. Horn, JD, PHR Employee Benefits Compliance Officer 71 36