Sections 6055 and 6056: MEC and ALE Reporting to the IRS

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1 Sections 6055 and 6056: MEC and ALE COMPLIANCE CONSULTING APRIL 2015 Agenda Background Who is subject to a Section 6055 and/or 6056 reporting obligation? IRS Forms: 1094-B and 1095-B 1094-C and 1095-C How to report minimum essential coverage, offers of coverage, full-time employee status, and other essential elements of these forms When the forms must be filed with the IRS and sent to employees, and administrative details for reporting in 2016 Action steps 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 2 1

2 Background PPACA created two significant IRS reporting obligations that will commence in early 2016: Internal Revenue Code Section 6055 requires insurers and sponsors of self-insured plans to prepare annual reports regarding minimum essential coverage ( MEC ) Internal Revenue Code Section 6056 requires applicable large employer members ( ALE members) to prepare annual reports regarding the coverage offered to their employees 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 3 Who is Required to Report? 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 4 2

3 Section 6055 ( MEC ) Employers (of all sizes) who sponsor self-insured health plans that provide minimum essential coverage to any individual during the calendar year are required to report under Section What if we sponsor a fully-insured plan? Your health insurance carrier will be responsible for Section 6055 reporting for that plan GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 5 What is MEC? Eligible employer-sponsored plans Both fully-insured and self-insured, regardless of employer size This does not include excepted benefits This does include even low cost plans or plans that do not provide minimum value Reporting not required for coverage that supplements MEC Government-sponsored programs Insured plans offered in the individual market or group market 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 6 3

4 Section 6056 ( ALE ) Applicable large employer members (both fully-insured and self-insured) must report information to the IRS about the health coverage, if any, that they offered to full-time employees Such ALE members must also report information about whether the coverage was affordable and whether coverage was offered to dependents Finally, this reporting is the mechanism in place for an employer to claim an exemption or delay in penalty exposure due to various forms of transitional relief 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 7 Who is an ALE member? Applicable large employers are those with 50 or more full-time (FT) and full-time equivalent (FTE) employees Status as applicable large employer is based on the entire controlled group, but each ALE member reports separately for its employees NOTE: All ALE members remain subject to 6056 reporting for the 2015 calendar year, even if transitional relief delays their penalty exposure until later 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 8 4

5 ESR Penalties: A Refresher Penalty for failing to offer coverage 4980H(a) An employer must offer minimum essential coverage to 95% (70% for 2015) of its full-time employees and their dependent children up to age 26 or risk a penalty equal to (i) $2,080 (indexed), multiplied by (ii) the number of fulltime employees minus 30 (80 for 2015) There is no requirement that t the coverage be affordable or provide minimum value to avoid this penalty. But 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 9 ESR Penalties: A Refresher there is a separate penalty for failing to offer coverage which is both affordable and provides minimum value Section 4980H(b) If the employer fails to offer coverage that is both affordable and provides minimum value to a full-time employee, it can risk a penalty equal to $3,120 (indexed) per year for that temployee Penalty can only be triggered if a full-time employee goes to the marketplace and receives premium tax assistance 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 10 5

6 IRS Forms: Walkthrough 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 11 Forms 1095-B and 1094-B Used by plan sponsors of self-insured employer coverage if the employer is not an applicable large employer member In other words, this form is used by small, self-insured employers A Form 1095-B is provided to each responsible individual The Form 1094-B is the transmittal form Also used by insurance carriers for fully-insured coverage 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 12 6

7 1095-B: Parts I, II, and III 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS B: Part IV 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 14 7

8 1094-B 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 15 Forms 1095-C and 1094-C Used by applicable large employer members, regardless of whether they are fully-insured or self-insured. Employers that are fully-insured may leave part of the Form 1095-C blank (the portion dealing with covered individuals) Keep in mind the rules for who is an ALE member Even if transitional relief delays potential penalties, the reporting obligation will apply for GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 16 8

9 1095-C: Parts I and II 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS C, Part II, Line 14 Codes 1A: Qualifying Offer 1B: MEC + MV to employee 1C: MEC + MV to employee; MEC to dependent(s) 1D: MEC + MV to employee; MEC to spouse 1E: MEC + MV to employee; MEC to spouse & dependent(s) 1F: MEC C(but not MV) 1G: Self-insured plan to non-full time employee (12 months) 1H: No MEC offer 1I: Qualified Offer Transition Relief GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 18 9

10 1095-C, Part II, Line 16 Codes 2A: Not employed during any day of month 2B: Not full-time employee; did not enroll 2C: Employee enrolled 2D: Limited non-assessment period or initial measurement period 2E: Multiemployer interim relief 2F: Affordability W-2 safe harbor 2G: Affordability FPL safe harbor 2H: Affordability Rate of pay safe harbor 2I: Non-calendar year 4980H(b) transition relief 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS C, Part II, Line 16 Codes Ordering Rules 2C (employee enrolled ed in coverage): Use this code for any month during which the employee was enrolled for each day of the month, regardless of whether another series 2 code might apply. 2D (employee in a limited non-assessment period): Use this code if the employee was in a limited non-assessment period (for example, an initial measurement period for a new variable hour employee), even if the employee was not yet a full-time employee. 2E (multiemployer plan interim relief): Use this code if the employer is making contributions for a particular employee to a multiemployer plan, and satisfies the interim relief provided by the IRS for such multiemployer plan contributions. Code 2E applies even if the employer is measuring affordability using one of the safe harbors that is normally assigned to codes 2F, 2G, or 2H GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 20 10

11 1095-C: Part III 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS C: Part I 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 22 11

12 1094-C: Part II 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS C, Part II, Line 22 Certifications of eligibility to provide simpler employee statements (A & B), eligibility for certain transition relief (C), or eligibility to avoid specifying the number of fulltime employees (D): A. Qualifying Offer Method B Qualifying Offer Method Transition Relief C. Section 4980H Transition Relief D. 98% Offer Method 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 24 12

13 1094-C: Part III 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS C: Part IV 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 26 13

14 Who Reports What? (Revisited) Employer and Plan Employee Type of Reporting Who Reports IRS Transmittal IRS Return Type Statement e t Health insurance B 1095 B 1095 B issuer or carrier Large employer* with fully insured group health plan Large employer* with selfinsured group health plan covering employees only Large employer* with selfinsured group health plan covering employees and non employees (e.g., directors, retirees, or COBRA qualified beneficiaries) 6056 Employer 1094 C 1095 C, Parts I and II Combined 6055 and 6056 Employees: Combined 6055 and 6056 Non employees employed for 1 or more months: Combined 6055 and 6056 Non employees for all 12 months: C, Parts I and II (or alternative) Employer 1094 C 1095 C 1095 C Employer 1094 C 1095 C 1095 C Employer 1094 C 1095 C 1095 C Employer 1094 B or 1094 C** 1095 B or 1095 C, Part III** 1095 B or 1095 C, Part III** * A large employer is an employer with 50 or more full time and full time equivalent employees. ** If using Form 1094 B as the transmittal form, use Form 1095 B for the IRS return and employee statement. If using Form 1094 Cfor transmittal, use Form 1095 C for the IRS return and employee statement GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 27 Who Reports What? (Revisited) Employer and Plan Type Type of Reporting Who Reports IRS Transmittal IRS Return Employee Statement Multiemployer plans 6055 Plan sponsor 1094 B 1095 B 1095 B Small employer with fully insured group health plan 6055 Health insurance issuer or carrier 1094 B 1095 B 1095 B Small employer with self insured group health plan 6055 Employer 1094 B 1095 B 1095 B 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 28 14

15 Details and Deadlines 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 29 Method of IRS Reporting Mailing the forms to the IRS is permitted for employers with fewer than 250 Forms 1095-B or 1095-C in a calendar year. Can I submit the reports electronically? IRS encourages all employers to file their forms electronically. Employers that file at least 250 Forms 1095-B or 1095-Cin a calendar year are required to file electronically. Other employers may file electronically; but are not required to do so GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 30 15

16 Statements to Employees How should I send out the statements? Mail Electronically (if employee has consented to electronic) Posting to a website (an employer must separately notify the employee) Employee can also request a paper copy Can we send out the employee statements t t with the Forms W-2? Yes. Employers may include an employee s statement with his or her Form W-2 mailing GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 31 Separate Return and Statement Deadlines Report/Disclosure Due date Form 1095-B to employees 1/31 of each year (2/1/16) Forms 1095-B and 1094-B to IRS 2/28 (or 3/31 if filed electronically*) Form 1095-C to employees 1/31 of each year (2/1/16) Forms 1095-C and 1094-C to IRS 2/28 (or 3/31 if filed electronically*) * Must file electronically if provide 250 or more returns 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 32 16

17 2016 Deadline Quirks Returns for the 2015 calendar year must be filed with the IRS no later than February 29, 2016 since February 28, 2016 is on a Sunday (but still March 31, 2016, if filed electronically) Statements for the 2015 calendar year must be furnished no later than February 1, 2016 (January 31, 2016 is on a Sunday) 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 33 Penalties Failure to timely file complete e and accurate returns to the IRS, or failure to timely furnish a correct statement to responsible individuals: $100 per return with a maximum of $1,500,000 for a calendar year. Penalties may be reduced if corrective action is taken within 30 days and may even be waived if the failure to file timely or accurately is due to reasonable cause and not due to willful neglect. Penalty relief for reports filed in 2016 as long as good faith efforts to comply pyare made Important Note: the C series forms themselves will trigger penalties under employer shared responsibility rules, if you failed to offer coverage to a sufficient number of your full-time employees, or if the coverage you did offer was not affordable or did not provide minimum value 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 34 17

18 Action Steps Collect data during 2015 regarding: Who is covered by MEC Who are full-time employees Who was offered coverage Was coverage affordable Consider vendor options for data aggregation and reporting 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 35 Action Steps Request Social Security numbers for covered dependents Button-up compliance with employer shared responsibility rules Dt Determine other controlled group and affiliated service group members 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 36 18

19 Resources: ajghealthcarereform.com 2015 GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 37 HRCI Certified This program has been approved for 1 recertification credit hour through the HR Certification Institute. To obtain the program ID number for this program, which you can include on your recertification application form, please send an request to GBS.CEcredits@ajg.com. Under HRCI rules, only those individuals who attend the webinar and whose attendance we can verify will receive the program ID. Once your attendance has been verified you will receive an with the program ID number. As such, if a group attends the webinar, the program ID can only be given to the individual whose information was used to register GALLAGHER BENEFIT SERVICES, INC. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 38 19

20 Thank you! Theintentof thispresentation is to provideyou with general information regarding the status of, and/or potential concerns related to, your current employee benefits issue. It does not necessarily fully address all your specific issues. It should not be construed as, nor is it intended to provide, legal or tax advice. Questions regarding specific issues should ldbe addressed d by the your organization's general counsel, tax advisor, or an attorney who specializes in this practice area. ARTHUR J. GALLAGHER & CO. BUSINESS WITHOUT BARRIERS 20