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Comp and Benefits Brief

November 3, 2015

ACA Year-End Reporting

Affordable Care Act (ACA) reporting starts in January 2016 and employers need to be prepared.  This summary provides some basic facts and a number of links to forms and information on the IRS website.  Part 1 assumes that the employer is not self-funded but provides health coverage through insurance.  Part 2 assumes the employer offers self-funded/self-insured health coverage.  The rules apply to all employers without regard to whether the employer is for profit, tax-exempt, non-profit, or governmental.

PART 1 - Employers With Only Fully-Insured Coverage

Who is required to file?

ACA reporting is required only for applicable large employers (ALE).  An employer who had on average at least 50 full-time employees in the prior year (2014), is an ALE for the current year (2015).  ALE determinations require counting both full-time and full-time-equivalent employees and include all members of the employer's controlled group. Click here for details from the IRS. Each member of an ALE with a separate EIN files for its employees.

What forms are required to be filed?

Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, must be provided to all full-time employees.

Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, must be filed with the IRS and aggregates the information provided to employees.

These forms and their instructions can be found on the IRS website:

When are filings due?

Form 1095-C for 2015 must be delivered to the individual employees by February 1, 2016.

Form 1094-C for 2015 must be filed with the IRS by February 29, 2016 if filing on paper, or by March 31, 2016 if filing electronically.

These are the same deadlines as for Form W-2 and Form 1099.

ALEs with 250 or more forms to provide must file electronically through the ACA Information Returns (AIR) program here.

What information is needed for the filings?

The Form 1095-C will need the name, address and Social Security number (SSN) for each full-time employee, ALE member name, address and EIN, determination of employee status as full-time or not by calendar month, whether an offer of health coverage was applicable by calendar month (by code), the employee share of lowest cost monthly premium for self-only coverage that meets the minimum value, and any applicable safe harbor.

Determination of full-time status for ACA reporting is not necessarily the same as the label "full-time" that an employer uses for employees and does not necessarily cover full-time equivalents.  See the instructions for Forms and Frequently Asked Questions for ACA for details.

Where can some questions be answered?

The IRS has posted over 30 frequently asked questions and answers (FAQs) on its website here.

Also, the IRS has posted FAQs on reporting and the forms required here.

In over 50 FAQs, the IRS addresses the rules regarding the Shared Responsibility Provisions of ACA, covering the "pay or play" regulations and other information here.

What if a third party prepares and makes the filings?

The IRS responded in FAQ 28 (click here) that an ALE can make arrangements for a third party to facilitate reporting but the ALE cannot transfer the liability for failures to the third party; the ALE is responsible for the reporting. This does not preclude indemnification by the third party. Service provider contracts should be carefully reviewed.

PART 2 - Employers With Self-Insured Coverage

Under ACA, providers of health coverage must report on the coverage offered to individuals and must report that information to the IRS.  For insured coverages, the health insurance issuer is responsible for filing these reports.  For self-insured group health plan coverage, each participating employer is considered a "plan sponsor" that has a reporting obligation.

What forms are required to be filed?

In most cases, the same forms identified above will be required to be filed, with the employer completing Part III on Form 1095-C for the employee and each covered family member.

Where can some questions be answered?

The IRS has posted about 30 questions and answers here. FAQ # 9 and #27 specifically address self-insured coverages.

PENALTIES

What are the penalties for not reporting or reporting incorrectly?

See here where the IRS website says:

"An ALE member that fails to comply with the information reporting requirements may be subject to the general reporting penalty provisions under section 6721 (failure to file correct information returns) and  section 6722 (failure to furnish correct payee statement).

  • The penalty for failure to file an information return generally is $100 for each return for which such failure occurs.  The total penalty imposed for all failures during a calendar year cannot exceed $1,500,000. 
  • For returns required to be filed after December 31, 2015, the penalty for failure to file an information return generally is increased from $100 to $250 for each return for which such failure occurs.  The total penalty imposed for all failures during a calendar year after December 15, 2015 cannot exceed $3,000,000.
  • The penalty for failure to provide a correct payee statement is $100 for each statement with respect to which such failure occurs, with the total penalty for a calendar year not to exceed $1,500,000.
  • The penalty for failure to provide a correct payee statement is increased from $100 to $250 for each statement for which the failure occurs, with the total penalty for a calendar year not to exceed $3,000,000.  The increased penalty amount applies to statements required to be provided after December 31, 2015.
  • Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to furnish a payee statement.

The waiver of penalty and special rules under section 6724 and the applicable regulations, including abatement of information return penalties for reasonable cause, may apply to certain failures under section 6721 or 6722."

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Thus, it is better to file a form even if it needs corrections than to fail to file at all.  If returns are late, be sure to check the penalty abatement rules and submit a request for abatement or reduction of any penalties.

Additional information or assistance:

If you still have questions or need help understanding the requirements, our Employee Benefits attorneys are ready and prepared to assist employers with ACA reporting compliance and with review of contracts between employers and vendors providing ACA reporting and consulting.

Nelson Mullins Executive Compensation and Employee Benefits attorneys are ready to assist with your compensation and benefits related matters in a cost-effective and responsive manner.  Please contact one of our Executive Compensation and Employee Benefits partners or the Nelson Mullins attorney with whom you work.

This Comp & Benefits Brief is a periodical publication of Nelson Mullins Riley & Scarborough LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances.  The contents are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have. ©2015 Nelson Mullins Riley & Scarborough LLP.  All Rights Reserved.