The A B C’s of New IRS Employer Reporting Requirements

By: Grace Taylor, Capstone Brokerage Vice President, December 18, 2015

The New Year brings yet additional IRS reporting responsibilities for some employers under the Affordable Care Act (ACA). Many employers will now need to file a range of reporting forms reflecting compliance with the health care reform’s “shared responsibility” mandate to provide affordable health coverage to their employees. However, many are still uncertain about the requirements to provide employees with these new ACA disclosures.

Overview

The Affordable Care Act (ACA) added Section 6056 to the Internal Revenue Code (IRC) requiring annual information reporting to the Internal Revenue Service (IRS) by applicable large employers with fully-insured plans relating to the health insurance that the employer offers (or does not offer) to full-time employees and their dependents. Applicable large employers have 50 or more full-time (FT), or full-time equivalent (FTE) employees.

Section 6055 requires annual information reporting to the IRS by health insurance issuers, employers with self-insured plans, governmental agencies, and other providers of health coverage.

The key form is the IRS Form 1095-C, which applicable large employers (ALE) must provide their employees annually, along with Form W-2 by the end of January 2016. Form 1095-C provides information for employees to use when completing Line 61 of their individual tax returns, showing that they or their family members had qualifying health coverage (referred to as “minimum essential coverage”) for some or all of the months during the year. Form 1095-C should be shared with tax preparers and retained with all other tax documents.

1. Employers are required to give employees a copy of the reported information on or before January 31st of the following year.

2. The IRS will use these reports to determine whether or not the large employer has to pay any penalties and whether the employees are eligible for the Advanced Premium Tax Credit (APTC).

3. Reporting was voluntary for 2014, but is mandatory for the 2015 calendar year.

4. Employers with 50-99 FTEs must comply with IRS Section 6056 reporting for 2015, even if they qualify for transition relief from the employer shared responsibility.

Due to the application of aggregation rules, companies need to take into account full-time employees in related entities (i.e., controlled groups) when determining large employer status.

According to the mandate, a large employer must offer a minimum essential coverage plan to its full-time employees (defined as those who are employed at least 30 hours of service per week, or averages 130 hours of service per month) and their dependent children, or face substantial penalties in the form of non-deductible excise taxes.

A less substantial—but still significant—excise tax penalty may apply on an employee-by-employee basis if a large employer offers coverage that is not affordable or does not meet minimum value standards and a full-time employee receives a valid premium tax credit through the marketplace. Next month I will discuss Affordable Care Act Affordability Coverage and how to determine and report to the IRS.