The Affordable Care Act (ACA) requires large employers to report information to the IRS and employees regarding the employer’s health coverage. These requirements are found in Section 6056 of the Internal Revenue Code.
On Sept. 5, 2013, the Internal Revenue Service (IRS) issued proposed regulations on the information reporting requirements.
The regulations are proposed to be effective for calendar years beginning on or after Jan. 1, 2015. This date reflects the one-year delay provided in IRS Notice 2013-45. However, the IRS is encouraging voluntary compliance for 2014.
Section 6056 Reporting
Section 6056 requires large employers to file information returns with the IRS and to provide statements to employees each year. The information that must be provided relates to the health coverage the employer provided in the prior year.
The IRS information return will give the IRS information about the employer’s compliance with the employer shared responsibility provisions of Code section 4980H, which are also known as the employer mandate and pay or play rules. These rules impose a penalty on large employers that do not offer required coverage to full-time employees and dependents.
The employee statements will provide information to employees about coverage that was provided in the prior year. The information will be used to determine whether employees can claim a premium tax credit on their tax returns for coverage purchased through an Exchange.
Employer coverage information is needed because employees are not eligible for premium tax credits if they are offered affordable coverage under an employer-sponsored plan that provides minimum value, or if the employee enrolls in an employer-sponsored plan.
The section 6056 reporting requirements apply to “applicable large employers.” An applicable large employer is an employer that employed, on average, at least 50 full-time employees (including full-time equivalents) during the prior calendar year. Full-time employees are those employed on average for at least 30 hours of service per week.
Related employers are treated as a single employer for determining employer size if they meet certain IRS criteria. Each large employer (and each member of a group of related companies that constitute a large employer) is responsible for its own reporting obligations.
Large employers can use third parties to facilitate filing returns and furnishing employers statements, but the employer retains responsibility for providing the information. However, a large employer that is a governmental unit or agency may report on its own or may designate another person to report on its behalf.
The IRS expects that reporting related to full-time employees eligible to participate in a multiemployer plan could be provided in a bifurcated manner. Under this approach, one return, filed by the multiemployer plan administrator, would pertain to the employees eligible to participate in the multiemployer plan. A separate return filed by the employer would pertain to the remaining full-time employees who are not eligible to participate in a multiemployer plan.
Section 6056 returns must be filed with the IRS annually, no later than Feb. 28 (March 31 if filed electronically) of the year after the calendar year to which the return relates.
Due to the one-year transition relief, the first section 6056 returns required to be filed are for the 2015 calendar year and must be filed no later than March 1, 2016 (Feb. 28, 2016, being a Sunday), or March 31, 2016, if filed electronically.
The employee statements for each calendar year must be furnished to full-time employees by Jan. 31 of the next calendar year. Extensions of this deadline may be available in certain circumstances.
The first section 6056 employee statements (meaning the statements for 2015) must be furnished no later than Feb. 1, 2016 (Jan. 31, 2016, being a Sunday).
IRS Return—Required Information
The following information must be reported on the section 6056 information return:
- The employer’s name, address and EIN, the name and telephone number of the employer’s contact person and the calendar year for which the information is reported;
- A certification as to whether the employer offered its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan by calendar month;
- The number of full-time employees for each month during the calendar year;
- For each full-time employee, the months during the calendar year for which coverage under the plan was available;
- Each full-time employee’s share of the lowest-cost monthly premium (self-only) for coverage providing minimum value offered to that full-time employee, by calendar month; and
- The name, address and TIN of each full-time employee during the calendar year and the months the employee was covered under an eligible employer-sponsored plan.
Additional information related to the employer and coverage is expected to be requested. Some of the information will be provided through the use of indicator codes, rather than detailed explanations or summaries.
Filing IRS Returns
Section 6056 information returns may be filed using Forms 1094-C and 1095-C or any other form(s) designated by the IRS. A substitute form may be used if it includes the required information and complies with IRS procedures or other guidance.
Electronic filing of section 6056 returns is required for all large employers filing 250 or more returns during the calendar year, although waivers can be provided in the case of hardship. Each section 6056 return is a separate return. Also, all types of returns (including information returns, income tax returns, employment tax returns and excise tax returns) are aggregated for purposes of the 250-return threshold.
A large employer filing fewer than 250 returns during the calendar year is encouraged to file section 6056 returns electronically, but is permitted to use the paper form.
Employee Statement—Required Information
Employers required to file section 6056 information returns must also furnish to each full-time employee identified on the return a written statement.
The statement must include the following information:
- The employer’s name, address and EIN; and
- The information required to be shown on the section 6056 return with respect to the employee.
Furnishing Employee Statements
Employee statements may be provided either by furnishing to the full-time employee a copy of Form 1095-C or any other form designated by the IRS. A substitute statement may be used if it includes the required information and complies with IRS procedures or other guidance.
Statements furnished to employees under section 6056 are not required to disclose their complete TINs.
The proposed regulations permit electronic furnishing of section 6056 employee statements if certain notice, consent and hardware or software requirements are met. The same rules and process currently in place for electronic furnishing of Forms W-2 will apply to providing the section 6056 employee statements electronically.
Combined and Simplified Reporting
In addition to section 6056 reporting, section 6051 requires employers to provide Forms W-2 and section 6055 requires information reporting by any person that provides minimum essential coverage to an individual.
Large employers with self-insured plans are subject to the reporting requirements of all three sections. The proposed rules include provisions that reduce duplicative reporting and otherwise simplify reporting. For example, self-insured health plans may be able to furnish a single statement to covered individuals for both sections 6055 and 6056.
The proposed rules outline a general method of information reporting that can apply to all employers. However, the IRS is considering simplified reporting methods, such as using codes on Form W-2, that employers could use for certain groups of employees.
Employers that do not comply with the filing and statement furnishing requirements of section 6056 may be subject to penalties for failure to file a correct information return and failure to furnish correct payee statements. However, these penalties may be waived if the failure is due to reasonable cause and not to willful neglect.
Request for Comments
The IRS has requested comments on a number of provisions. Comments can be submitted for a period of 60 days after the proposal is published in the Federal Register. A hearing on the proposed rules will be held on Nov. 18, 2013.
Please contact Business Benefits Group for more information on the ACA’s employer reporting requirements.