In July, the IRS released draft Forms 1094-C and 1095-C, and on August 1, 2016, draft instructions for completing the ACA forms for the 2016 tax year were published.
The forms require applicable large employers to report information about offers of health insurance coverage to full-time employees and the provision of minimum essential coverage during the reporting year.
The IRS has released these as 2016 draft forms and instructions for information reporting under the Affordable Care Act (ACA). Although these are not final versions, it is important for employers to review the updates and changes from the 2015 forms and instructions as they prepare for the 2016 filings.
All entities that provide minimum essential coverage (MEC), such as employers and insurers, must submit the reports to support enforcement of the individual mandate. All applicable large employer (ALE) members must submit the reports to support enforcement of the employer mandate.
Some of the changes are intended to help plan sponsors and third-party administrators (TPAs) properly complete and file the forms, while others eliminate indicator codes no longer in use and add some new codes.
The final forms and instructions for 2016 are expected before the end of the year.
ACA Reporting Background
Internal Revenue Code (IRC) Section 6056 under the Affordable Care Act (ACA) requires Applicable Large Employers (ALEs) to report to the IRS whether they offer their full-time employees and their employees' qualified dependents the opportunity to enroll in minimum essential coverage (MEC) under an eligible employer-sponsored plan.
An ALE is an employer that employed (any combination of workers within a controlled group) an average of at least 50 full-time employees (including full-time equivalent employees) during the preceding calendar year. Employees are considered full-time in any month that they are credited with at least 30 hours of service per week, on average, or 130 hours of service in the month.
Form 1094-C is the transmittal report which accompanies and summarizes information from Forms 1095-C. Form 1095-C is filed for each employee who was full-time for one or more months during the calendar year and includes details of any health care coverage offered to the employee, reported on a monthly basis.
For self-insured plans, Form 1095-C must also be provided to any individuals who enrolled in qualified coverage, which may include non-full-time employees and any covered spouses and dependents. (One Form 1095-C may be furnished to the employee; i.e., it is not necessary to provide a form to each covered spouse/dependent.)
Forms 1095-C must be furnished to employees by January 31, 2017 for coverage offered in 2016, and must be filed with the IRS by February 28, 2017 if filed on paper and by March 31, 2017 if filed electronically. Electronic filing is required for parties filing 250 or more forms.
Highlights of the Draft Changes
The IRS has released the following 2016 draft forms and instructions:
- 2016 draft Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, dated July 7, 2016)
- 2016 draft Form 1095-C (Employer-Provided Health Insurance Offer and Coverage, dated July 7, 2016)
- 2016 draft Instructions for Forms 1094-C and 1095-C (dated August 1, 2016)
While the 2016 draft Forms 1094-C and 1095-C are substantially similar to the final 2015 versions, the proposed additions and revisions should be reviewed by plan sponsors and TPAs.
Revisions to Forms 1094-C and 1095-C
- On Form 1094-C, line 22, box B is designated “reserved” because the associated transition relief is not applicable for 2016. In Part III, column (b), “Section 4980H” was inserted before “Full-Time Employee Count for ALE Member” to remind filers to apply the section 4980H definition of “full-time employee” to this column.
- On Form 1095-C, the IRS inserted “Do not attach to your tax return. Keep for your records.” under the title.
Changes to Form 1095-C Series 1 and 2 indicator codes
- Indicator codes 1I for line 14 and 2I for line 16 are no longer applicable and have been “reserved.”
- New Series 1 indicator codes 1J and 1K — which address conditional offers of spousal coverage — were added to line 14.
- A conditional offer of coverage is subject to one or more reasonable, objective conditions, such as offering coverage to an employee’s spouse only if he or she is not eligible for Medicare or another employer group health plan.
- Using new Series 1 indicator codes 1J or 1K, an ALE member may report a conditional offer to a spouse as an offer of coverage, regardless of whether the spouse meets the condition. A conditional offer of coverage would affect a spouse’s eligibility for the premium tax credit only if the spouse met the condition.
- The draft instructions explain that to help employees (and spouses) who receive a conditional offer determine their eligibility for the premium tax credit, ALE members should be prepared to provide, upon request, a list of all conditions applicable to the spousal offer of coverage.
The IRS removed forms of transition relief that are no longer available and clarified the months in 2016 to which the remaining transition relief applies (for non-calendar year group health plans).
Other notable revisions and additions
- Clarification of coding for COBRA continuation coverage and post-employment (non-COBRA) coverage reporting on Line 14 of Form 1095-C
- Confirmation that the “Plan Start Month” continues to be optional on Form 1095-C for 2016
- Clarification that the multi-employer plan interim guidance continues to apply for 2016
- Description of adjusted information reporting penalty amounts and removal of the reference to 2015 penalty relief
For additional information on the new forms, see IRS Releases Draft 2016 Affordable Care Act Reporting Forms.
Help for Navigating the ACA Requirements
An updated and streamlined reporting strategy will help your organization meet its obligations, while providing accuracy and timeliness. So take time to understand the law and prioritize accurate record keeping. In this way, you will make compliance a sure thing.
Another key step in maintaining HR compliance and increasing your company's cost-effectiveness is to consider outsourcing. A professional agency such a Accuchex can provide much-needed help with Human Resources needs and questions.
Accuchex is a full spectrum Payroll Management Services provider offering expertise in Time Management, Insurance and Retirement issues, as well.