Health care reform imposed new employer reporting requirements regarding health coverage provided to individuals, including: (i) reporting of minimum essential coverage for employer-sponsored self-insured plans and (ii) reporting of health insurance coverage offered under employer-sponsored plans. Recently, the U.S. Department of Treasury issued final regulations on these two reporting requirements that mostly follow the proposed regulations issued last fall. Notably, the final regulations permit employers that are subject to both reporting requirements (i.e., applicable large employers that provide minimum essential coverage on a self-insured basis) to file a single information return that combines reporting under both requirements. Reporting will be required on new IRS Forms 1094 and 1095, which have not yet been released.
Reporting of Minimum Essential Coverage for Employer-Sponsored Self-Insured Plans
Section 6055 of the Internal Revenue Code of 1986, as amended (the “Code”) requires employers that provide minimum essential coverage on a self-insured basis (and other entities that issue coverage) to report to the IRS certain information about the type and period of such coverage and furnish related information statements to covered individuals. The purpose of this reporting requirement is for individuals to establish, and the IRS to confirm, that the individuals have minimum essential coverage and are not subject to the individual mandate penalties. The information required to be reported to the IRS generally includes, among other items, identifying information regarding the employer, identifying information for each “responsible individual” and each covered individual (including tax identification numbers), and the months for which each individual was enrolled in and entitled to receive benefits. The information statement required to be sent to individuals generally must include all of the information required to be reported to the IRS.
Reporting on Health Insurance Coverage Offered Under Employer-Sponsored Plans
Code Section 6056 requires employers that are subject to the employer mandate (e.g., employers with at least 50 full-time employees, including full-time equivalents) to file a different report with the IRS describing the health coverage that the employer provides to its full-time employees. Employers must also furnish similar information to the covered individuals. The purpose of this report is to facilitate the administration of the employer mandate penalties and premium tax credits. The information required to be reported to the IRS generally includes, among other items:
- Identifying information regarding the employer and applicable contact person;
- Certification as to whether the employer offered its full-time employees (and dependents) the opportunity to enroll in minimum essential coverage (by month);
- 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 month);
- Number of full-time employees for each month; and
- Identifying information for each full-time employee and the months, if any, during which the employee was covered under the plan.
The final regulations also include simplified alternative methods of reporting that employers may use for Code Section 6056 purposes if certain requirements are met. Under a transition rule, employers also may be eligible for simplified reporting with respect to coverage provided in 2015.
Failure to timely and accurately report the required information may result in penalties under Code Sections 6721 and 6722, which together can be up to $200 per required statement (maximum of $3 million) per year. The final regulations clarify that the IRS will not impose penalties on reporting entities that can show good faith efforts to comply with the reporting requirements for returns and statements filed and furnished in 2016 to report coverage in 2015.
Reports must be submitted to the IRS by February 28 (March 31 if filed electronically) of the year following the calendar year in which coverage is provided. Individual statements must be provided to the individuals by January 31 of the year following the calendar year in which coverage is provided. This means that the first set of reports will be due in the beginning of 2016 (for information with respect to coverage provided in 2015).
Although the first set of reports are not due until the beginning of 2016, employers should begin to consider now whether its internal systems are prepared to, or can be modified to, capture the required 2015 enrollment and coverage information in order to timely meet the requirements for its 2016 reporting obligations.