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Today’s Presenters
Kara Badyna Compliance Consultant
Arthur J. Gallagher & Co.
Jim Littlefield Solutions Engineer
PeopleMatter
Agenda ● Background
● Who is subject to a Section 6055 and/or 6056 reporting obligation?
● IRS Forms:
○ 1094-B and 1095-B
○ 1094-C and 1095-C
○ How to report minimum essential coverage, offers of coverage, full-time employee status and other essential elements of these forms
● When the forms must be filed with the IRS and sent to employees and
administrative details for reporting in 2016.
● Action steps
PPACA created two significant IRS reporting obligations that will commence in early 2016:
Background
6055 Internal Revenue Code Section
6055 requires insurers and sponsors of self-insured plans to prepare annual reports regarding
“minimum essential coverage” (“MEC”).
6056Internal Revenue Code Section 6056 requires “applicable large
employer” members (“ALE” members) to prepare annual
reports regarding the coverage offered to their employees.
Who is required to report?
Employers (of all sizes) who sponsor self-insured health plans that provide minimum essential coverage to any
individual during the calendar year are required to report under Section 6055.
Section 6055 (“MEC”)
What if we sponsor a fully-insured plan?
Your health insurance
carrier will be responsible for Section 6055 reporting
for that plan.
● Eligible employer-sponsored plans
○ Both fully-insured and self-insured, regardless of employer size
○ This does not include excepted benefits
○ This does include even “low cost” plans or plans that do not provide
minimum value
○ Reporting not required for coverage that supplements MEC
● Government-sponsored programs
● Insured plans offered in the individual market or group market
What is MEC?
● Applicable large employer members (both fully-insured and self-insured) must report information to the IRS about the health coverage, if any, that they offered to full-time employees.
● Such ALE members must also report information about whether the coverage was affordable and whether coverage was offered to
dependents.
● Finally, this reporting is the mechanism in place for an employer to
claim an exemption or delay in penalty exposure due to various forms of transitional relief.
Section 6056 (“ALE”)
● Applicable large employers are those with 50 or more full-time (FT) and full-time equivalent (FTE)
employees
● Status as applicable large
employer is based on the entire controlled group, but each ALE
member reports separately for its employees
Who is an ALE member?
NoteAll ALE members remain subject to 6056 reporting
for the 2015 calendar year, even if transitional relief
delays their penalty exposure until later
● Penalty for failing to offer coverage – 4980H(a)
○ An employer must offer “minimum essential
coverage” to 95% (70% for 2015) of its full-time
employees and their dependent children up to
age 26 or risk a penalty equal to (i) $2,000 (indexed), multiplied by (ii) the number of full-
time employees minus 30 (80 for 2015).
○ There is no requirement that the coverage be
affordable or provide “minimum value” to avoid this penalty.
○ But…
ESR Penalties: A Refresher
● …there is a separate penalty for failing to offer coverage which is both affordable and provides minimum value – Section 4980H(b)
○ If the employer fails to offer coverage that is both
affordable and provides minimum value to a full-time employee, it can risk a penalty equal to $3,000
(indexed) per year for that employee.
○ Penalty can only be triggered if a full-time employee
goes to the marketplace and receives premium tax
assistance.
ESR Penalties: A Refresher
IRS Forms: Walkthrough
● Used by plan sponsors of self-insured employer coverage if the employer is not an applicable large employer member.
○ In other words, this form is used by small, self-insured
employers.
○ But note: applicable large employers may also be
required to use these forms for covered non-
employees (like COBRA qualified beneficiaries, retirees, and partners).
● Also used by insurance carriers for fully-insured coverage.
Form 1095-B and 1094-B
1095-B: Parts I, II and III
1095-B: Part IV
1094-B
● Used by applicable large employer members, regardless of whether they are fully-insured or self-insured.
○ Employers that are fully-insured may leave part of
the Form 1095-C blank (the portion dealing with covered individuals).
● Keep in mind the rules for who is an applicable large employer member.
○ Even if transitional relief delays potential penalties,
the reporting obligation will apply for 2015.
Form 1095-C and 1094-C
1095-C: Parts I and II
1095-C: Parts III
1094-C: Part I
1094-C: Part II
● Certifications of eligibility to provide simpler employee statements (A & B), eligibility for certain transition relief (C), or eligibility to avoid specifying
the number of full-time employees (D):
○ A. Qualifying Offer Method
○ B. 2015 Qualifying Offer Method Transition Relief
○ C. Section 4980H Transition Relief
○ D. 98% Offer Method
1094-C: Parts II, Line 22
1094-C: Part III
1094-C: Parts IV
Type of Reporting
Who Reports Transmittal Form
6055 Insurer 1094-B 1095-B
6056 Large Employer with Fully Insured Plan
1094-C 1095-C
6055 Small Employer with Self-Insured Plan
1094-B 1095-B
6055 Multiemployer Plans 1094-B 1095-B
6055/6056 Large Employer with Self-Insured Plan reporting employees
1094-C 1095-C
6055 Large Employer with Self-Insured Plan reporting non-employees
1094-B or
1094-C
1095-B or
1095-C
Who reports what (revisited)
Details and Deadlines
● Mailing the forms to the IRS is permitted for employers with fewer than 250 Forms 1095-B or 1095-C in a calendar year.
● Can I submit the reports electronically?
○ IRS encourages all employers to file their forms
electronically.
○ Employers that file at least 250 Forms 1095-B
or 1095-C in a calendar year are required to file electronically. Other employers may file
electronically, but are not required to do so.
Method of IRS Reporting
● How should I send out the statements?
○ Electronically (if employee has consented to
electronic)
○ Posting to a website (an employer must separately
notify the employee)
○ Employee can also request a paper copy
● Can we send out the employee statements with the W-2
forms?
○ Yes. Employers may include an employee’s
statement with his or her Form W-2 mailing.
Statements to Employees
Report/Disclosure Due date Section 6055 statement to employees 1/31 of each year (2/1/16) Section 6055 report to IRS 2/28 (or 3/31 if filed electronically*) Section 6056 statement to employees 1/31 of each year (2/1/16) Section 6056 report to IRS 2/28 (or 3/31 if filed electronically*)
* Must file electronically if provide 250 or more “returns”
Separate Return & Statement Deadlines
● Failure to timely file complete and accurate returns to the IRS, or failure to timely furnish a correct statement to responsible individuals:
○ $100 per return with a maximum of $1,500,000
for a calendar year
○ Penalties may be reduced if corrective action is
taken within 30 days and may even be waived if
the failure to file timely or accurately is due to reasonable cause and not due to willful neglect.
● Penalty relief for reports filed in 2016 as long as “good faith” efforts to comply are made
Penalties
Action Steps
Collect data during 2015 regarding
Who is covered by MEC Who are full-time employees Who was offered coverage Was coverage affordable
Consider vendor options for data
aggregation and reporting
Action Steps
Request Social Security numbers for covered dependents
Button-up compliance with employer
shared responsibility rules
Determine other controlled group and affiliated service group members
Resources
www.ajghealthcarereform.com
The intent of this presentation is to provide you with general information regarding the status of, and/or potential concerns related to, your current employee benefits issue.
It does not necessarily fully address all your specific issues. It should not be construed as, nor is it intended to provide, legal or tax advice.
Questions regarding specific issues should be addressed by the your organization's general counsel, tax advisor, or an attorney who specializes in this practice area.
Thank you!
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Q&A
Kara Badyna Compliance Consultant
Arthur J. Gallagher & Co.
Jim Littlefield Solutions Engineer
PeopleMatter
Program ID 238272
Credit hours awarded 1
Specified credit hours HR (General)
HRCI
