2015 Affordable Care ActProvisions for Individuals,

Families, and Business

Association of Government Accountants Tax Seminar

December 4, 2015

Richard G. Furlong, Jr.Senior Stakeholder Liaison

Small Business/Self-Employed Division

The information contained in this presentation is current as of November 2015. For the latest information about tax provisions of the Affordable Care Act, visit IRS.gov/aca.

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Agenda

• Individual Shared Responsibility Provisions

• Premium Tax Credit

• Employer Shared Responsibility Provisions– Determining Applicable Large Employer Status (ALE) – Defining Full-Time Employees– Shared Responsibility Payment (§4980H) – 2015 Transition Relief

• Information Reporting– Employer Reporting (§6056) – Insurance Issuer (§6055)

• Summary

• Resources3

Individual Shared Responsibility

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Reporting Coverage

• Check box and leave entry space blank if everyone on the return had coverage for the full year

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Minimum Essential Coverage

MEC coverage is:

•Offered by an employer, COBRA and retiree coverage

•Purchased through private insurance or Health Insurance Marketplace

•Provided by government-sponsored programs, including veteran’s coverage, most Medicare and Medicaid

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Information Statements

• Marketplace - Form 1095-A, - Health Insurance Marketplace Statement

• Insurers - Form 1095-B, Health Coverage

• Large Employers – Form 1095-C, Employer-Provided Health Insurance Coverage and Offer

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Form 1095-A

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Form 1095-B

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Form 1095-C

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Form 8965Health Coverage Exemptions

Submit Form 8965 with federal tax return to claim coverage exemptions granted by either the Health Insurance Marketplace or IRS

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Coverage Exemptions

• Coverage Exemptions only available at filing

• Coverage Exemptions only available through the Marketplace

• Coverage Exemptions from Marketplace or IRS

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Making an Individual Shared Responsibility Payment

Taxpayers calculate SRP if everyone on the return does not have:

•MEC for every month of the year, or

•Exemption for months without MEC

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How is the 2015Payment Calculated?

• For the year, based on the greater of the calculated:

– percentage of income (2%) or

– flat dollar amount ($325 per adult)

• Limited to maximum of $975 per household

• Prorated for months without coverage/exemption

• Cannot exceed the national average premium for bronze level health plans

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Return Preparer Interview Best Practice

• Use Form 1095-A, B or C to– verify coverage months and – who is covered

• Determine eligibility for exemption– Marketplace ECN– Income below return filing threshold or– IRS coverage exemptions

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Common Errors

• Eligible for coverage exemption but did not claim– Income below filing threshold– Not lawfully present– Coverage gaps

• Miscalculated SRP

• SRP on dependent returns

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2015: What You Need to Know

• Forms 1095-A, B and C

• Apply for Marketplace exemptions early

• ISRP amounts increase

• 2016 Marketplace enrollment– Nov 1, 2015 to January 31, 2016– Special Enrollment Periods

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Basics of the PTC

•Refundable tax credit

•Must buy Marketplace coverage

•Must file Form 8962 to claim the PTC and reconcile any advance payments

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PTC Eligibility

Must meet all of the following requirements:

•Income between 100-400% of Federal Poverty Line•Taxpayer, spouse, or dependent must enroll in Marketplace coverage for a month that the enrollee is not eligible for coverage through employer or government plan•Cannot be claimed as a dependent by another person•Not file as Married Filing Separately

Note: Some exceptions apply

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2015 Income Limits are based on 2014 FPL

One Individual: $11,670 (100% FPL) - $46,680 (400% FPL)

Family of Two: $15,730 (100% FPL) - $62,920 (400% FPL)

Family of Four: $23,850 (100% FPL) - $95,400 (400% FPL)

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Advance Payments of PTC (APTC)

• Determined by Marketplace based on estimated household income and family size

• Paid directly to insurance company on the taxpayer’s behalf

• MUST file tax return to reconcile

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Reporting Changes in Circumstances

Examples:

•Family size or filing status (family = personal exemptions)

•Increase/decrease in household income

•Gain/loss of health care coverage or eligibility

•Moving to another address

Important: Report changes to the Marketplace when they happen

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How to claim the PTC

•Based on actual annual household income and family size reported on the tax return

•Claimed on tax return using Form 8962 –Reconciles APTC

–Results in either a refundable credit or repayment of excess advance payments

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Forms needed to claim PTC

• Form 1095-A from Marketplace• Form 8962 to claim and reconcile PTC/APTC

• File Form 8962 with 1040, 1040A or 1040NR

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Form 1095-A, Health Insurance Marketplace Statement

• Issued by the Marketplace

•Must be used to complete Form 8962

• Reports monthly household coverage information:

Plan premiumApplicable second lowest cost silver

plan premiumAPTC

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Form 8962 - Premium Tax Credit

File Form 8962 with tax return to :

•claim the premium tax credit and

•reconcile APTC

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Completing Part II of Form 8962

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Completing Part IV of Form 8962

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• Did your client receive Form 1095-A from Marketplace?

•APTC

•Verify coverage months and who is covered

•Multiple policies issued

• Were there changes in circumstances during the year?

•Married/divorced  

•Eligible for government or employer sponsored coverage

•Months without coverage

Return Preparer Interview Best Practices

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2014 Filing Season Recap

• Reconciling APTC

•Penalty relief for 2014

• Reporting changes in circumstances

• Corrected Forms 1095-A

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Common Errors

• Claimed PTC but failed to attach Form 8962

• Did not reconcile APTC–Form 8962, Part 2, Lines 11 or 12-23 (Column F)

• Form 1095-A data not correctly reported–Form 8962, Part 2, Lines 11 or 12-23 (Columns A

and B)

• Transposed digits

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Common Errors

• Miscalculated Monthly PTC Allowed–Form 8962, Part 2, Lines 11 or 12-23

(Column E)

• Miscalculated Repayment Amount of Excess APTC–Form 8962, Part 3, Lines 28 & 29

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2015: What You Need to Know

• Forms 1095-A and 8962

• Report changes in circumstance to the Marketplace if receiving APTC

• 2016 Marketplace enrollment–Nov 1, 2015 to January 31, 2016

–Special Enrollment Periods

Affordable Care Act: Employer Shared

Responsibility and Information Reporting

November 13, 2015

Richard Furlong, Jr.

What Employers Need to Know

• Impacts Applicable Large Employer’s (ALEs) - those with 50 or more full-time or full-time equivalent employees – Fewer than 50 – §4980H does not apply

• Employer Shared Responsibility Provisions (§4980H)

• ALE Information Reporting (§6056)

• Health Coverage Information Reporting (§6055)

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The Employer Shared Responsibility Provisions (§4980H)

• In general, ALEs must either:

– Offer health coverage that is affordable and that provides minimum value to their full-time (FT) employees (and their dependents), or

– May be subject to an employer shared responsibility payment

• Effective beginning January 1, 2015

• 2015 transition rules for eligible ALEs with less than 100 full-time employees (including full-time equivalent employees)

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Determining ALE Status

• Average number of employees and their hours of service in preceding year determines ALE status for the current year

• Full time employees are defined as 30 hours/week or 130 hours/month

• Definition of full-time equivalent employee

• Seasonal worker exception

• Common ownership and controlled groups

• Transition rule for 2015 ALE determination40

ALE Example: Subject to ESRP

• Company X had 40 full-time employees and 20 part-time employees at 60 hours each month– The 20 part-time employees = 10 full-time-

equivalent employees – 40 FT plus 10 FTE = ALE (50 FT/FTE)

• Company X is subject to the employer shared responsibility provisions

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ALE Example: NOT Subject to ESRP

• Company Y had 20 full-time employees and 20 part-time employees at 60 hours each month– The 20 part-time employees = 10 full-time-

equivalent employees – 20 FT plus 10 FTE = 30 FT/FTE

• Company Y is NOT subject to the employer shared responsibility provisions

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Common Owner ALE Example

• For all of 2015 & 2016, Corp A owns 100% of Corp B and Corp C

• Number of 2015 FT employees:

Corp A – None

Corp B – 40

Corp C – 60

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Total – 100

• Corp A + B + C is an ALE for 2016

• Corps B & C are each an ALE member43

Determining Full-Time Employee Status

• FT = 30 hours/week or 130 hours/month

• Two measurement methods– Monthly– Look-back

• Defining an hour of service– Hour for which paid or entitled to be paid– Special rules

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Employer Shared Responsibility

• Generally, liability exists if employer:

– Does not offer coverage to at least 95% of FT employees (and their dependents) and at least one FT employee receives the PTC, OR

– Does offer to at least 95% of FT employees (and their dependents), but at least one FT employee receives the PTC because, for that full-time employee, coverage was

• not offered

• unaffordable, or

• did not provide minimum value

• 2015 Transition relief45

Definition of Affordability and Minimum Value

• Affordability

– Affordable if employee’s share of lowest cost self-only coverage does not exceed 9.5% of household income

• Three employer “safe harbors”

• Minimum value

– Coverage is considered to provide minimum value if the plan covers at least 60% of the total cost of benefits and covers substantial in-patient hospital and physician services

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Employer Shared Responsibility Payment

• Offer to less than 95% (70% for 2015*) – Payment of 1/12 of $2,000 per FT

employee, above 30 threshold (per month)

• Offer to at least 95% (70% for 2015*)– Payment of 1/12 of $3,000 per PTC-

receiving FT employee, (per month), subject to limitation

* 2015 Transition Relief 47

Additional 2015 Transition Relief

• Eligible employers with 50-99 FT + FTE employees (requires certification)

• Dependent coverage

• Non-calendar year plans

• First payroll rule (January 2015)

• Multiemployer plans

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Shared Responsibility – Assessment and Payment

• Employer will not make a payment with a return

• IRS will determine amount and notify employer

• Employer will have opportunity to respond before assessment

• IRS will send a notice and demand after assessment

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ALE Information Reporting (§6056)

• Requires ALEs to file an information return to report health care coverage offered to the employer’s full-time employees for the calendar year– Applies to employers who are subject to the

employer shared responsibility provisions (4980H)

• Information is used to (1) administer the employer shared responsibility provisions (4980H) and (2) to determine an employee’s eligibility for the premium tax credit

• Effective 2015; first returns due 2016

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ALE Reporting Methods

• General Reporting Method– Full reporting for all full-time employees– Reporting on a month-by-month basis

• Alternative Reporting Methods– Qualifying Offer Method– 98% Offer Method

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ALE Forms

• Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns– Transmittal of employer level data

• Form 1095-C, Employer–Provided Health Insurance Offer and Coverage

–Employee statement

• Due Dates– Furnished to Employee by January 31– Filed with the IRS by February 28 (March 31 if

filed electronically) 52

Form 1094-C (page 1 of 3)

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Form 1094-C (page 2 of 3)

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Form 1094-C (page 3 of 3)

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Form 1095-C

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Health Coverage Information Reporting (§6055)

• Requires all health insurance issuers, self-insured employers, certain government agencies, and other entities, that provide minimum essential coverage to an individual during a calendar year to report certain information to the IRS

• Information is used to verify months covered by MEC to satisfy the individual shared responsibility requirement (5000A)

• Effective 2015; first returns due 201657

Minimum Essential Coverage

• Government-sponsored programs

– Medicare part A, most Medicaid programs, CHIP, most TRICARE, most VA programs, Peace Corps, DOD Non-appropriated Fund Health Program

• Employer-sponsored coverage

– Insured or self-insured group health plans

– Excludes coverage that is solely excepted benefits

– Grandfathered Plans

– Cobra Coverage

• Individual market coverage

– Qualified health plans enrolled in through Marketplace

– Other individual coverage

• Miscellaneous MEC

– Other health benefits coverage recognized by HHS as MEC58

Who is an MEC provider?

• All insured coverage– Issuer or carrier (i.e., the insurance company)

• Government-sponsored coverage– Medicare: Medicare, including for part C (Medicare

Advantage)– Medicaid, CHIP: State agency administering

program– Tricare, VA, Peace Corps, Non-appropriated fund

program: agency sponsoring the program

• Misc. MEC– Sponsoring entity 59

Who is an MEC provider? (continued)

• Self-insured coverage

• Plan sponsor must report. Plan sponsor is:– Employer– Multiemployer plan (as defined in ERISA) –

association, committee, joint board of trustees, similar body that establishes and maintains the plan

– MEWAs – each participating employer for that employer’s employees

– Union plans – the employee organization– Others – person identified as sponsor or

administrator60

Health Coverage Reimbursement Arrangements

• Notice 2015-17 provides temporary relief from the §4980D excise tax

• Small employers with Employer Payment Plans got relief for 2014 and up to July 1, 2015

• S corporations continue to report pursuant to Notice 2008-1

• Market reforms do not apply to health plans that cover less than two current employees

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Health Coverage Forms

• Form 1094-B, Transmittal of Health Coverage Information Returns

– Transmittal of Individual Data

• Form 1095-B, Health Coverage

– Information return and recipient statement reporting Minimal Essential Coverage

• Due Dates

– Furnished to taxpayers by January 31

– Filed with the IRS by February 28 (March 31 if filed electronically)

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Form 1094-B

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Form 1095-B

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Combined Information Reporting

• Applies to ALE members that sponsor self-insured group health plans

• Combined reporting on Form 1095-C for both §6056 and §6055 – Benefit to ALE

• Only one form provided to each employee

• Only one form submitted to IRS

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Electronic Filing Requirements

• Must electronically file if submitting 250 or more information returns– Note: Do not aggregate with Forms W-2 to determine if 250

threshold applies

• Information Return Filing Preparation:

1. Responsible Officials and Contacts complete e-Services Registration Process (if not completed previously)

2. Complete and sign online ACA Information Return Application for Transmitter Control Code (TCC)

3. Receive TCC through the mail (also available online)

4. Participate in ACA Assurance Testing (AATS) or Communication Testing

5. File information returns electronically66

Summary

• Applicable Large Employer (ALE) defined

• Employer Shared Responsibility Provisions (§4980H)

• ALE Information Reporting (§6056)

• Health Coverage Information Reporting (§6055) 67

Affordable Care Act Resources

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Affordable Care Act Resources

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Richard G. Furlong, Jr.

Senior Stakeholder Liaison

267-941-6343

richard.g.furlong@irs.gov

Contact Information

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