6055 and 6056 webinar · 2018-04-04 · • self-funded health plans –employers of all sizes who...

IRS Reporting:Sections 6055 and 6056

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© 2017 GALLAGHER BENEFIT SERVICES, INC.

ALEXIS MARTIN, ACCOUNT EXECUTIVE

JANUARY 10, 2017

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™

Agenda

• Background

• Review: Who is subject to a Section 6055 and/or 6056 reporting obligation?

• Lessons Learned from 2015

• What’s New for 2016

• IRS Forms Walkthrough:

– 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

• Best Practices to Adopt

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Employer Reporting

Minimum Essential Coverage §6055• Self funded only

• All size employers

Applicable Large Employer §6056• ≥ 50 FTEs

• Fully-insured and self funded

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ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™

Who is required to report?


Employer Reporting

• Self-Funded Health Plans

– Employers of all sizes who sponsor self-funded health

plans that provide minimum essential coverage to any

individual during the calendar year are required to

report

• Fully-Insured Health Plans

– The health insurance carrier will be responsible for

reporting

– If the employer who sponsors the plan is an

applicable large employer, the employer will have

additional reporting obligations

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What is MEC?

• MEC = Minimum Essential Coverage

• Eligible employer-sponsored health plans

– Both fully-insured and self-insured, regardless of employer size

– This does not include excepted benefits (certain dental, vision and EAP plans)

– 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

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Employer Reporting

• The reporting for applicable large employers who sponsor fully-insured health plans will include detailed information about

– In which months they offered minimum essential coverage to an employee

– The reasons why coverage was not offered in certain months

– The lowest cost to the employee for employee-only coverage

– Reliance on any transition relief

– Members of their controlled group, if any

– The number of full-time employees and total number of employees per month

• Information about the months in which employees, their spouses and dependents were covered will be reported by the health insurance carrier

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Reporting to IRS and Employees

• A – Marketplace

– Form 1095-A

• B – Health Insurance Carriers (and small self-funded employers)

– Form 1094-B (transmittal)

– Form 1095-B

• C – Applicable Large Employers - ALEs are those

with 50 or more full-time (FT) and full-time

equivalent (FTE) employees

– Form 1094-C (transmittal)

– Form 1095-C

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Reporting by Health Insurance Carriers

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To Enrolled Employees To IRS

Individualized Statement

Form 1095-B

Transmittal Report

Form 1094-B

Each Employee Statement

Forms 1095-B

Feb. 28, 2017(Mar. 31, 2017 if e-file)


Applicable Large Employer Reporting

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To Full-Time Employees To IRS

Each member of controlled group reports separately

Individualized Statement

Form 1095-C

Jan. 31, 2017

Transmittal Report

Form 1094-C

Feb. 28, 2017(Mar. 31, 2017 if e-file)

Each Employee Statement

Forms 1095-C

Feb. 28, 2017(Mar. 31, 2017 if e-file)


Reporting to Employee

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Fully-insured plan

where employer has

fewer than 50 FTEs

Fully-insured plan

where employer has

50 or more FTEs

Full-time employee enrolled in

coverageInsurer reports on Form 1095-B

Insurer reports on Form 1095-B

Employer reports on Form 1095-C

Full-time employee NOT

enrolled in coverageEmployer reports on Form 1095-C

Non-full-time employee

enrolled in coverageInsurer reports on Form 1095-B Insurer reports on Form 1095-B

Non-full-time employee NOT

enrolled in coverage

Non-employee for full year

(e.g., retirees, COBRA

beneficiaries, directors)

Insurer reports on Form 1095-B Insurer reports on Form 1095-B


Employer Mandate

Lesser of:

2016: $3,240 for each FT receiving tax credit

OR $2,160 x (# of FTs – 30)

2017: $3,390 for each FT receiving tax credit

OR $2,260 x (# of FTs – 30)*

NO

No penalty applies!

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No penalty applies!

If at least one FT employee receives premium

assistance:

2016: $2,160 x (total # of FTs – 30)

2017: $2,260 x (total # of FTs – 30)*

YES

NO

NO

NOIs coverage affordable?

YES

Does plan have minimum value?

YES

Is coverage offered to 95% of all full-time

employees?

YES

Do you have at least 50 FT and FTE employees?

*Proposed© 2016 GALLAGHER BENEFIT SERVICES, INC.


Lessons Learned from 2015


Reporting Expectation

• Expect to report

– Despite rumors and expectations, reporting for 2015

still took place

• We only saw delays

– Despite election outcome, wholesale changes are not

expected to alter reporting for 2016

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Full-Time Employee Status

• Full-time employee status

– Need to determine full-time status for each month

based on the IRS rules

– This status may differ from eligibility under plan

documents

– If using look-back method:

• Variable hour employees’ status during stability period is

based on hours during measurement period, not current

hours

• We will look at an example during the “IRS Forms

Walkthrough”

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Tracking Employees

• Track all employees:

– Even if full-time and eligible for benefits

– Needed to report on Form 1095-C

– Especially if employee changes job positions or

locations

– Initial tracking for full-time employees

• Must be done based on hours per month

• Even if using the look-back method

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Working with Vendors

• Can help to make reporting easier

• Make sure:

– They are using up-to-date, accurate information

– You check to ensure that reporting is done properly

• District is responsible for accuracy of forms

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Electronically Filed Forms

• Employers with at least 250 Forms are required to

file electronically with the IRS

• Many filings were “accepted with errors” while some

were “rejected”

• Appears that many issues involved Social Security

Number failing to match employee’s name

• Should confirm that name and number used on SSN

card match Form 1095-C

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What’s New for 2016


Filing Deadlines in 2017

• Reporting must be completed timely

– Statements to employees

• Deadline was extended to March 2, 2017

– To IRS

• Paper filing by February 28, 2017

• Electronic filing by March 31, 20107

• Further delays are not expected for these filings

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Penalties

• Penalties increased

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Time returns filed/furnishedReturns due 1/1/2016 thru

12/31/2016

Returns due 1/1/2017 thru

12/31/2017

Not more than 30 days late

(e.g. by March 30 if the due

date is February 28)

$50 per return/

$529,500 maximum

$50 per return/

$532,000 maximum

31 day late – August 1 $100 per return/

$1,589,000 maximum

$100 per return/

$1,596,500 maximum

After August 1 or Not At All$260 per return/

$3,178,500 maximum

$260 per return/

$3,193,000 maximum

Intentional Disregard$520 per return/

No limitation

$530 per return/

No limitation


Good Faith Effort

• IRS recently provided relief if good faith effort for:

– Forms sent to individuals and/or IRS

– Incorrect or incomplete returns

• Does not apply to Forms that are late or not filed

• IRS will consider whether made reasonable efforts to prepare for filing, such as:

– Gathering and transmitting data to vendor

– Testing ability to transmit information to IRS (if applicable)

– Taking steps to comply for 2017 reporting (due in 2018)

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Changes to the Codes

• Reporting Spousal Coverage

– New codes for use on line 14 of Form 1095-C if

conditional offer of coverage is made to spouse

• 2015 Qualifying Offer Method Transition Relief

– No longer available

– Form 1095-C, Part II, Line 14, Code 1I and Line 16,

Code 2I have been removed

– Was available to applicable large employers that

made Qualifying Offers for one or more months of

2015 to at least 95% of its full-time employees

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IRS Forms Walkthrough


Northwest School District

• School district with 400 employees

– Full-time salaried

– Hourly

– Substitute

• Fully insured health plan

• November 1-October 31 plan year

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Form 1094-B

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To IRS with all Forms 1095-B

Completed by Insurer


Form 1095-B:

Parts I, II, and III

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Form 1095-B:

Part IV

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Form 1094-C and 1095-C

• 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, Part III blank (the portion dealing with

covered individuals)

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Form 1094-C:

Part I

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To IRS with all Forms 1095-C

Completed by District

Northwest

School

District

information

Provide total number of Forms 1095-C

included with this transmittal

327

There must be one Form

1094-C that is the

authoritative transmittal

X


Form 1094-C:

Part II

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If only one

Form 1094-

C is filed,

this number

is the same

as line 18

327

X


Form 1094-C:

Part II, Line 22• Simplifications and transition relief may be available

– A. Qualifying Offer Method

• Can provide simplified statement to employees who

received a qualifying offer for all 12 months and do not

have to report amount of lowest-cost coverage

– B. “Reserved”

• Previously used for 2015 transition relief

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Form 1094-C:

Part II, Line 22• C. Section 4980H Transition Relief includes:

– ALEs with Full-Time 50-99 Employees – No 4980H(a) or (b) penalty for plan year beginning in 2015, including months of the plan year in 2016 calendar year (if certain conditions are met)

– ALEs with 100 or More Full-Time Employees –Reduction in amount of 4980H(a) penalty for plan year beginning in 2015, including months of the plan year in 2016 calendar year (if certain conditions are met)

– 70% of Full-Time employees – No 4980H(a) penalty for plan year beginning in 2015, including months of the plan year in 2016 calendar year (if certain conditions are met)

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Form 1094-C:

Part II, Line 22• D. 98% Offer Method – Not required to:

– Identify which employees are full-time employees; or

– Complete full-time employee count

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Form 1094-C:

Part III

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Leave (d) blank -

not part of a

controlled group

Check “Yes” if

offered MEC to at

least 95% (70% in

2015 plan year) of

full-time employees

and dependents

Do not have to

complete column (b)

if qualify for the 98%

Offer Method.

Enter total

number of

all

employees

as of 1st or

last day for

each month

401

404

410

410

405

380

380

380

415

404

405

404

Enter Code B if

eligible for

Section 4980H

(a) Transition

Relief

B


Form 1094-C:

Part IV

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Leave Part IV blank -

not a member of a

controlled group



Mike

• Bus driver hired in 2014

– Variable hour position

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Ongoing Employee

2013-14

Plan Year

2014-15

Plan Year

Stability Period

Nov 1, 2015-Oct 31, 2016

Stability Period

Nov 1, 2016-Oct 31, 2017

1st Standard

Measurement Period

Sept 1, 2014-Aug 31, 2015

1st Administrative Period

(≤90 days)

Sept 1, 2015-Oct 31, 2015

2nd Standard Measurement Period

(≤12 months)

Sept 1, 2015-Aug 31, 2016

2nd Administrative Period

(≤90 days)

Sept 1, 2016-Oct 31, 2016

• Meets hpw requirements

during 1st Standard

Measurement Period

• Offered coverage Nov 1,

2015

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Form 1095-C:

Parts I and II

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Line 14: Use Code 1A for all

12 months, as he was offered

coverage for the full year

1A

Line 15: Do not enter

amount for lowest-cost

since using 1A

Line 16: Use Code 2C

as Mike enrolled in

coverage for the year *See note below.

2C*

* When using code 1A on line 14, it is informally recommended by the IRS

to leave line 16 blank, even when the employee is enrolled (2C) and

coverage is affordable (2G). Otherwise there is a potential for programming

code errors.


Form 1095-C, Part II, Line 14 Codes

• 1A: “Qualifying Offer”

• 1B: MEC + MV to employee

• 1C: MEC + MV to employee; MEC to dependent(s)

• 1D: MEC + MV to employee; MEC to spouse

• 1E: MEC + MV to employee; MEC to spouse & dependent(s)

• 1F: MEC (but not MV)

• 1G: Self-insured plan to non-full time employee (12 months)

• 1H: No MEC offer

• 1I: “Reserved” (previously used for transition relief)

• 1J (new): Conditional offer to spouse; no offer to dependents

• 1K (new): Conditional offer to spouse; offer to dependents

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Form 1095-C, Part II, Line 16 Codes

• 2A: Not employed during any day of month

• 2B: Not full-time employee; did not enroll

• 2C: Employee enrolled

• 2D: Limited non-assessment period

• 2E: Multiemployer interim relief

• 2F: Affordability – W-2 safe harbor

• 2G: Affordability – FPL safe harbor

• 2H: Affordability – Rate of pay safe harbor

• 2I: “Reserved” (previously used for transition relief)

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Form 1095-C:

Part III

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District leaves blank.

Coverage information

provided to Mike on

1095-B by insurer.


Sophie

• Hourly paraeducator

• Averaged 18 hpw during last measurement period

– Is not eligible for health coverage

• No Form 1095-C is completed for Sophie because:

– She is not a full-time employee, and

– She does not participate in the health plan

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Scott

• New custodian hired on May 10, 2015

– Variable hour position

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New Employee

2015Ongoing Stability Period

Nov 1, 2015-Oct 31, 2016

Ongoing Stability Period

Nov 1, 2016-Oct 31, 2017

DOH:

May 10, 2015

Initial Measurement Period

(≤12 months)

Jun 1, 2015-May 31, 2016

Initial Administrative Period

(≤90 days)

Jun 1, 2016-Jun 30, 2016

• Meets hpw requirement during

Initial Measurement Period

• Employee offered coverage

July 1, 2016

Initial Coverage

Stability Period

Jul 1, 2016-Jun 30, 2017

Ongoing Standard Measurement

Sept 1, 2015-Aug 31, 2016

Ongoing Standard Measurement

Sept 1, 2016-Aug 31, 2017

Ongoing

Stability Period

Jul 1, 2017-Oct 31, 2017

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Form 1095-C:

Parts I and II

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* When using code 1A on line 14, it is informally recommended by the IRS to leave

line 16 blank, even when the employee is enrolled (2C) and coverage is affordable

(2G). Otherwise there is a potential for programming code errors.

Line 14: Use Code 1H for

Jan. 2016 – Jun. 2016, as he

was not offered coverage

1H 1H 1H 1H 1H 1H

Line 14: Use Code 1A for Jul. 2015

– Dec. 2015, as qualifying coverage

was offered to employee,

dependents and spouse

1A 1A 1A 1A 1A 1A

Line 15: Do not enter

an amount since a

qualifying offer

Line 15: Leave blank for

Jan. 2016 – Jun. 2016 as

no coverage offered

Line 16: Use Code 2D for Jan.

2016 – May 2016 as he was in

an initial measurement period

2D 2D 2D 2D 2D

Line 16: Use Code 2D for

June 2016 as he was in an

administrative period

2D

Line 16: Use Code 2C for

Jul. 2016 – Dec. 2016 as he

was enrolled in coverage*See note below

2C* 2C* 2C* 2C* 2C* 2C*


Form 1095-C:

Part III

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provided to Scott on

1095-B by insurer.


Aubrey

• Hired as a variable hour substitute teacher on

May 15, 2015

• Promoted to full-time teacher on

January 15, 2016

• Offered coverage as of April 1, 2016

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Transition to Full-Time

Nov 1, 2014-Oct 31, 2015

Plan Year/Stability Period

Nov 1, 2015-Oct 31, 2016

Plan Year/Stability Period

Initial Measurement Period:

6/1/15 – 5/31/16

DOH:

May 15, 2015Variable Hour

Substitute Teacher

• Must offer affordable, minimum

value coverage by May 1, 2016

− Offered by April 1 to avoid 90-

day waiting period limitation

• If not, may be subject to penalty

from DOH (5/15/15) if Aubrey

obtains coverage through the

Marketplace with premium

assistance

Promotion:

January 15, 2016Full-Time Teacher

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Form 1095-C:

Parts I and II

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Line 14: Use Code 1H for

Jan. 2016 – Mar. 2016, as

she was not offered coverage

1H 1H 1H 1E 1E 1E

Line 14: Use Code 1A for Apr. 2016

– Dec. 2016, as coverage was

offered to employee, dependents

and spouse. *Could use 1A instead and not reflect cost in line 15

1E 1E 1E 1E 1E 1E

Line 15: Enter amount for

lowest-cost to employee for self-

only coverage that was offered

for Apr. 2016 – Dec. 2016.

Line 15: Leave blank for

Jan. 2016 – Mar. 2016 as

no coverage offered

Line 16: Use Code 2D for Jan.

2016 – Mar 2016 as she was in

an initial measurement period

2D 2D 2D 2C 2C 2C

Line 16: Use Code 2C for

Apr 2016 – Dec. 2016 as she

was enrolled in coverage

2C 2C 2C 2C 2C 2C


Form 1095-C:

Part III

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provided to Aubrey on

1095-B by insurer.


Best Practices to Adopt


Count Hours of Service for Each

Employee• If available, track actual hours of service or

equivalency hours for all employees

– Allows vendors to have data on all full-time

employees

– Data may be needed if an employee changes status

from full-time to part-time

– Unless reporting under the 98% Offer Method

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Offer Coverage to All Full-Time

Employees• Required to inform IRS on Form 1094-C that

employer mandate penalties apply if:

– Do not offer coverage to at least 95% of full-time

employees and their dependents

• Determined each month

• Be aware of excluded employees, such as interns,

temps, etc.

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Maintain Adequate Documentation

Regarding Methods Used• Look-back method periods, including measurement,

administrative and stability periods

• Beginning of initial measurement period for new

hires

– i.e., date of hire or first of the month

• If different methods or measurement periods are

used for different groups (e.g., salaried vs. hourly)

• Use of special provisions, such as for continuously

covered employees

• Affordability safe harbor used each year

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Resources

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ajghealthcarereform.com


Resources

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Thank you!Alexis Martin, Account Executive

[email protected]

425-974-4428


Not Legal or Tax Advice

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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 your organization’s general

counsel, tax advisor, or an attorney who specializes in this

practice area.

6055 and 6056 webinar · 2018-04-04 · • self-funded health plans –employers of all sizes who...

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