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ACA EMPLOYER REPORTING
Managing your 2015 reporting process
Presented by:
Next Generation Healthcare Economics
November, 2015
Sources of Rules Information
The authoritative sources of all information in this presentation are either summarized and/or referenced in the following publications:
• IRS Instructions for Forms 1094-B and 1095-B, published 9-16-2015
• IRS Instructions for Forms 1094-C and 1095-C, published 9-16-2015
In any cases where the interpretations in this presentation may differ from the above cited publications, the IRS Instructions and IRS interpretations of those instructions; made both now and in the future, will take precedence.
Please refer to the last presentation slide for references and disclaimers
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What does the IRS want to know?
1. Who has “minimum essential coverage”?
2. Who is eligible for premium tax credits?
3. Which employer plans exist, what kind of coverage do they provide and for whom:
a) For small group, who is covered under an MEC plan?
b) For large group, who is covered and who is eligible for an MEC, MV plan and is that coverage affordable?
c) Employer Share Responsibility rules impose penalties for “applicable large employers” who fail to offer full-time employees and their dependents coverage; affordability penalties apply to ALE plans that fail to meet earnings-contribution specifications for single employee MV coverage.
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What, Where, How and When
Compliance policies from the ACA’s Employer Shared Responsibility rules:
1. Status as small or large (applicable large employer) determines reporting rules/process
2. Methods use to determine eligibility and affordability determine kind of reporting data
3. Policies established for making eligibility offers of coverage(ACA-compliant personnel policies)
4. Personnel and HR data resources
5. IRS reporting rules, distribution of forms and instructions for filing forms
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Small or Large Group?
1. Self-insured small group (less than 50 full-time and full-time equivalent employees) must file with IRS using form 1094-B (employer transmittal form) and distribute 1095-B (employee return form) to employees covered under their health plan
2. Self-insured large groups (50 or more full-time and full-time equivalent employees) must file with IRS using form 1094-C (employer transmittal form) and distribute 1095-C (employee return form) to employees covered under their health plan
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PART 1: SMALL GROUP
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Purpose of the “B” forms
Filed by insurers, multiemployer plans, and small
employers (non-ALEs) with self-funded plans.
For Applicable Large Employers (ALEs) who are fully-
insured they must file 1095-C forms for their full-time
employees and all covered non-employees (Part 1 and II
only).
ALE insurance companies must file 1095-B forms providing
coverage information via 1095-B Part IV. The ALE must
distribute the 1095-B forms and file using the 1094-B
transmittal form.
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Two key reporting tasks for small groups
1. Distributing separate 1095-B forms to each “responsible
individual” covered under the group health plan.
2. Filing your 1094-B transmittal and copies of all 1095-B
forms distributed to the IRS.
How will you prepare the 1095-B forms for distribution?
How will you file with the IRS (manual or electronically)?
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Information required for 1095-B
1. Part I: “Responsible Individual” is the employee who is covered under the health plan.
2. Part II: Do not complete part II; this is only for insurance companies or SHOP exchange carriers.
3. Part III: Do complete Part III, entitled “issuer or other coverage provider”. This references employer sponsors of self insured plans.
4. Part IV: Health plan coverage details for the responsible individual listed in Part I and dependents also covered. Note requirement for dependent social security numbers. Part IV information is available from the group health plan administrator.
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Social security numbers
Remember To Obtain the SSN of EVERYONE!
• The SSN is needed for the forms
• Section 6055 reporting requires SSN of all covered individuals (e.g., employee, spouse, dependent children)
• Section 6056 reporting requires full-time employee’s SSN
• If you are unable to obtain a SSN after making a reasonable effort to do so, the covered individual’s date of birth may be reported in lieu of a SSN
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Social security numbers
Reasonable effort is required
• Initial request for SSN at the time of enrollment
• If no SSN received, first annual solicitation is required by
December 31 of the year coverage begins
• If still no SSN received, second annual solicitation is
required by December 31 of the following year
• If still no SSN is received after the second solicitation, you
do not need not continue to solicit the SSN
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Social security numbers
When employers obtain social security numbers for
dependents, they should do so in a manner that protects
individual identities and privacy rights.
SSNs can be listed on the printed versions of the forms in
protected formats; e.g., xxx-xx-1234.
All such information should be passed on to the plan
administrator so they can update their year end reports with
complete data.
TIP: Lots of missing SSNs could trigger an IRS audit.
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Integrating 1095-B data
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Each employee and non-employee continuant, retiree, etc. covered
under the employer’s health plans must be reported in Part IV. This
information must be provided in a format that can be integrated with
the employer’s information provided in Part I and Part II data so that
all three data sets may be assembled into one form for each individual
recipient of the 1095-B form.
Note: Taft-Hartley and other multiple employer plans must provide
1095-B forms to responsible individuals covered under their plans.
The Taft-Hartley plan must also file the 1094-B transmittal for all such
individuals.
Multiple data submissions will be required for groups that have more
than one plan administrator. Split groups (having more than one
health plan administrator) must collate information for Part IV in time
for process and delivery to responsible individuals.
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PART 2: LARGE GROUP
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Small vs Large Group
1. Small group reporting basically serves the purpose of providing information for individual coverage verification only.
2. Small group does not have to comply with the Employer Shared Responsibility provisions of the ACA.
3. Note: Groups must be prepared to verify that they are either a small group or large group (aka Applicable Large Employer) following the rules for counting full-time and full-time equivalent employees specified in the ACA rules for Employer Shared Responsibility (subject of past seminars ).
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Two key reporting tasks for large groups
1. Distributing separate 1095-C forms to each full-time
eligible employee and all other plan-covered individuals.
2. Filing your 1094-C and copies of all 1095-C forms
distributed to the IRS.
How will you prepare the 1095-C forms for distribution?
How will you file with the IRS (manual or electronically)?
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How are you coordinating your resources to
ensure timely reporting?
1. Payroll
2. HRIS
3. Health plan administrator
4. Third party tax-filing service (?)
Which of these will file your reports with the IRS?
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Collating information from different sources into
the 1095-C forms – and in a file-worthy format
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Preparing the 1095-C forms
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The most challenging ACA reporting task is the preparation,
coordination and integration of the information that must go into each
1095-C form. 1095-C must collate different kinds of information for
different purposes in different sections of the form:
1. It must identify employee and dependent plan eligibility and
coverage offer
2. It must identify the nature of the coverage offer (MEC/MV) and the
affordability of the offer for single coverage
3. It must verify coverage for each individual listed on the form
Individuals must attach their 1095 form to their 1040 form when filing
their 2015 taxes. The 1095 form stipulates compliance with the
individual mandate for all listed covered individuals.
The kind of information provided on the 1095-C form depends on how
the employer chooses to satisfy the ACA’s compliance rules for 2015;
specifically in regards to Transitional Relief.
How to Prepare Employer Data for 1095-C
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Step 1: The employer selects their chosen method of certification of
eligibility for 2015 on Line 22 of the 1094-C transmittal form (see
instructions on slides 14-22).
The method(s) selected will determine the codes that will be required
when filling out Lines 14, 15 and 16 in Part II of 1095-C.
Groups using transitional relief for 2015 will use either method B or C
(see slide 22).
How to Prepare Employer Data for 1095-C
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Step 2: Parts I and II data must be collated and produced for each
full-time employee and each health plan covered non-employee.
Part I data resides in payroll systems. Part II data sources will vary
depending upon how the employer produces and stores the
information – and where it is stored. HRIS systems may be used by
the employer to transfer the data to the 1095-C form.
Question for payroll/HRIS administrators: Can your system load 1095-
C Part II data from our records using a designated Certification of
Eligibility method?
If Part II data cannot be produced from HRIS in an automated fashion,
employers must manually load it into whatever system they are using
to produce the 1095 forms.
How to Prepare Individual Data for 1095-C
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Step 3: Part III health plan coverage individual data must be provided
for all employees and non-employees covered under the employer’s
health plan. This section of 1095-C fulfills the verification of coverage
requirement stipulated in the individual mandate.
Part III data comes from the health plan administrator. It is
important for the employer to receive a completed report for Part II
coverage data for all plan-covered individuals no later than 1-15-2016.
Part III data should come from the plan administrator complete with
dependent social security numbers. (see slides 12-14 for detailed
instructions)
Integrating the 1095-C data
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Each employee, continuants, retirees and all individuals
covered under the employer’s health plans must be
reported in Part III. This information must be provided in a
format that can be integrated with the employer’s Part I
and Part II data so that all three data sets may be
assembled into one form for each individual recipient of
the 1095-C form.
Multiple data submissions will be required for groups that
have more than one plan administrator. Split groups
(having more than one health plan administrator) must
collate information for Part III in time for process and
delivery to responsible individuals.
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Filing the 1094-C and 1095-C Forms with the IRS
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Once Part I, II and III data have been integrated into one
1095-C form per individual, the form must be:
(a) Distributed to each recipient, and
(b) Converted to an XML formatted form for bulk
transmission to IRS via the ACA Information Reporting
(AIR) system (accompanying form 1094-C).
Note that all 1095-C forms must be transmitted along with
the 1094-C Transmittal form (also prepared in XML
format) no later than 3-31-2016 (for 2015 calendar year
reporting).
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Large group reporting:
step by step
Control Groups
The ACA’s reporting rules require all groups who are part of, or are
themselves applicable large employers to indicate their status as either
being a control group or an entity that must report up through a control
group, subject to the Employer Shared Responsibility (ESR) rules that
apply to ALEs.
• “ALE” members may be part of an “aggregated ALE (aka controlled)
group;
• An “aggregated ALE group” is a controlled group of employers which
together have 50 or more full-time and full-time equivalent employees.
• Each entity within a controlled group is subject to the ESRs. Groups
that are suspect ALE members may “play it safe” by following the
reporting rules for ALEs. Each group is individually responsible.
You may seek legal guidance to determine your status as an ALE
member group or aggregated ALE control group. You are required to
make a “reasonable determination” as to your status.
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Designated Governmental Entities
ALEs may band together for reporting purposes, with one entity
designating itself as the control group, responsible for reporting all or
part of the others’ filing requirements.
For the first year of ACA reporting it is recommended that each group
submits its own reporting. Each group should follow the rules for ALEs,
regardless of their individual size.
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1094-C Lines 18, 19, 20 and 21
Line 18 – Enter total number of 1095-C forms that will be filed with the
IRS with this 1094-C form.
Line 19 – Is this the authoritative transmittal for ALL members of the
control group? Or are some excluded (e.g., when DGE files for some,
but not all, members of the control group? Answer is normally “yes”.
Note: there must be only one Authoritative Transmittal submitted for
each group (see instructions for details).
Line 20 – Enter all 1095-C forms that are being filed not only with this
1094-C, but any forms that may be filed by some other entity (e.g.,
DGE) for some portion of the employer group. The number of forms
will normally be the same as shown on Line 18 (see instructions for
details).
Line 21 – Are you a part of a control group? Check “yes” for any
months which your group was part of a control group.
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1094-C Select reporting methods – Line 22
The ACA’s reporting rules provide employers with general methods for
how they must report information to the IRS. These “certification of
eligibility” rules specify the type of information they must provide to full-
time employees (via 1095-C), depending on the methods chosen for all
or different groups of employees. Multiple methods may be used.
There is also a special method for employers who take advantage of
the one-time transitional relief rules that apply for 2015.
Some methods are designed to minimize the cost and complexity of the
administrative tasks associated with reporting. Therefore, it benefits
employers to seek the least complicated reporting methods wherever
possible.
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Certification of Eligibility (1094-C line 22 A)
A. Qualifying Offer Method
This method applies if an employer made a qualifying offer to one or
more full-time employees for all 12 months of the calendar year. The
qualifying offer is an offer of Minimum Essential Coverage (MEC) at a
monthly cost for self-only coverage not exceeding 9.5% of the Federal
Poverty Level. MEC must also be offered to spouses and dependents.
The employer should enter Code 1A on form 1095-C, Part II line 14.
The employer does not report the dollar amount on 1095-C Part II line
15 for any month a qualifying offer is made, providing the FPL safe
harbor applies to all employees.
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Certification of Eligibility (Qualifying Offer Method)
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Certification of Eligibility (1094-C line 22 B)
B. Qualifying Offer Method Transitional Relief (for 2015)
This method applies if an employer made a qualifying offer for one or
more months during 2015 to at least 95% of its full-time employees.
For any month a qualifying offer was made, enter Code 1A on 1095-C
Part II line 14 for any months for which the employee received a
qualifying offer or enter Code 1I for any months for which the employee
did not receive a qualifying offer.
Leave Part II line 15 blank; be sure to fill out Line 16 with the applicable
safe harbor code that is being used (2F W-2 safe harbor, 2G FPL safe
harbor or 2H Rate of Pay safe harbor).
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Certification of Eligibility (Qualifying Transitional Relief)
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Certification of Eligibility (1094-C line 22 C)
C. 4980H Transitional Relief Method (for 2015)
This method applies if an employer is eligible for either the 2015
transitional relief for applicable large employers with fewer than 100
full-time employees or the 70% transitional relief for the no coverage
penalty (4980H (a)) for ALEs with 100 or more full-time employees.
The employer should complete 1094-C Part III, column e.
You must provide affordability cost data on Line 15 for all employees.
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Certification of Eligibility (4980H Transitional Relief)
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Certification of Eligibility (1094-C line 22)
D. 98% Offer Method
This method applies for employers who offered affordable, minimum
value coverage for all 12 months to at least 98% of its employees and
MEC to those employees’ dependents.
The employer does not have to complete the full-time employee count
on 1094-C Part III, column b. Nor does it have to provide cost
information on Line 15 (be sure to specify which safe harbors apply on
Line 16). This is the simplest reporting option.
However, while this method offers a simpler filing process, it does NOT
relieve the employer from tracking specific data for each employee and
covered individuals. Upon request, the employer would be expected to
provide that information (for an audit, e.g.).
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Certification of Eligibility (98% Offer Method)
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Transitional Relief Reporting (2015 ONLY)
4980H Transition Relief (2 types)
1. 50-99 full-time/full-time equivalent relief (not subject
to 4980H penalties for 2015)
• Must enter code A on 1094-C, Part III, Column (e)
2. 100 or > full-time/full-time equivalent relief (2015)
70% of eligibility offers required
• 4980H(a) penalty calculated with 80 employee reduction
rather than 30) for 2015 only
• Must also enter code B on 1094-C Part III, Column (e)
Note: Coverage offers for 2016 must be made for 95% of
all full-time employees for employers with 50 + full-time
and/or full-time equivalent employees.
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1094-C Part III
Column (a) Minimum Essential Coverage Offer Indicator.
• If the employer offered minimum essential coverage to at least 95% of its full-
time employees and their dependents for the entire calendar year, enter “X” in
the “Yes” checkbox on line 23 for “All 12 Months” or for each of the 12
calendar months.
• If the employer offered minimum essential coverage to at least 95% of its full-
time employees and their dependents only for certain calendar months, enter
“X” in the “Yes” checkbox for each applicable month.
• For the months, if any, for which the employer did not offer minimum essential
coverage to at least 95% of its full-time employees and their dependents,
enter “X” in the “No” checkbox for each applicable month.
• If the employer did not offer minimum essential coverage to at least 95% of its
full-time employees and their dependents for any of the 12 months, enter “X”
in the “No” checkbox for “All 12 Months” for each of the 12 calendar months.
• However, an employer that did not offer minimum essential coverage to at
least 95% of its full-time employees and their dependents but is eligible for
certain transition relief described in the instructions later under Section 4980H
Transition Relief for 2015 should enter an “X” in the “Yes ”checkbox for Part
III, line 23, column (a), as applicable.
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1094-C Part III
Column (b) Full-Time Employee Count for ALE Member.
Enter the number of full-time employees for each month, but do not
count any employee in a Limited Non-Assessment Period. (If the
number of full-time employees (excluding employees in a Limited Non-
Assessment Period) for a month is zero, enter “0”.)
Note. If the employer certified that it was eligible for the 98% Offer
Method by selecting box D, on line 22, it is not required to complete
column (b).
Column (c) Total Employee Count for ALE Member.
Enter the total number of all of your employees, including full-time
employees and non-full-time employees and employees in a Limited
Non-Assessment Period, for each calendar month.
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1094-C Part III
Column (d) Aggregated Group Indicator.
An employer must complete this column if it checked “Yes” on line 21,
indicating that, during any month of the calendar year, it was a member
of an Aggregated ALE Group.
Column (e) Section 4980H Transition Relief Indicator.
• If the employer certifies by selecting box C on line 22, that it is eligible
for Section 4980H Transition Relief and is eligible for the 50 to 99
Relief, enter code A.
• If the employer certifies by selecting box C on line 22, that it is eligible
for Section 4980H Transition Relief and is eligible for the 100 or More
Relief (i.e.,70% eligibility offer), enter code B.
• An employer will not be eligible for both types of relief.
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Employer’s health plan renewed 7-1-2015
Transitional relief code for 100
+ ees at 70% for the plan year
Full-time
employees
All employees
including part
time
Employer’s health plan renewed 7-1-2015
Full-time
employees
All employees
including part time
Transitional relief code for 100+ ees at 70% offer
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1095 – C Part II: Line 14 Offer of Coverage Codes
The Code Series 1 indicator codes specify the type of coverage, if any, offered
to an employee, the employee’s spouse, and the employee’s dependents. This
information is required on Part II, Line 14.
1A. Qualifying Offer: Minimum essential coverage providing minimum value
offered to full-time employee with employee contribution for self-only coverage
equal to or less than 9.5% mainland single federal poverty line and at least
minimum essential coverage offered to spouse and dependent(s).
1B. Minimum essential coverage providing minimum value offered to employee
only. (non-compliant code; do not use)
1C. Minimum essential coverage providing minimum value offered to employee
and at least minimum essential coverage offered to dependent(s) (not spouse).
1D. Minimum essential coverage providing minimum value offered to employee
and at least minimum essential coverage offered to spouse (not dependent(s)).
1E. Minimum essential coverage providing minimum value offered to employee
and at least minimum essential coverage offered to dependent(s) and spouse.
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1095 – C Part II: Line 14 Offer of Coverage Codes
1F. Minimum essential coverage NOT providing minimum value offered to
employee; employee and spouse or dependent(s); or employee, spouse and
dependents.
1G. Offer of coverage to employee who was not a full-time employee for any
month of the calendar year (which may include one or more months in which the
individual was not an employee) and who enrolled in self-insured coverage for
one or more months of the calendar year.
1H. No offer of coverage (employee not offered any health coverage or
employee offered coverage that is not minimum essential coverage, which may
include one or more months in which the individual was not an employee).
1I. Qualifying Offer Transition Relief 2015: Employee (and spouse or
dependents) received no offer of coverage; received an offer that is not a
qualifying offer; or received a qualifying offer for less than 12 months.
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1095 – C Part II: Line 14 Coverage Code Tips
• Avoid red codes if possible; they are non-compliant with the ACA rules.
• An offer of COBRA continuation coverage that is made to a former employee
upon termination of employment should not be reported as an offer of coverage
on Line 14.
• An offer of COBRA continuation coverage that is made to an active employee
(for instance, an offer of COBRA continuation coverage that is made due to a
reduction in the employee’s hours that resulted in the employee no longer
being eligible for coverage under a plan) is reported in the same manner and
using the same code as an offer of that type of coverage to any other active
employee.
• For a terminated employee, code 1H (No offer of coverage) should be entered
for any month for which the offer of COBRA continuation coverage applies.
• If the type of coverage, if any, offered to an employee was the same for all 12
months in the calendar year, enter the Code Series 1 indicator code
corresponding to the type of coverage offered in the “All 12 Months” box or in
each of the 12 boxes for the calendar months.
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Cost of Coverage Reporting (1095 - C Part II, Line 15)
• Complete Part II, Line 15 only if code 1B, 1C, 1D, or 1E is entered on Line 14 either in the “All 12 Months” box or in any of the monthly boxes.
• Enter the amount of the employee share of the lowest-cost monthly premium for self-only minimum essential coverage providing minimum value that is offered to the employee. Enter the amount including any cents.
• For purposes of determining the monthly employee contribution, an employer may divide the total employee share of the premium for the plan year by the number of months in the plan year to determine the monthly employee contribution for the plan year.
• This monthly employee contribution would then be reported for any months of that plan year that fall in the 2015 calendar year.
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Cost of Coverage Reporting (1095 - C Part II, Line 15)
• If the employee is offered coverage but is not required to contribute any amount towards the premium, enter “$0.00” (do not leave blank).
• If the employee share of the lowest-cost monthly premium amount was the same amount for all 12 calendar months, enter that monthly amount in each monthly box or enter that monthly amount in the “All 12 Months” box and do not complete the monthly boxes.
• If the employee share of the lowest-cost monthly amount was not the same for all 12 months, enter the amount in each calendar month for which the employee was offered minimum value coverage.
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Cost of Coverage Reporting (1095 - C Part II, Line 15)
Tip:
For line 15, enter the lowest-cost monthly premium for self-
only minimum essential coverage providing minimum value
that is offered to the employee. This amount may not be the
amount the employee is paying for the coverage, for
example, if the employee chose to enroll in a more expensive
coverage such as family coverage, or in a more expensive
plan option of higher value that the employer offers in
addition to the minimum value plan.
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1095 – C Part II, Line 16 – 4980H Safe Harbor and other relief codes
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An employer enters the applicable Code Series 2 indicator code, if any,
on Part II, Line 16 to report for one or more months of the calendar year
that one of the following situations applied to the employee:
1. The employee was not employed or was not a full-time employee;
2. The employee enrolled in the minimum essential coverage offered;
3. The employee was in a Limited Non-Assessment Period with respect
to section 4980H(b);
4. Non-calendar year transition relief applied to the employee;
5. The employer met one of the section 4980H affordability safe
harbors with respect to this employee;
6. The employer was eligible for multi-employer interim rule relief for
this employee.
In some circumstances more than one situation could apply to the same
employee in the same month. In that case, see the IRS instructions that
determine order of precedence as to what code should apply.
1095 – C Part II, Line 16 – 4980H Safe Harbor and other relief codes
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2A. Employee not employed during the month. Enter code 2A if the employee
was not employed on any day of the calendar month. Do not use code 2A for a
month if the individual was an employee of the employer on any day of the
calendar month. Do not use code 2A for the month during which an employee
terminates employment with the employer.
2B. Employee not a full-time employee. Enter code 2B if the employee is not a
full-time employee for the month and did not enroll in minimum essential
coverage, if offered for the month. Enter code 2B also if the employee is a full-
time employee for the month and whose offer of coverage (or coverage if the
employee was enrolled) ended before the last day of the month solely because
the employee terminated employment during the month (so that the offer of
coverage or coverage would have continued if the employee had not terminated
employment during the month). Also use this code for January 2015 if the
employee was offered health coverage no later than the first day of the first
payroll period that begins in January 2015 and the coverage offered was
affordable for purposes of the employer shared responsibility provisions under
section 4980H and provided minimum value.
1095 – C Part II, Line 16 – 4980H Safe Harbor and other relief codes
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2C. Employee enrolled in coverage offered. Enter code 2C for any month in
which the employee enrolled in health coverage offered by the employer for each
day of the month, regardless of whether any other code in Code Series 2 (other
than code 2E) might also apply (for example, the code for a section 4980H
affordability safe harbor). Do not enter 2C in line 16 if code 1G is entered in the All
12 Months Box in line 14 because the employee was not a full-time employee for
any months of the calendar year. Do not enter code 2C in line 16 for any month in
which a terminated employee is enrolled in COBRA continuation coverage (enter
code 2A).
2D. Employee in a section 4980H(b) Limited Non-Assessment Period. Enter
code 2D for any month during which an employee is in a Limited Non-Assessment
Period for section 4980H(b).
If an employee is in an initial measurement period, enter code 2D (employee in a
section 4980H(b) Limited Non-Assessment Period) for the month, and not code 2B
(employee not a full-time employee). For an employee in a section 4980H(b)
Limited Non-Assessment Period for whom the employer is also eligible for the
multiemployer interim rule relief for the month, enter code 2E (multiemployer interim
rule relief) and not code 2D (employee in a Limited Non-Assessment Period).
1095 – C Part II, Line 16 – 4980H Safe Harbor and other relief codes
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2E. Multiemployer interim rule relief. Enter code 2E for any month for which the
multiemployer arrangement interim guidance applies for that employee, regardless
of whether any other code in Code Series 2 (including code 2C) might also apply.
This relief is described under Offer of Health Coverage in the Definitions section of
these instructions.
2F. Section 4980H affordability Form W-2 safe harbor. Enter code 2F if the
employer used the section 4980H Form W-2 safe harbor to determine affordability
for purposes of section 4980H(b) for this employee for the year. If an employer uses
this safe harbor for an employee, it must be used for all months of the calendar year
for which the employee is offered health coverage.
2G. Section 4980H affordability federal poverty line safe harbor. Enter code 2G
if the employer used the section 4980H federal poverty line safe harbor to
determine affordability for purposes of section 4980H(b) for this employee for any
month(s).
2H. Section 4980H affordability rate of pay safe harbor. Enter code 2H if the
employer used the section 4980H rate of pay safe harbor to determine affordability
for purposes of section 4980H(b) for this employee for any month(s).
1095 – C Part II, Line 16 – 4980H Safe Harbor and other relief codes
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2I. Non-calendar year transition relief applies to this employee. Enter code 2I if
non-calendar year transition relief for section 4980H(b) applies to this employee for
the month. See the instructions later under Section 4980H Transition Relief for 2015
and 2015 Section 4980H(b) Transition Relief for Employers with Non-Calendar Year
Plans (Form 1095-C, line 16, code 2I), for a description of this relief.
Note. Codes 2F through 2H: Although employers may use the section 4980H
affordability safe harbors to determine affordability for purposes of the
multiemployer arrangement interim guidance, an employer eligible for the relief
provided in the multiemployer arrangement interim guidance for a month for an
employee should enter code 2E (multiemployer interim rule relief), and not a code
for the section 4980H affordability safe harbors (codes 2F, 2G, or 2H).
Reporting Covered Individuals
You must complete 1095-C, Part III ONLY if:
• Employees and non-employees are enrolled in an employer-
sponsored self-insured health coverage
• Must be completed for all employees enrolled in the self-insured
health coverage, regardless of whether or not they are FTEs
You must also report enrolled spouses and dependents
• Note that SSNs are required for both employee, spouses and
dependents. Use dates of births if SSNs are not available (e.g., for
newborns).
• SSNs are preferred and provide the employer protection against
potential penalty assessment error reconciliations.
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MEC Reporting for Non-Employees
Reporting is also required for non-employees who are covered
under the employer’s health plan.
ALEs that offer employer-sponsored self-insured health coverage to
non-employees who enroll in the coverage should use form 1095-C,
Part III, to report MEC provided to those individuals and other family
members.
Who might be affected:
• non-employee directors
• an individual receiving retiree coverage who was not an employee
during the entire year
• a non-employee COBRA beneficiary (e.g., dependent)
• A terminated employee receiving COBRA coverage who terminated
employment during a previous year
• If part-time employees are eligible, their offer of coverage may be
reportable via 1095-C (rules are vague on this)
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PART 3: SAMPLES/TIPS
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Reporting tips
• A TIN may be used where an SSN is not available.
• The EIN on the employee’s 1095 form must match the
EIN on their W-2.
• Employers that cover non-employees that are on their
plan (e.g. COBRA, retirees) may, but are not required to,
use the B Forms instead of 1095-C Part III.
• The C Forms require employers to count their total
number of employees, in addition to just full-time
employees.
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Reporting tips
• The two counting methods from the draft instructions (first
or last day of the calendar month) remain, plus now
employers may count on the first or last day of the payroll
period starting in the calendar month.
• An employee working for multiple employer members in a
calendar month is treated as an employee of only the
member for which she worked the most hours that month
(i.e. only that employer must file the 1095-C for her,
though the employee may also receive the form from
other members she worked for).
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Reporting tips
• Applicable large employers may use transition relief under which they are deemed to offer coverage to certain employees, even if they don’t actually do it, in order to hit the 2015 70% threshold on 1094-C. However, only actual offers of coverage go on Form 1095-C Part II.
• With respect to actual offers of coverage:
• An employer may report offering coverage for a month only if it offers coverage for every day of that month.
• Offers to employee spouses, even if conditional, count so long as the condition is reasonable and objective (e.g. excluding spouses covered or offered coverage by their own employers).
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Reporting tips
• While the draft instructions said that providing each
employee with a summary of the offered coverage was
acceptable, the final instructions require that a self-
insured employer give a copy of the 1095-C to each
covered employee.
• An employer with 50 to 99 full-time employees, though
exempt from the employer mandate for 2015, must still file
forms 1094-C and 1095-C.
• The final instructions do not offer further information on
using third parties to facilitate reporting by employers.
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Reporting tips
Delivery methods of information to employees:
Two options:
• Mail paper forms to last known permanent address
• Electronic delivery; must get affirmative consent
Note: Hand delivery or intra-office mail may not satisfy
delivery requirements
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Reporting due dates
• Employee 1095 returns are due to responsible
individuals (employees and non-employees covered
under the plan) by 2-1-2016
• Paper filing of employer transmittals (1094 forms) are
due IRS – along with copies of 1095 forms – by 2-29-
2016.
• Electronic filing of employer transmittals (1094 forms)
are due IRS – along with copies of 1095 forms – by 3-
31-2016. Note employers issuing 250 or more 1095
forms must file electronically via the IRS AIR system.
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Extensions and exceptions applications
30 Day Filing Extension
• Groups may apply for a 30 day grace period for filing
their 1094-B and/or 1094-C Employer Transmittal to
the IRS by submitting form 8809 on or before the due
date of the forms.
• No explanation is required for the extension.
• The request is automatically granted unless filed for
after the date the forms are due.
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Extensions and exceptions applications
Extensions of time to furnish statement to recipients. Employers
may request (not automatic) an extension of time to furnish 1095-B and
1095-C statements to recipients by sending a letter to:
Internal Revenue Service, Information Returns Branch
Attn: Extension of Time Coordinator
240 Murall Drive, Mail Stop 4360
Kearneysville, WV 25430.
The letter must include (a) filer name, (b) filer TIN, (c) filer address, (d)
type of return, (e) a statement that extension request is for providing
statements to recipients, (f) reason for delay, and (g) the signature of
the filer or authorized agent. The request must be postmarked by the
date on which the statements are due to the recipients. The maximum
extension granted will be no greater than 30 days; approval may be
granted for a lesser extension of time, depending on circumstances
related to the need for the extension.
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Extensions and exceptions applications
Electronic filing exception (file instead on paper)
• If you are required to file 250 or more Forms 1095-C during a
calendar year, you must file the returns with the IRS
electronically. If you are unable to comply, you may apply for a
waiver from electronic filing
• To receive waiver from electronic filing, submit Form 8508 at
least 45 days before due date for filing the forms 1095-C. Once
the application of waiver is made, the group must submit its
1094-B and/or 1094-C transmittal forms according to the paper
filing deadline of 2-29-2016 (unless a filing extension is also
requested via Form 8809).
• If filing by paper, send the forms to the IRS by first class mail
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Penalties for late/incorrect reporting
IRS has issued transitional relief for penalties for forms that are filed that
contain errors:
“There will be no penalties if employer has inadvertent errors or
incomplete data but can demonstrate that they have made a good
faith effort to comply. However there is no relief for late filing and
the penalties for late filing are severe:”
$250 per late filing up to a maximum annual fine of $3 million. Late filing
doubled ($500 per form) if late filing is intentional. Other penalty triggers:
• Incorrect media for transmission of filings
• Incorrect formatting of filings
• Incorrect employee TINs
(Note: Groups may apply for a 30 day grace period for filing their
employer transmittal to the IRS – see form 8809):
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Data Requirements
The data employers need to satisfy their reporting requirements will come from three basic sources:
Payroll records and employer timesheets – Payroll systems and employer timesheets are two data sources employers will need to rely upon to track and report their hours of eligibility information and affordability data.
Employer HR eligibility offer records – Employer HR systems must also be prepared to track and provide records of coverage offers so that the employer may verify that it has offered coverage to all eligible employees.
Health plan administrator coverage records (census/list bills) - Each employer’s health plan is a source of coverage information necessary for filling out either IRS 1095-B Part IV (for small group) or IRS form 1095-C Part III (for ALEs). .
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What to do NOW
Identify all of your data sources!
Make sure your payroll system is programmed to track and
record how you measure eligibility and affordability.
You must be able to produce the payroll data records that
substantiate every eligibility determination you make. If
you are audited by the IRS, that is the information they are
most likely to examine.
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What to do NOW
Check the integrity and availability of personnel records that will:
1. Substantiate the issuance of eligibility offers; declinations and acceptance
for employee and dependent coverage for 2015. It is also a good idea to retain
documentation of notification of affordability status of the coverage offer that is
made to each full-time employee.
2. Have documented personnel policies that support your ACA-compliant
eligibility and contributions policies applicable to 2015.
3. Make sure similar processes are followed for your eligibility determinations
and offers of coverage made for 2016. (Note: This process must be in place for
open enrollment periods applicable to the upcoming 2016 policy year).
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What to do NOW
4. Document and supplement payroll records with any hour equivalency
formulas you may use in lieu of actual hours tracked by payroll. These must be
recorded in your personnel policies along with substitute timesheets you must
maintain for these employees – unless payroll can do it for you.
5. (Large employers only) Keep personnel records for each employee (all W-2
employees) that will substantiate the coverage, transitional relief and
affordability coding needed for form 1095-C Part II.
6. Create a distribution plan for your employees’ 1095 returns. Hint: These
forms must be distributed to employees in the same timeframe as they receive
their W-2 forms. See IRS Section 530 for general rules and guidelines.
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What to do NOW
7. Find out what health plan coverage information will be provided by
your health plan administrator.
a. Make sure plan information will be provided in a complete format
that can be automatically transferred to the IRS 1095 forms.
b. Make sure employee-specific plan information will be sent to you in
early January 2016, since you must complete and distribute the
1095 forms to your employees no later than 2-1-2016.
c. Make sure to obtain and record the social security numbers of all
employees, spouses and dependents.
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QUESTIONS FOR PAYROLL/HRIS ADMINISTRATORS
Many payroll and HRIS systems have already adopted technologies that
will enable employers to automate most, if not all, of their ACA reporting
requirements – AND complete the electronic filing for them. Will yours?
Here are a few pertinent questions you should ask your payroll/HRIS and
health plan administrator(s):
1. When will we receive complete calendar year plan coverage (1095-B
Part IV and 1095-C Part III) information from Blue Cross and other
health plan administrators (e.g., other insurance companies, PEIP,
etc.?)
2. Will our payroll/HRIS system be able to transfer/integrate plan
coverage data from Blue Cross’ EXCEL file into our 1095 forms?
How about information from other insurance companies/PEIP, etc.?
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QUESTIONS FOR PAYROLL/HRIS ADMINISTRATORS
3. 1095-C (Large employers only): Once we identify our Certification of
Eligibility Method(s) (Form 1094-C, Line 22), will our payroll/HRIS
system be able to “auto fill” the appropriate coding and MV single
coverage contributions for Lines 14, 15 and 16 on form 1095-C Part
II?
4. Will our payroll/HRIS system produce form 1095-B and 1095-C for
our employees in a format that can be filed with the IRS using the
new ACA Information Reporting (AIR) system? Ready for distribution
to our employees?
5. Will our payroll/HRIS service file our forms with the IRS for our group
electronically by the required dates?
6. Will our payroll/HRIS service distribute forms 1095-B and 1095-C to
our employees and non-employee plan members by the required
dates?
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References
• The Internal Revenue Service IRS Health Care Tax Tip 2015-62
IRS Instructions and forms for 1094-B, 1095-B, 1094-C and 1095-C - 2015
IRS Section 4980 H (a) and (b)
IRC 6051
IRC 6055
IRC 6056
IRS Section 5000A
• ADP, LLC.
• Benefitslink.com
• Groom Law Group
• Dorsey & Whitney, LLP
• HR 360
DISCLAIMER
The information included in this presentation is intended for general information purposes only. It is not to be construed as legal or tax advice applicable to any employer or individual.
Any U.S. federal tax or other regulatory agency references made herein are not intended to be used, and cannot be used, by any person or business entity for the purpose of avoiding any penalties that may be imposed by the IRS or any other governing agency, state or federal. Under IRS rules governing tax advice, a taxpayer may rely on professional advice to avoid federal tax penalties only if that advice is provided in a tax opinion that conforms to federal
requirements.
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