On July 24 the Internal Revenue Service released prototypes of forms employers will use to comply with the extensive reporting requirements mandated by the Affordable Care Act (ACA). The healthcare reform law requires employers annually to report details of employer-sponsored health coverage to the IRS and to their full-time employees.  

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ACA Reporting Update: IRS Releases Draft Forms

Tue Jul 29, 2014

On July 24 the Internal Revenue Service released draft forms 1094-B, 1094-C, 1095-B and 1095-C, prototypes of forms employers will use to comply with the extensive reporting requirements mandated by the Affordable Care Act (ACA).

The healthcare reform law requires employers annually to report details of employer-sponsored health coverage to the IRS and to their full-time employees.

Ceridian’s Human Resurces Legislation Blog outlined the final reporting rules when they were issued in March 2014.

Like the W-2 reporting process, code sections 6055 and 6056 will require employers to file and furnish—i.e., (a) to file with IRS an annual information return on behalf of each full-time employee and a transmittal statement; and (b) to furnish full-time employees with a corresponding information statement.

First returns, for calendar year 2015, will be due early in 2016.

Section 6055 requires sponsors of self-insured group health plans and insurance issuers to report on individual enrollments in minimum essential health coverage. Section 6056 requires employers subject to the so-called “Play or Pay” mandate to report on health coverage offered to full-time employees and their dependents. Sponsors of self-insured health plans are therefore subject to both reporting rules.

More specifically, under 6055 employers will report to IRS (on Forms 1095-B) information for each individual (not just full-time employees) enrolled in minimum essential coverage, including names, addresses and EINs or DOBs, and for each covered individual the months for which the individual was enrolled.

Section 6056 requires employers to report to IRS (on Forms 1095-C) information on their compliance with the Play or Pay mandate, including for each full-time employee the employee’s dollar share of the lowest cost monthly premium for self-only coverage providing minimum value offered to that employee—the 9.5% affordability test.

IRS will also use “indicator codes” to capture additional information from employers, such as total number of employees by calendar month and whether the employer met one of the affordability safe harbors, e.g., the W-2 safe harbor.

The US Chamber of Commerce testified recently on Capitol Hill that the ACA reporting requirement represents an “extensive burden of cost and time to comply” and an “exceedingly high administrative burden.”

Indeed, IRS has acknowledged that sections 6055 and 6056 impose an extensive new reporting burden on employers. Nevertheless, says the agency, employer reporting is the only way IRS can enforce the ACA’s dual mandate—that individuals enroll in minimum essential coverage and that employers offer “affordable” coverage that provides “minimum value.”

Implications for Employers—

Publication of the draft forms signals essentially three things to employers:

One, IRS intends to implement the ACA reporting requirement as a matter of law and as an enforcement tool. The appearance last week of the draft forms in many ways dashes hopes for another delay in the reporting requirement.

Two, IRS is providing a much-needed “heads-up” about the specific information employers will be expected to collect and report to the government.

Three, for their part, employers need to make sure they have on board the HCM technology, like Dayforce HCM, that will enable them to collect the data and populate the fields in Forms 1094-B, 1094-C, 1095-B and 1095-C. The reports will require information on qualification (time and attendance), eligibility and enrollment (benefits) and affordability (payroll), ideally a single application across these three domains as well as purpose-built reporting functionality.

To be sure, the section 6055 and 6056 health coverage reporting requirement is one of the most challenging compliance mandates the ACA imposes on employers. July 24 publication of draft IRS forms means it is now time for employers to put in place the needed HCM reporting technology.