The IRS got the attention of employers in February when it issued final rules on ACA “employer shared responsibility.” Known colloquially as “Play or Pay,” the regulations spell out penalties employers face for failing to offer minimum essential coverage to full-time employees and their dependents starting in 2015.

Regulation round two followed on March 5: section 6056 reporting.

The two sets of regulations send an important message: Play or Pay cannot work without extensive employer reporting. This explains why IRS will require employers annually to (a) file a return with IRS, similar to the Form W-2, with respect to each full-time employee; and (b) furnish each full-time employee with a statement of their health insurance coverage.   

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Affordable Care Act Reporting: New Compliance Complication

Fri Mar 14, 2014

The IRS got the attention of employers in February when it issued final rules on ACA “employer shared responsibility.” Known colloquially as “Play or Pay,” the regulations spell out penalties employers face for failing to offer minimum essential coverage to full-time employees and their dependents starting in 2015.

Regulation round two followed on March 5: section 6056 reporting.

The two sets of regulations send an important message: Play or Pay cannot work without extensive employer reporting. This explains why IRS will require employers annually to (a) file a return with IRS, similar to the Form W-2, with respect to each full-time employee; and (b) furnish each full-time employee with a statement of their health insurance coverage.

More specifically, effective next year employers subject to Play or Pay are required to file an annual section 6056 (and section 6055) information return, Forms 1095-C, as well as an accompanying transmittal statement, Form 1094-C, containing the following information:

  • Name, address, employer identification number and calendar year for which the information is reported;
  • Name and telephone number of the employer contact person;
  • Certification whether the employer offers to full-time employees and their dependents the opportunity to enroll in minimum essential coverage, by calendar month;
  • Number of full-time employees for each calendar month during the calendar year;
  • For each full-time employee, the months for which minimum essential coverage was available;
  • For each full-time employee, the employee’s share of the lowest cost monthly premium for self-only coverage providing minimum value offered to that employee, by calendar month;
  • The name, address and TIN/SSN of each full-time employee during the calendar year and the months during which the employee was covered under an employer plan.

Employers will file their first Forms 1094-C, covering calendar year 2015, no later than March 1, 2016 (March 31 if filed electronically). They will furnish employees with their first coverage statements no later than February 1, 2016.

It now becomes clear that ACA “employer shared responsibility” and employer reporting are two sides of the same compliance coin. Moreover, IRS has now spoken: public comments have been considered; final regulations have been promulgated.

On top of all the ACA compliance mandates that have rolled out in 2011, 2012, 2013 and 2014, we now know that 2015 will bring employer play or pay and employer health coverage reporting.

Prudent employers will use 2014 to prepare for 2015 ACA compliance. They will evaluate HCM solutions to enable seamless monitoring and tracking of detailed compliance metrics, like coverage “affordability” at 9.5 percent of W-2 wages for the lowest cost self-only plan. And they will make sure they have the tools to generate accurate and timely section 6056 reporting.