This post focuses on the highlights of IRS Code section 6056 reporting, including reporting requirements imposed on employers, factors driving reporting and deadline for ACA Code 6056 compliance, to help employers prepare for 2015 compliance with Affordable Care Act health coverage reporting requirements.  

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IRS News: Employer ACA Reporting—Part 2

Tue Sep 9, 2014

To help employers prepare for 2015 compliance with Affordable Care Act health coverage reporting requirements, the Internal Revenue Service on August 29 released draft instructions for completing the new reporting forms as well as useful questions and answers. 

To recap, Code section 6055 reporting relates to the individual mandate to have health insurance (Part 1) , while Code section 6056 applies to the employer “Play or Pay” mandate to offer health coverage to full-time employees.

This blog focuses on Code section 6056 reporting, including IRS questions and answers and draft instructions for Forms 1094-C and 1095-C that “applicable large employers” must use to report coverage information.

Highlights from the IRS Q&A on Code section 6056 reporting:

  • What are the requirements? The Affordable Care Act requires employers to file information returns annually with the IRS and furnish statements to full-time employees about the health coverage such employers offer.
  • Why 6056 reporting? IRS must have this information in order to enforce ACA’s requirements under section 4980H employer shared responsibility (also known as “Play or Pay”).  In addition, IRS and full-time employees will use the information to determine whether an employee is eligible for a premium tax credit subsidy to help pay premiums for insurance purchased on a health insurance exchange.
  • When to comply? The 6056 information reporting mandate is effective for coverage offered or not offered in 2015. Applicable large employers will file information returns with IRS and furnish statements to employees beginning in 2016, to report information about health coverage offered for CY 2015.
  • What information must be reported to IRS? Employers will need to review the Code 6056 reporting regulations IRS issued on March 10, 2014 for details of what must be reported.
  • Similar to the W-2, a separate return is required to be filed for each full-time employee and will include such information as a certification whether the employer offered minimum essential coverage to full-time employees and their dependents; the number of full-time employees for each calendar month; and, 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 full-time employee under the employer sponsored plan, by calendar month.  Indicator codes will also be used to provide certain additional information.
  • How to report to IRS? IRS states in the Q/A that applicable large employers will annually file a Form 1094-C (transmittal) and a Form 1095-C (employee statement) for each full-time employee.
  • Note that applicable large employers who are sponsors of self-insured health plans, and therefore subject also to Code section 6055 reporting, will be able to use the Form 1095-C to satisfy both section 6055 and section 6056 reporting requirements.
  • To Whom Must Providers Furnish a Statement? An applicable large employer is required to furnish a written statement to its full-time employees showing the name, address and EIN of the employer, as well as the information required to be shown on the section 6056 return with respect to full-time employees and dependents. The statement may be a copy of the Form 1095-C filed with IRS.
  • What About Penalty Relief? IRS states that short-term relief from reporting penalties is available if an applicable large employer can show it has made good faith efforts to comply with the information reporting requirements for returns and statements filed and furnished in 2016, specifically for incorrect or incomplete information reported on the return. It appears that penalty relief will be provided only to allow employers additional time to develop appropriate procedures for collection of data and compliance with the new requirement.

Speaking of developing appropriate procedures, mandatory reporting of employee health coverage under Code sections 6055 and 6056 represents an enormous compliance and technical challenge for employers of all sizes. Clearly the regulations require employers timely and accurately to report many details of the health coverage offered to full-time employees and their dependents.

The requirement outlined above, for example, to report, 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 full-time employee under the employer sponsored plan, by calendar month, will involve data inputs from across the organization.

Affordable Care Act health coverage reporting will require information on qualification (time and attendance), eligibility and enrollment (benefits) and affordability (payroll), ideally a single HCM application across these domains as well as purpose-built reporting functionality. HCM reporting technology is the only way to go.