The deadline is approaching for employers with 50 or more full-time employees or full-time equivalents (FTEs) to file new health care information returns. Here is a summary of what applicable large employers (ALEs) need to know about their reporting requirements.
Most employers affected by the new regulations will be subject to the reporting requirements of Sec. 6056, which will allow the IRS to identify employers that do not offer minimum essential coverage to their full-time employees and, if at least one such employee qualifies for a premium tax credit with respect to a qualified health plan, assess the applicable penalty to the ALE of $2,000 per year per full-time employee (or one-twelfth that amount for any month). Because employers that do offer coverage must also report specifics as to offers of coverage and the cost to individuals by month, individual employees and the IRS can calculate the affordability of the coverage to the household and determine eligibility for premium credits. If an employee applies for insurance through a health care exchange and receives a premium tax credit because his or her employer's offer of coverage was not affordable or did not provide minimum value, the IRS may assess against the employer the higher $3,000 annual penalty (or one-twelfth for any month) with respect to each such full-time employee.
To comply with Sec. 6056, an ALE must file Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, for each full-time employee and the related Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, with the IRS on or before Feb. 29, 2016 (March 31, 2016, if filed electronically), for the 2015 calendar year. The employer must furnish employee statements to employees on or before Feb. 1, 2016.
To provide the required information, employers must track by month whether minimum essential coverage providing minimum value was offered to the employee and his or her spouse and dependents, as well as whether coverage was offered to the employee in a month the employee was not a full-time employee.
Two alternative reporting methods are available that may simplify reporting for certain employers. If an ALE makes a "qualifying offer" of minimum essential coverage to an employee (and his or her spouse and dependents) for all 12 months of the calendar year, the ALE can indicate this by a code entered on Form 1095-C and does not need to report the employee's share of the lowest-cost monthly premium on the Form 1095-C. The ALE also does not need to furnish a copy of Form 1095-C to the employee; it can instead provide a simplified statement to the employee with certain prescribed information notifying the employee that he or she will not be eligible for a premium tax credit.
If an employer certifies that it offered minimum essential coverage providing minimum value to at least 98% of its employees and their dependents, the ALE can provide a simplified statement to the employee, does not need to identify which employees were full-time, and does not need to complete the full-time-employee count on Part III of Form 1095-C.
For a detailed discussion of the issues in this area, see "New Information-Reporting Requirements for Employers Under the Affordable Care Act," by Jenny Smerud, CPA, in the December 2015 issue of The Tax Adviser.
—Alistair M. Nevius, editor-in-chief, The Tax Adviser
The Tax Adviser is the AICPA's monthly journal of tax planning, trends, and techniques. AICPA members can subscribe to The Tax Adviser for a discounted price of $85 per year. Tax Section members can subscribe for a discounted price of $30 per year.
Also in the December issue:
- An update on developments in employee compensation and benefits issues.
- The second part of a discussion of tax considerations for Up-C partnerships.
- A look at how to help clients plan for cash flows in retirement.