Draft Instructions for 2016 ACA Reporting Forms

The IRS has released draft instructions for the 2016 Forms 1094-C and 1095-C.  They confirm that the Affordable Care Act ("ACA") reporting requirements for 2016 are similar to 2015, except for several minor changes, some of which are explained below. 

Background.  The ACA requires Applicable Large Employers ("ALEs") to report to the IRS on whether they offer full-time employees and their qualified dependents the opportunity to enroll in minimum essential coverage through their group health plans.

Note: ALEs are employers who had 50 or more full-time employees or full-time equivalent employees (collectively, "FTEs") during the preceding calendar year.  An employer will determine its monthly FTE count by adding: (i) each employee who works more than 30 hours per week (i.e., full-time), and (ii) the total number of hours worked during a month by employees who are not full-time, divided by 120.  Monthly FTE counts are then totaled and divided by 12.  If the resulting number is 50 or more, the employer is subject to the mandate.

ALEs file Forms 1094-C with the IRS to transmit and summarize information provided on Forms 1095-C.  ALEs file Forms 1095-C for each employee who was full-time during one or more months during the calendar year.  Forms 1095-C report information (on a monthly basis) about the health care coverage offered to the employee.

For offers of coverage made during 2016, Forms 1095-C must be furnished to employees by January 31, 2017 and to the IRS by February 28, 2017, if filed by paper, and March 31, 2017, if filed electronically.

Note:  Entities filing 250 or more Forms 1095-C must  file them electronically.

Draft Instructions. Highlights from the draft instructions, include:

  • Confirmation that certain transition relief, including the transition penalty relief, is no longer available to ALEs.  (Note: For 2015, the transition relief exempted ALEs with 50 to 99 full-time equivalent employees from the ACA's employer mandate penalties and reduced the required offer of coverage threshold for full-time employees from 95% to 70% for other ALEs.) 
     
  • Reminders that:
    • one Form 1094-C is required to be file for each ALE member (i.e., each employer with its own EIN).        
    • a corrected Form 1094-C must be filed where an ALE's name or EIN information is incorrect in Part IV of the original Form 1094-C.
  • Clarification that the number of FTEs to be reported in Part III of Form 1094-C must be based on the employer shared responsibility penalty provisions and the regulations thereunder.
  • New "Offer of Coverage" codes (for Form 1095-C, Line 14) for ALEs to use when they offer coverage to a spouse that is conditioned upon one or more reasonable objective conditions.
  • Confirmation that the specialized coding for ALEs subject to the multiemployer plan interim rule reporting will remain in effect for 2016.  (Note: Under the interim rule, an employee is treated as having been offered coverage if the ALE is required under a collective bargaining agreement to contribute to a multiemployer plan on the employee's behalf.)
  • Information regarding how to report offers of COBRA coverage.  For former employees who receive an offer of COBRA coverage after termination of employment, the Form 1095-C should be coded 1H and 2A regardless of whether coverage is elected.

Takeaway For Employers.  Although the instructions are only in draft format, significant changes are unlikely.  Therefore, with 2017 less than five months away, employers should begin preparing to meet their 2016 ACA reporting obligations by reviewing the draft instructions. 

The draft instructions are available at: https://www.irs.gov/pub/irs-dft/i109495c--dft.pdf