IRS Releases Final Version of ACA Reporting Forms for 2016
The IRS has released final 2016 Forms 1094-C and 1095-C along with instructions for each. They confirm that the Affordable Care Act ("ACA") reporting requirements for 2016 are similar to those for 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 ("MEC") 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 in the calendar year. Forms 1095-C report information (on a monthly basis) about the health care coverage offered to the employee.
Changes to the 2016 versions. Some of the changes contained in the 2016 versions (of the forms and instructions) include:
- The end of certain transition relief. Certain transition relief no longer applies for calendar year plans beyond 2015, including the transition penalty relief available for ALEs. 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.
NOTE: This relief remains available in 2016, however, for non-calendar year plans through the end of their 2015 plan year.
- The end of "good faith" relief. In 2015, non-compliance penalties could be waived if an ALE could show it made "good faith" efforts towards complying with the regulations and deadlines. For 2016, an ALE must now show "reasonable cause" for why it failed to comply in order to receive penalty relief.
- Reporting COBRA offers of coverage. Offers of COBRA coverage to former employees (and their dependents) should not be reported as offers of coverage (on line 14 of Form 1095-C). However, an offer of COBRA coverage to an employee who remains employed with the ALE should be entered as an offer of coverage.
- "ALE Member" replaces "Employer". The 2015 ACA reporting forms referred to the entity required to file the form as "employer." In the 2016 versions, the IRS has replaced the term "employer" with "ALE Member" to highlight the fact that each ALE member must file its own forms.
- Reporting Spousal Coverage. The IRS has created new codes (for Part II, Line 14 of Form 1095-C) to indicate when an ALE has offered coverage to employees' spouses.
- Filing deadlines no longer extended. For offers of coverage made during 2016, Forms 1095-C must be furnished to employees by January 31, 2017 (the date was extended until March 31, 2016 for the 2015 forms), and to the IRS by February 28, 2017 (previously May 31, 2016), if filed by paper, and March 31, 2017 (previously June 30, 2016), if filed electronically.
NOTE: Entities filing 250 or more Forms 1095-C must file them electronically.
- Increased penalties. An ALE's failure to timely provide correct forms to either the IRS or employees can result in a penalty of $260 per delinquent or incorrect return (up from $250 in 2015), with an annual maximum of approximately $3.2 million.
Takeaway For Employers. With 2017 less than three months away, employers should begin preparing to meet their 2016 ACA reporting obligations by reviewing the final versions of the instructions and forms.