The buzz in the HR community lately is “How is your company handling the required year-end reporting?” The Affordable Care Act Added Two New Sections to the IRS Code.
We’ve pulled together 10 helpful facts about Sections 6055 and 6056 Reporting:
- What is Section 6055? - It states that every provider of minimum essential coverage will report coverage information by filing a return with the IRS and furnishing a statement to employees. This information will be used to show compliance with the individual shared responsibility provision. (This will be completed by the insurance carrier for fully insured plans and the plan sponsor for self-insured plans.)
- What is Section 6056? It states that applicable large employers must file information returns with the IRS and provide statements to their full time employees about the health insurance coverage the employer offered. (This will be completed by the employer.)
- Why does this information need to be reported to the IRS? The statements will support compliance with the employer shared responsibility provision (employer mandate). The statements will assist individuals in determining their eligibility for federal assistance (subsidy) through the Health Insurance State or Federal Exchange.
- Who is required to report? Applicable large employers (ALEs) are required to to report under section 6056. ALEs employ at least 50 full-time or full-time equivalent employees on business days during the preceding calendar year
- What forms need to be completed by the employer?
- Form 1094-C to IRS and Form 1095-C to employees
What specific information needs to be reported to IRS and employee?
- Name, address and EIN of the ALE
- Name and phone number of contact person
- Calendar year for which information is reported
- Certification as to whether the ALE offered full-time employees the opportunity to enroll in a plan by calendar month
- The months during which coverage was available
- Each full-time employee’s share of the lowest cost monthly premium (self-only) for coverage providing minimum value offered under a plan by calendar month
- Number of full-time employees for each month during the calendar year
- Name, address, TIN of each full-time employee during the calendar year and the months during which the employee was covered un the plan
When is the ALE required to report? An ALE must file information returns with the IRS and furnish statements to employees beginning in 2016 about its offers of health coverage to its full-time employees for calendar year 2015.
- Reports can be submitted to the IRS in either paper format by February 28, 2016 or electronic format by March 31, 2016. ALEs that have over 250 returns are required to file electronically
- Statements to employees must be furnished on or before January 31 of the year following the calendar year in which coverage was offered. These statement may be in the same envelope as the W-2.
- Is there a penalty for failure to report? The IRS will not impose penalties on ALE members that can show that they have made a good faith effort to comply with the reporting requirements. This allows additional time to develop appropriate procedures for collection of data and compliance with the new reporting requirements. Penalties for failure to timely file may result in penalties of $100 per return not to exceed $1.5 million in a calendar year.
- What is the best way to get this information? Before you look for a solution, determine what data you are tracking now, where it is stored and what additional data you need to be tracking. Ask your payroll providers if they have all this information in their payroll systems and if they have made accommodations for these requirements. Some may charge a fee for the statements (similarly to how they charge for W-2’s). Ask your benefit partners if they have online benefit enrollment systems that capture the data.
- When do I need to get started? While the IRS forms were finalized in late February, you will be required to report on all your employees (even if they are no longer employed) beginning in January. Therefore, it’s best to get started as soon as you can by exploring your options based on the systems you have in place today.
Early education and communication to employees about the reporting that they will receive and its purpose may help to minimize confusion upon receipt of the forms.
Reminder: As long as you make a good faith effort to start modifying your systems today and give it the “old college try” on the reports, you will not be charged a penalty. It may take a village this year to pull the information together. Don’t hesitate to rely on your HR, benefits and payroll partners to help develop a solution that works for you.