IRS Delays ACA Reporting Deadlines

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Good News!

The Internal Revenue Service (IRS) sent out a belated Christmas present to employers and other plan sponsors on December 28th when it announced it was delaying the 2016 Affordable Care Act reporting requirements. In Notice 2016-4, the IRS announced that the deadline for providing to individuals the 2015 Form 1095-B and Form 1095-C is delayed from February 1, 2016 to March 31, 2016. Similarly, the deadline for filing with the IRS Forms 1094-B and 1094-C is delayed from February 29 to May 31, 2016 for non-electronic filers and from March 31 to June 30, 2016 for electronic filers.

These requirements are related to defined “Large Employers” in 2015, those with 100 or more employees. “Medium Employers“, those with 51 to 99 employees, will meet the law’s requirements for the first time in 2016, and provide the noted documents to employees and the IRS in early 2017. “Small Employers“, those with less than 50 employees, are not subject to these requirements at this time.

Because of the delay, some employees will not receive their forms until after the April 15 tax filing deadline. The IRS indicates that these employees do not have to file an amended tax return. Employers should simply keep their forms in a file should they need them later.

Should you have any questions about this extension or anything else, please contact your Professional Agent or Underwriter here at Morris & Reynolds Insurance and we will be most happy to help.

As always, thank you for allowing us the honor to be of service.

ACA Compliance Bulletin:
ACA Reporting Deadlines Delayed

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Notice 2016-4 From the IRS

Average Individual Mandate Penalty Rising To $969 Per Household, Analysis Finds.

New analysis from the Henry J. Kaiser Family Foundation has found that Americans going into the New Year without purchasing health insurance or filing exemptions will be paying higher tax penalties than in previous years under the Affordable Care Act (ACA).

Starting in 2014, Americans filing their federal tax returns for the year were required to report whether they had health coverage or were exempt. As outlined by the ACA’s Individual Mandate, those who had not attained coverage, or filed for an exemption, paid a tax penalty fee of either 1 percent of their yearly income, capped at a maximum of the average price of an ACA Marketplace Bronze plan, or $95 per person ($47.50 per child under 18), limited to a family maximum of $285.

As the Individual Mandate is being phased in over a three-year period, the penalties have seen a steady increase. For anyone remaining uninsured in 2016, the penalty (to be paid out at tax time in 2017) will be much steeper than previous fees, as shown in the figure below:ACA Individual Mandate - Infographic

The Kaiser analysis estimates that individuals who were uninsured during the beginning of 2015 and eligible to enroll in the marketplace, the average household penalty in 2016 is $969, a 47% rise from 2015’s average estimated penalty of $661. Those who qualify for subsidized premiums will be subject to an average household penalty of $738 in 2016 and the average household penalty for uninsured individuals not eligible for any financial assistance is estimated to be $1,450.

According to the Kaiser analysis, just over 3 million uninsured Americans are eligible for healthcare at lower prices than what they would pay in penalties, or for free after subsidies. However, that leaves approximately 7 million people weighing their options, as the tax penalty fine could be more cost-effective for many than purchasing the least expensive insurance plan available.

The analysis goes on to say “a key area of uncertainty for 2016 is how much the increased penalties will encourage uninsured people – particularly those who are healthy – to obtain coverage”.  The ACA relies heavily on bringing healthy people into the risk pool; more people means lower premiums and increased subsidies for many, keeping the marketplace sustainable.

Open enrollment for 2016 health plans began November 1st and will last until the end of January 2016. In the last few weeks, the Obama administration has been endeavoring to publicize the increasing fines to the millions who remain without coverage. Mr. Kevin Counihan, the Chief Executive of the Federal Insurance Marketplace, wrote in a recent blog post that “A Special Enrollment Period around the April 15 tax filing deadline” will not be offered in 2016 like it was in previous years.

Please contact our fine Professional Agents and Underwriters here at Morris & Reynolds Insurance with any questions you have about these penalties, coverage options, or anything else you might need at (305) 238-1000.

As always, thank you for allowing us to provide your protection.

Know Your Insurance: Individual Mandate
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Know Your Benefits: Individual Mandate Penalties
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ACA Requirement to Buy Coverage: Flowchart

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Penalties Increased for Section 6055 and Section 6056 Reporting Violations

QUICK FACTS
  • Signed into law on June 29, 2015, the Trade Preferences Extension Act of 2015 increases the penalties for reporting entities that fail to comply with Section 6055 or 6056 reporting.
  • The increased penalties take effect for returns and statements filed in 2016.
  • Short-term relief from penalties is available in certain limited circumstances.

Effective for returns and statements filed in 2016, the Trade Preferences Extension Act of 2015 significantly increases the penalties for violations of the Section 6055 or Section 6056 reporting requirements.

The Affordable Care Act (ACA) created new reporting requirements under Internal Revenue Code (Code) Section 6055 and 6056. These new reporting rules require certain employers to report information to the Internal Revenue Service (IRS) on the health coverage offered during the year. Related statements must also be provided to individuals.

On June 29, 2015, President Barack Obama signed the Trade Preferences Extension Act of 2015 into law, which increases penalties for the failure to file correct information returns or to provide individual statements under either Section 6055 or Section 6056. These changes are effective for information returns and individual statements required to be filed or provided after Dec. 31, 2015.

Overview of Section 6055 & 6056 Reporting
Section 6055 applies to providers of minimum essential coverage (MEC), which generally includes health insurance issuers, self-insured plan sponsors and government-sponsored programs. Section 6055 reporting will be accomplished using Forms 1094-B and 1095-B.

Section 6056 applies to applicable large employers (ALEs) subject to the ACA’s employer shared responsibility rules.

Under Section 6056, ALEs will use Forms 1094-C and 1095-C to satisfy their reporting obligations.

Reporting Violations
A reporting entity that fails to comply with the Section 6055 or Section 6056 reporting requirements may be subject to the general reporting penalties under the tax code for:

  • Failure to file correct information returns (under Code Section 6721); and
  • Failure to furnish correct payee statements (under Code Section 6722).

Penalties may be reduced if the reporting entity corrects the failure within a certain period of time. In addition, lower annual maximums apply for reporting entities that have average annual gross receipts of up to $5 million for the three most recent taxable years.

Adjusted Penalty Amounts
Effective for returns and statements required to be filed in 2016, the Trade Preferences Extension Act of 2015 significantly increases the penalties for reporting entities that fail to comply with the Section 6055 or Section 6056 reporting requirements.

The increased penalty amounts are as follows:

  • General penalty amount: $250 for each return (increased from $100), up to an annual maximum of $3 million per calendar year (increased from $1.5 million). The annual maximum for employers with up to $5 million in annual gross receipts is $1 million (increased from $500,000).
  • Violations corrected within 30 days: $50 for each return (increased from $30), up to an annual maximum of $500,000 per calendar year (increased from $250,000). The annual maximum for employers with up to $5 million in annual gross receipts is $175,000 (increased from $75,000).
  • Violations corrected before Aug. 1: $100 for each return (increased from $60), up to an annual maximum of $1.5 million per calendar year (increased from $500,000). The annual maximum for employers with up to $5 million in annual gross receipts is $500,000 (increased from $200,000).
  • Violations due to intentional disregard: $500 for each return (or, if greater, 10 percent of the aggregate amount of the items required to be reported correctly) (increased from $250), with no annual maximum.

Short-term Relief from Penalties
Short-term relief from penalties is available, to allow additional time for developing appropriate procedures for data collection and compliance with these new reporting requirements.

For returns and statements filed and furnished in 2016 to report offers of coverage in 2015, the IRS will not impose penalties on reporting entities that can show they make good faith efforts to comply with the information reporting requirements.

This relief is provided only for incorrect or incomplete information reported on the return or statement, including Social Security numbers, taxpayer identification numbers or birthdates. No relief is provided for reporting entities that:

  • Do not make a good faith effort to comply with these reporting regulations; or
  • Fail to file an information return or provide an individual statement on time.

Action Items for Employers
The Section 6055 and Section 6056 requirements took effect for the 2015 calendar year. The first returns will be due in 2016, with information related to the coverage offered or provided in 2015.

Reporting under Section 6055 and Section 6056 is done on a calendar-year basis, regardless of whether the employer has a non-calendar year plan. Employers will need to have information for the full 2015 calendar year in order to file complete and accurate reports in 2016.

This means that employers will need to collect and record information in 2015 in order to prepare for the filing deadlines in 2016. Employers should begin tracking this information now to avoid penalties for failure to comply with these reporting requirements.

More Information
Please contact your professional agents and underwriters here at Morris & Reynolds Insurance for more information on Section 6055 and Section 6056 reporting.

IRS Reverses Course on HRA Reporting

The IRS release updated instruction for the 2015 ACA reporting forms on September 17th 2015 and reversed its earlier guidance regarding reporting for HRAs.

Per the instructions, an employer with an insured major medical plan and HRA coverage for which an individual is eligible because the individual enrolls in the insured major medical plan is not required to report the coverage under the HRA for an individual covered by both arrangements. If an individual is covered by an HRA sponsored by one employer and a non-HRA group health plan sponsored by another employer (such as spousal coverage), each employer must report the coverage the employer provides.

This is welcome relief for employers that provide HRA coverage to employees enrolled in their fully insured group health plan, as separate reporting is not required for the HRA.

Section 6055 and 6056 Filing Extensions & Electronic Reporting Waiver Available HCR Employer Reporting of Health Coverage - Code Sections 6055 and 6056

Minimum Wage Rate Increases, Summer 2015

QUICK FACTS
  • On June 30, 2015, the DOL proposed a rule to modify the FLSA’s white collar exemption.
  • Additional changes are expected in other states for 2016.
  • Employers should review employee wage rates and workplace-required postings to ensure compliance with state laws.

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The minimum wage rate will increase in four jurisdictions during the summer of 2015.

Most employers in the United States are subject to the minimum wage provisions of the Federal Labor Standards Act (FLSA). These employers are required to pay their employees a wage rate of at least $7.25 per hour. However, many states have adopted minimum wage rates higher than the federal rate. When the state rate and the federal rate are different, employers must pay their employees the higher rate.

As of April 2015, 29 states and the District of Columbia have already adopted a minimum wage rate higher than the federal minimum wage rate.

During the summer of 2015, four jurisdictions will see an increase in their minimum wage rate. Affected employers should review their employees’ pay rates and update their minimum wage poster notices as necessary to ensure their compliance with wage and hour regulations.

State New Rate (per hour) Effective Date
DE $8.25 1-Jun-15
D.C. $10.50 1-Jul-15
MD $8.25 1-Jul-15
MN $9 (large employers)
$7.25 (small employers)
1-Aug-15

Increases in the minimum wage rate are also expected in New York, Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Florida, Hawaii, Massachusetts, Michigan, Missouri, Montana, Nebraska, New Jersey, Oregon, Rhode Island, South Dakota, Vermont, Washington and West Virginia for 2016.

Morris & Reynolds Insurance will continue to monitor these developments and inform you of any updates as necessary.