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

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

Draft Instructions & Revised Draft 2015 Forms for IRS Reporting Requirements

2015 Draft Instructions for 6055 and 6056 Include Filing ExtensionsAs the summer starts to come to an end, the IRS has been very busy creating new ACA reporting requirements under their Code Sections 6055 and 6056 and updating the 2015 reporting forms. The newly drafted forms are now available and whether you are preparing these forms yourself or working with a third party administrator, such as a data processing company, we wanted you to be aware of the requirements.

08-17-15 Legal Alert - IRS Releases Draft 2015 Instructions for ACA Reporting FormsOn August 7, the Internal Revenue Service (IRS) released draft instructions and revised draft 1095-B and 1095-C forms to be used for Affordable Care Act (ACA) Minimum Essential Coverage (MEC) and Large Employer reporting in 2016. The IRS has posted the 2015 draft instructions and forms at IRS.gov/draftforms as information only, and will post final versions at a later date.

The revised 2015 draft forms are generally unchanged from the versions released on June 19, 2015. However, the IRS made several changes to the 2014 final instructions, including:

  • “B” form instructions for applicable large employers – The draft instructions for forms 1094-B and 1095-B now allow applicable large employers (ALEs) the option to use the “B” forms to report coverage of individuals who are not considered full-time employees for any month during the calendar year.
  • “C” form instructions for applicable large employers – The draft instructions for forms 1094-C and 1095-C require that ALEs continue to report all employees enrolled in self-insured coverage on the “C” forms – as part of MEC reporting.
  • 30-day extension for IRS filing – An automatic extension is granted if Form 8809 is submitted to the IRS on or before the filing due date.
  • 30-day extension for providing forms to individuals – An extension may be granted by submitting a letter to the IRS on or before the due date for providing forms to individuals.
  • Details on how to file corrected forms – The draft instructions include details on filing corrected paper returns. Information on electronic filing corrections can be found on IRS Publication 5125.
  • Hand delivery – Both sets of reporting may be hand delivered to individuals.
  • Reporting supplemental coverage – The definition of a “plan sponsor” has been clarified for the purpose of reporting supplemental coverage by the same reporting entity as the health plan sponsor.
  • Reporting coverage offered under multiemployer plans – Simplified reporting now available for reporting offers of coverage for employers with multiemployer arrangements that qualify for relief.
  • Reporting on COBRA participants – Clarifications on how to report COBRA participants.

For more information on the final rules on this IRS information reporting, please read our Reporting Requirements Fact Sheet.

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Draft Instructions & Forms

We will keep you informed when final instructions and forms are made available.

About This Alert. This alert is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Morris & Reynolds Insurance are not attorneys and are not responsible for any legal advice. To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

Family Plans Must Embed Out-of-Pocket Limits in 2016

The Affordable Care Act (ACA) requires non-grandfathered health plans to limit an enrollee’s out-of-pocket costs for essential health benefits each year. This annual limit is often referred to as the “out-of-pocket (OOP) maximum.”

ACA FAQsRecent agency guidance will require the self-only OOP maximum to be embedded family coverage when the plan’s OOP maximum for family coverage exceeds the ACA’s limits for individual coverage. This requirement will take effect beginning with the 2016 plan year, when the OOP maximum for self-only coverage will be $6,850.

This guidance applies to all non-grandfathered group health plans, including self-funded plans and insured plans of all sizes.

While this change will have a significant impact on many employer-sponsored health care plans, high deductible health plans are likely to be affected the most. This is due to the fact that high-deductible family plans have higher cost-sharing limits. They are also typically designed to administer a single OOP limit on all family coverage with no underlying OOP maximum for each individual enrolled in the family plan.

Under the new guidance, many high-deductible family health plans will need to be modified so that a single individual’s OOP costs do not exceed the specified maximum. For instance, currently, a plan could have an $8,000 OOP limit for family coverage and require that limit to be satisfied before it covers expenses at 100 percent, even if one individual incurs all of the expenses.

According to the guidance, this type of plan design will no longer be permitted for non-grandfathered plans, and the plan would have to be amended so that each individual would not be required to pay more than the OOP maximum for individual coverage for essential health benefits.

DID YOU KNOW
The ACA’s excise tax on high-cost employer health plans (or the “Cadillac tax”) is set to take effect in 2018. Under this provision, employer coverage that exceeds certain dollar limits will be subject to a 40-percent excise tax.Bipartisan support is currently growing for a repeal of the Cadillac tax. Those who are advocating for repeal assert that the tax is no longer needed to help keep health care costs in check. They also argue that it will lead to reduced or eliminated benefits and higher costs for employees.With repeal far from certain, employers are already planning ahead for 2018 and making adjustments to benefits offerings to avoid the tax penalty.

IRS Issues New Q&As on Section 6056 Reporting
The Internal Revenue Service (IRS) recently released new Questions and Answers (Q&As) regarding Section 6056 reporting. These Q&As provide additional details on completing Forms 1094-C and 1095-C.

Under Section 6056, applicable large employers (ALEs) subject to the “pay or play” rules must report information to the IRS and full-time employees about the health coverage they offer. Reporting is first required in early 2016 for calendar year 2015.

The Q&As clarify existing requirements under Section 6056 and provide more guidance on specific aspects of reporting that had not been addressed previously. For example, the Q&As address reporting offers of COBRA coverage and reporting offers of coverage for employees who are newly hired or who terminate employment during a month. The Q&As also include examples that may be helpful when completing Forms 1094-C and 1095-C.

More Information
Stay tuned to www.morrisandreynolds.com for the latest news affecting your insurance needs, and stay in close contact to your professional agents and underwriters here at Morris & Reynolds Insurance. We will do our very best to guide you in the right direction, keep you informed and assist you for many years to come.