The Affordable Care Act (ACA) has imposed significant information reporting responsibilities on insurance companies and applicable large employers (ALEs) since 2015. These entities are required to file annual information returns reporting information about health plan coverage. Like the Form W-2, the Form 1095-B/C is provided to covered individuals/employees and then sent to the Internal Revenue Service (IRS) with a transmittal form (Form 1094-B/C).
Forms, Instructions and Timing
The IRS uses the Forms 1095-B/C information to determine whether individuals and employers are liable for penalties related to health coverage.
The information is used to determine whether individuals are subject to the shared responsibility “individual mandate” payment penalty for not having health coverage (the individual mandate expires December 31, 2018). In addition, the IRS uses the information on these Forms to determine whether an individual is eligible for premium tax credits on insurance purchased through the health insurance Exchange/Marketplace. Individuals report their health coverage and premium tax credits on their individual income tax returns.
The information is also used to determine whether employers are liable for a penalty known as a shared responsibility “employer mandate” payment. This penalty can be imposed on any ALE or ALE group member that does not offer affordable, minimum value health coverage to all of its full-time employees. In the case of an aggregated group, the penalty applies to each member of the group individually.
The information reporting requirements are complex. Employers should take note of the timing requirements and review the information reporting requirements through IRS resources available at the Applicable Large Employer Information Center. Form 1095-C for the 2018 calendar year must be furnished by ALEs to each “full-time employee” by January 31, 2019, and Forms 1094-C and 1095-C are required to be filed with the IRS by February 28, 2019, or April 1, 2019, if filing electronically. The IRS recently released draft Forms and instructions for calendar year 2018 (available on the IRS website here). The draft 2018 Forms and Instructions are largely unchanged from calendar year 2017. The draft 2018 Instructions include the indexed penalty amount for failure to file a correct information return ($270 per form, up to a $3,275,500 cap).
Enforcement
The IRS is charged with enforcement of the ACA reporting and penalty rules and they are actively sending enforcement notices. Some employers have received notifications from the IRS (Letter 5699) that they have failed to file the IRS reporting forms. The IRS is also issuing Letter 226-J to inform ALEs that filed Forms 1094-C and 1095-C of their potential liability for a penalty for the 2015 calendar year (as reported in 2016). Determination of liability is based on information reported on Forms 1094-C and 1095-C and information about full-time employees that received premium tax credits. Employers should be on the lookout for the IRS letters and should present the materials received to their ACA reporting vendors, legal counsel and qualified tax advisers. We strongly suggest that any IRS communications be promptly reviewed and deadlines for responding should be noted. Employers may also need to coordinate with their reporting vendors to be sure the appropriate documentation is on hand to challenge any assessment as needed.
Status of the ACA
The ACA remains the law of the land at this time. According to the IRS, “legislative provisions of the ACA law are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe.” As evidenced by these non-filer and penalty assessment letters, all signs continue to point to the IRS continuing to enforce the employer mandate.
Should you have questions about this or any aspect of federal health insurance reform, contact your Conner Strong & Buckelew account representative toll free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.