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Benefits & Compensation Alert >> Next ACA Employer Reporting Deadline Fast Approaching

November 14, 2016

As part of the Affordable Care Act (ACA), employers with 50 or more full-time equivalent employees must offer qualifying health care coverage to their full-time employees or pay a tax.

Even though there is some uncertainty surrounding the future of the ACA in light of the 2016 election results, employers must still comply with the ACA (including the reporting requirements) for calendar year 2016 and plan to comply for 2017 unless and until changes to the law are actually made. While employers are still awaiting tax notices from the Internal Revenue Service (IRS) regarding their compliance for calendar year 2015, and many have just completed their IRS reporting for 2015, the 2016 deadline is almost here and employers need to start preparing. The urgency may be particularly acute for employers that have already received notices from the Department of Health and Human Services (HHS) regarding employees who may have already received subsidies through the Health Insurance Marketplace in 2016.

IRS Reporting Requirements
As was the case for the 2015 reporting year, affected employers must: (1) provide IRS Forms 1095-C to all employees eligible for coverage, describing the insurance offered to them; and (2) send copies of all IRS Forms 1095-C to the IRS along with IRS Form 1094-C.

Updated Forms and Instructions
The IRS recently released updated forms and instructions for IRS Forms 1094-C and 1095-C. Although the forms largely remain the same as in 2015, there are a few differences employers should be aware of, including:

  • For the 2016 tax year, the deadline for sending the IRS Form 1095-C to employees is January 31, 2017, and the deadline for sending IRS Forms 1094-C and 1095-C to the IRS is February 28, 2017 for paper submissions and March 31, 2017 for electronic submissions. The IRS has not announced any extensions.
  • The penalty for failing to file a correct form is $260 for each statement per form per entity, with the total penalty not to exceed $3,193,000 per entity. Penalties may be waived if the failure was due to reasonable cause and not willful neglect; however, the good faith exception from the 2015 tax year is no longer available.

IRS Form 1094-C

  • Line 22, box B (Qualifying Offer Transition Relief for 2016) is no longer applicable and has been reserved.
  • In Part III, column (b), "Section 4980H" was inserted before "Full-Time Employee Count for ALE Member" to remind employers that the Section 4980H definition of “full-time employee” applies for purposes of this column.

IRS Form 1095-C

  • Code 1I on line 14 (Qualifying Offer Transition Relief for 2016) and code 2I on line 16 (non-calendar year transition relief) are no longer applicable and have been reserved.
  • Line 14 has two new codes (i.e., 1J and 1K) to signify a conditional offer of coverage to a spouse. A conditional offer is an offer of coverage that is subject to one or more reasonable, objective conditions (e.g., an offer to cover an employee’s spouse only if the spouse is not eligible for coverage under Medicare or a group health plan sponsored by another employer).

    • Code 1J should be entered if minimum essential coverage providing minimum value is offered to an employee and at least minimum essential coverage is conditionally offered to the employee’s spouse, but minimum essential coverage is not offered to the employee’s dependents. A conditional offer to a spouse may be reported as an offer of coverage regardless of whether the spouse met the condition to be eligible for coverage.
    • Code 1K should be entered if minimum essential coverage providing minimum value is offered to an employee, at least minimum essential coverage is offered to the employee’s dependents, and at least minimum essential coverage is conditionally offered to the employee’s spouse. A conditional offer of coverage to dependents may not be reported as an offer to dependents unless the employer knows that the dependents met the condition to be eligible for coverage.
  • The box for Plan Start Month continues to be optional for 2016.

Bottom Line

Employers must take action now to be in a position to deliver 2016 IRS Forms 1095-C to employees by January 31, 2017. The IRS continues to clarify ACA guidance, so employers should speak to their legal counsel about these changes before the end of 2016.