HRB 114 - IRS Releases 2015 Draft 1094/1095 Series Forms and Instructions (article)
HRB 114 - IRS Releases Draft 2015 1094/1095 Series Forms
Released August 17, 2015 I Download as a PDF
On August 6, 2015, the Internal Revenue Service (IRS) issued draft 2015 Forms and Instructions for the annual reporting that will be required in 2016 by employers subject to the Affordable Care Act’s shared responsibility requirements, as well as by plans providing minimum essential coverage (MEC):
These forms are used to satisfy the IRC Section 6056 and 6055 reporting requirements. The Form 1094-B and 1095 B-series is used for reporting MEC; and the Form 1094 and 1095-C series is used for reporting employer provided coverage by employers subject to the ACA’s shared responsibility requirement.
It is important to note that these instructions and forms are drafts only and subject to change.
Highlights from draft instructions applicable to both B and C series of the Forms 1094 and 1095:
- Due Date. For forms filed in 2016 reporting coverage provided in calendar year 2015, the Forms 1094 and 1095 of the B and C series are required to be filed with the IRS by February 29, 2016; or March 31, 2016, if filing electronically.
Electronic filing. Reporting entities required to file 250 or more information returns must file the forms electronically (eFile). The 250-or-more requirement applies separately to each type of form. For example, if an entity is filing 500 Forms 1095-B and 100 Forms 1095-C, then it must file the Forms 1095-B electronically, but is not required to e-file the Forms 1095-C. While the IRS encourages entities to file electronically even if there are less than 250 returns, entities can apply for a hardship waiver from the electronic filing requirement. To receive a waiver, entities must file a Form 8508, Request for Waiver From Filing Information Returns Electronically with the IRS at least 45 days prior to the due date of the returns.
For entities that eFile the forms, the IRS has developed a guide (Pub. 5165, Guide for Electronically Filing Affordable Care Act (ACA) Information Returns (AIR) for Software Developers and Transmitters) of the various procedures, transmission formats, business rules and validation process for eFiled returns through the IRS’ AIR system.
- Extension of time to file. An automatic 30-day extension of time to file the B or C series of forms is available by completing Form 8809, Application for Extension of Time to File Information Returns. The Form 8809 may be submitted on paper or through the FIRE System either as a fill-in form or an electronic file. No signature or explanation is required for the extension. However, the Form 8809 must be filed with IRS by the due date of the return in order to get the 30-day extension. It should be noted that proposed regulations issued by the IRS earlier this week would disallow the automatic 30-day extension.
- Substitute returns. Entities not using the designated IRS forms may be able to use a substitute form, as long as the form meets the IRS required criteria. See IRS Publication 5223, General Rules & Specifications for Substitute Affordable Care Act Forms 1094-B, 1095-B, 1094-C, and 1095-C and Certain Other Information for specifications for private printing of substitute information returns.
- Correcting forms. The Instructions provide information about how to make corrections on forms that have already been submitted to the IRS, as well as information about how to provide corrected forms that have already been furnished to individuals.
- Consent to furnish statement electronically. The IRS requires entities to obtain an affirmative consent when furnishing a statement electronically to individuals. The consent must relate specifically to the relevant Form 1095-B or 1095-C. The individual may consent on paper or electronically, such as by e-mail. If consenting by paper, the individual must confirm the consent electronically. A statement may be furnished electronically by e-mail or by informing the individual about how to access the statement on the reporting entity’s website. In addition, the instructions outline the steps to be taken if an extension of time is needed for purposes of furnishing statements to individuals.
- Penalties for failure to file. The instructions reiterate the potential increased penalties for failure to comply with reporting requirements (see Increase in Tax Information Reporting Penalties from CBIZ HRB 112, Updates on Section 6055/6056 Reporting, 7/13/2015. Given the increase in these penalties, it is very important that a good faith effort be made to comply with these reporting obligations.
Penalty Relief. For 2015 reporting, the IRS indicates that it won't impose penalties on filers for reporting incorrect or incomplete information, including TINs or dates of birth, if the reporting entity can show that it has a made good faith effort to comply with the information reporting requirements for coverage in 2015.
- Record retention. Copies of information returns filed with the IRS, or the ability to reconstruct the data, must be kept for at least 3 years, measured from the due date of the returns.
Following are some of the specific changes to Forms 1094 and 1095-B:
- Supplemental coverage. Entities filing the B series are not required to report supplemental coverage for purposes of MEC reporting. This would include coverage that supplements a government sponsored program such as Medicare or TRICARE; or, coverage provided to an individual in one or more plans provided by the same plan sponsor, i.e., the plan sponsor is required to report only one type of MEC. According to the instructions, coverage is not deemed to be provided by the same plan sponsor if they aren't reported by the same reporting entity. Thus, an insured group health plan and a self-insured health reimbursement arrangement covering the employees of the same employer aren’t considered supplemental. This might be particularly relevant when an employer offers a retiree-only health reimbursement arrangement.
- In Part II of Form 1095, lines 10–15 request employer information, such the name, EIN, and mailing address for the employer sponsoring the coverage. If the employer is a member of a controlled group, information for the specific controlled group member that is the covered employee’s employer is entered in these lines. The instructions clarify that if the coverage is provided through an association or a Multiple Employer Welfare Arrangement, information for the participating employer of the covered employee must be provided. Part II of the form need not be completed if the coverage is provided through a multiemployer.
- Part IV of the Form requires information about the covered individuals, such as name, SSN or date of birth, and series of check boxes in indicate the months that an individual was covered under the plan. The draft instructions clarify that if an individual wasn't covered for all months, the applicable box(es) for the months in which the individual was covered for at least one day must be checked. In addition, if there are more than six covered individuals to report, then this information for the additional covered individuals must be provided on Part IV, Continuation Sheet.
Following are some of the specific changes to Forms 1094 and 1095-C:
- For 2015, the Form 1094-C was revised to move line 19 (Is this the Authoritative Transmittal for this ALE Member?) into Part I of the form and to allow for an entry in the “All 12 Months field” in Part III, Line 23, column (b) Full-Time Employee Count for an applicable large employer member.
- Plan Start Month. Part II of the Form 1095-C includes a box to place a 2-digit indicator code for purposes of identifying the calendar month of the beginning plan year in which the employee is offered coverage. This box is optional for 2015 form but may be made mandatory in future years.
- Breaks in service. An employee on unpaid leave during the break in service is treated as an employee for reporting purposes during the break in service; while a former employee whose employment had been terminated during the break in service would not be treated as an employee for reporting purposes.
- Minimum value. A plan provides minimum value if the plan pays at least 60% of the costs of benefits and provides substantial coverage of inpatient hospitalization services and physician services. An offer of coverage under a plan that fails to provide substantial coverage of inpatient hospitalization and physician services should be reported on Form 1095-C as not providing minimum value, even if an employer qualifies for the IRC Section 4980H transition rule.
- Indicator codes for Employee Offer and Coverage. In Line 14, a series of codes are used to indicate the type of coverage An offer of coverage is treated as made to an employee’s dependents only if the offer of coverage is made to an unlimited number of dependents regardless of the actual number of dependents, if any, an employee has during any particular calendar month.
- An offer of COBRA continuation coverage that is made to a former employee upon termination of employment is reported as an offer of coverage using the appropriate indicator code on line 14 only if the former employee enrolls in the coverage. If the former employee does not enroll in the coverage (even if a spouse or dependent of the former employee independently enrolls in the coverage), code 1H (No offer of coverage) should be entered for any month for which the offer of COBRA continuation coverage applies.
- An offer of COBRA continuation coverage that is made to an active employee (for instance, an offer of COBRA continuation coverage that is made due to a reduction in the employee’s hours that resulted in the employee no longer being eligible for coverage under a plan) is reported in the same manner and using the same code as an offer of that type of coverage to any other active employee.
- Calculating employee’s share of premium. Line 15 requires the dollar amount of an employee’s share of the lowest cost monthly premium for self-only minimum value coverage. For purposes of determining the monthly employee contribution, an employer can divide the total employee share of the premium for the plan year by the number of months in the plan year to determine the monthly employee contribution for the plan year. This monthly employee contribution would then be reported for any months of that plan year that fall in the 2015 calendar year.
- In the case of a multi-employer plan, each employer contributing on behalf of an individual participating in a multi-employer plan is responsible for reporting. An employer can satisfy its shared responsibility obligation by contributing to the multi-employer plan, but it remains responsible for tracking the individuals and making certain that the reporting obligation is accomplished. The employer should make certain it can obtain from the multiemployer plan, information such as who participated and that the plan meets minimum value and affordability. An employer can satisfy its obligation by completing Line 14, using code 1H and in Line 16, Code 2E.
In several places throughout the draft instructions, the IRS provides tips and examples; for instance, in the qualifying offer discussion, the IRS provides alternative methods of reporting. These tips and examples should prove to be useful for filers.
As soon as the instructions are finalized, we will provide additional information. In the meantime, employers and other responsible entities should familiarize themselves with these forms and instructions to ensure being prepared for the filings due in 2016.
As a reminder, the CBIZ ACA CheckPoint provides employers with the tools to determine whether they are an applicable large employer, track and manage employee measurement periods, and aid in complying with ACA’s employer shared responsibility reporting requirements. To view a short video demonstration of CBIZ ACA CheckPoint, click HERE. CBIZ is also hosting a webinar on August 20th entitled, CBIZ ACA CheckPoint: Is This Your Solution for Employee Measurement, Tracking and Reporting for 2015? Time is running out! Click HERE to register for this webinar. Please note new implementation requests for CBIZ ACA CheckPoint will only be taken until October 1, 2015 to ensure adequate time for implementation. For more information about CBIZ ACA Checkpoint, contact your local CBIZ consultant.
The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.