HRB 92 - IRS Final Rules – IRC Sections 6055 and 6056; and, HHS Benefit and Payment Parameters for 2015
Released March 14, 2014I Download as a PDF March 14, 2014 --
IRS Final Rules – IRC Sections 6055 and 6056
The Affordable Care Act (ACA) imposes some new annual reporting requirements, the specific objective of which is to inform the IRS and individuals about who has access to minimum essential coverage (MEC), and when an employer shared responsibility assessment might be owed. In addition, these requirements are intended to facilitate the determination about who is eligible for premium assistance.
As background, individuals who fall below 400% of the federal poverty level (FPL) and do not have access to MEC that meets the minimum value and affordability standards may be entitled to premium assistance in the form of an advance tax credit available only for purchase of coverage through the marketplace. To help the IRS know who is offered MEC, IRC Section 6055 requires insurers, self-funded plans and other providers of MEC to report certain information to the IRS. Of particular interest to employers is the newly added IRC Section 6056 reporting requirement. This requirement obligates employers subject to the employer shared responsibility rules of the ACA, specifically employers employing 50 or more employees (known as “applicable large employer” or “ALE”), to report certain information annually to the IRS, as well as provide related benefit statements to employees.
The IRS issued proposed regulations on these reporting requirements six months ago (see CBIZ Health Reform Bulletin, Information Reporting by Employers on Health Coverage and Reporting of Minimum Essential Coverage, 9/18/13).
Final IRS regulations on both IRC Sections 6055 and 6056 reporting were published on March 10, 2014, together with a Fact Sheet. These regulations are effective March 10, 2014 and apply to calendar years beginning after December 31, 2014.
IRC Section 6056 Reporting
Section 6056 requires employers to report to the IRS information about their compliance with the employer shared responsibility provisions, including the type of health care coverage they offer to their employees. In addition, employers are required to furnish related benefit statements to employees to assist them in determining whether they can claim a premium tax credit on their tax return.
The IRS Form 1095-C (employee statement) and a Form 1094-C (transmittal) are the proposed designated forms to be used for Section 6056 reporting. The type of information to be reported includes:
- Name, address and employer ID of the ALE;
- Name and telephone number of a contact for ALE;
- The calendar year for which the report is filed. Note, the reports are based on calendar years, not plan years;
- Reporting on a calendar month basis of the following:
- Certification as to whether the ALE’s full-time employees and their dependents, including spouses, are given an opportunity to enroll in MEC,
- The number of FTEs employed by ALE,
- The months for which MEC was offered, and
- The employee’s share of the monthly premium for single health coverage that meets minimum value;
- The name, address and taxpayer ID number for each full-time employee offered coverage.
It is important to note that to avoid the risk of an IRC Section 4980H penalty (the employer shared responsibility penalty), the ALE is obligated to offer MEC to the employee and dependents (biological and adopted children only) through the month of their 26th birthday. This notwithstanding, the Section 6056 reporting requirement obligates the employer to report on whether coverage is offered to spouses.
Alternative Reporting Methods
The final regulations provide for two alternative reporting methodologies for satisfying the IRC Section 6056 reporting in 2015. They are:
- Certification of Qualifying Offer. In this method, the ALE certifies on the Form 1095-C (or other IRS designated form) that it made a qualifying offer of MEC to its full-time employees and their spouses and dependents for all months during the year at a cost under 9.5% of the single federal poverty line (approx $1,100 for 2015). Either a copy of the form filed with the IRS or similar document would then be used to satisfy the related benefit statement disclosure to participants.
- Option to report without separate identification of full-time employees. If the ALE offers MEC that meets the affordability standard to at least 98% of its employees and their dependents, the ALE is not required to separately identify its full-time employees or report the total number of its full-time employees on the Section 6056 return for the reporting year.
Timing of filing. The report is required to be filed with the IRS no later than February 28th of each year (or March 31st of each year if filed electronically), reflecting information for the previous calendar year.
Benefit Statements to Employees
Full-time employees must be furnished with a written statement derived from information contained in the employer’s report. This can be accomplished by providing a copy of the Form 1095-C or other IRS designated form. The statement would include the employee’s name and address, his/her Social Security number, and a code indicating that an offer of coverage for all 12 months of calendar year or the specific months for which coverage is offered has, in fact, been made. These benefits statements must be provided annually by January 31st and are based on prior calendar plan year information.
Manner of Distribution. These benefit statements may be provided in paper or electronically. The paper version is required to be mailed to the full-time employee's last known permanent address or, if no permanent address is known, to the employee's temporary address. These statements may be provided electronically or by posting to a website, as long as the electronic distribution standards contained in the regulations are followed.
IRC Section 6055 Reporting
Insurers, self-funded plans and other providers of MEC are required to report certain information to the IRS, known as IRC Section 6055 Reporting. The type of information required to be reported to the IRS on the Form 1095-B (or other IRS designated form) includes the following information for each calendar year:
- Name, address, and EIN for the person required to file the return;
- Name, address, and TIN, or date of birth of each individual covered under the policy or program; and
- For each covered individual, the months for which the individual was enrolled in coverage and entitled to receive benefits.
In addition, information returns reporting MEC provided to an individual under an insured group health plan must report:
- Name, address, and EIN of the employer sponsoring the plan; and
- Whether the coverage is a qualified health plan enrolled in through the Small Business Health Options Program (SHOP) and the SHOP's unique identifier.
Timing of filing. The report is required to be filed with the IRS no later than February 28th of each year (or March 31st of each year, if filed electronically), reflecting information for the previous calendar year.
Benefit Statements to Employees
Employers submitting a Section 6055 return must furnish the same information to all individuals named in the return, together with the contact phone number of the individual filing the return and the policy number. This can be accomplished by providing a copy of the Form 1095-B, or similar substitute statement as prescribed by the IRS. These benefit statements must be provided annually by January 31st and are based on prior calendar plan year information. These statements may be provided electronically, as long as the electronic distribution standards contained in the regulations are followed.
Combined 6055/6056 Streamline Reporting
The final regulations provide a combined streamline reporting process, particularly for ALEs offering self-funded plans that would be subject to both Code Sections 6055 and 6056 requirements. While the IRS has not formally released the designated forms for accomplishing these reporting requirements yet, the final regulations indicated that an ALE sponsor of a self-insured plan who is subject to both IRC Sections 6055 and 6056 reporting requirements would complete both sections of IRS Form 1095-C. An ALE sponsoring an insured plan will also utilize the Form 1095-C, but need only complete the relevant information required by Section 6056 since it is the insurer who files information to satisfy its Section 6055 obligation.
While employers are encouraged to file the Section 6056 report for the 2014 calendar year, it is not obligatory until the 2015 calendar year, due in the first quarter of 2016. Employers should begin thinking about how to design a system that captures the relevant data. The IRS reporting forms referred to in this document have not been issued yet; they are expected to be available in the near future.
If an employer is interested in the alternative reporting process, the employer should work toward ensuring that affordability standard it uses is the single federal poverty line limit; or, it offers coverage to at least 98% of its full-time employees.
HHS Benefit and Payment Parameters for 2015
The Department of Health and Human Services (HHS) issued its 2015 Benefit and Payment Parameters on March 11, 2014. These uniform standards are intended for health insurers and the marketplace to ensure health coverage options for consumers, as well as provide planning guidance for insurers and employers. Following are highlights of these standards:
2015 Cost-sharing Limitations. Following are the deductible and out-of-pocket limits that can be imposed by plans:
- Deductible (only applicable to small insured plans offered in/outside Marketplace)
- $2,050 for single coverage
- $4,100 for coverage for more than one
- Out-of-pocket (applicable to insured plans offered via the Marketplace, and insured and self-funded plans offered outside Marketplace)
- $6,600 for single coverage
- $13,200 for coverage for more than one
Transitional Reinsurance Fee. The goal of a transitional reinsurance program is to stabilize premiums in the individual market due to anticipated immediate enrollment of higher risk individuals. The reinsurance money would be used to offset the expenses of the newly eligible individuals. For 2014, the contribution rate is $5.25 per covered life per month, or approximately $63, annually. The annual reinsurance contribution rate to be collected in 2015 is $44 per enrollee. Virtually, all-sized health plans, whether insured or self-funded are subject to the fees. Self-funded, self-administered plans are exempt from the transition reinsurance fee for the 2015 and 2016 reporting year. This is expected to have very limited application in that most self-funded plans engage the services of a third party administrator.
Federal Exchange User Fees. To support the functions of federally-facilitated marketplaces (FF-marketplace), participating insurers offering a plan through a FF-marketplace are required to remit a user fee to HHS each month. In 2015, the federal user fee remains at 3.5% of premium revenue of insurers who participate in the FF-marketplace.
Open Enrollment Period for 2015. The annual open enrollment period for the 2015 benefit year through the Marketplace is November 15, 2014 through February 15, 2015.
About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Leawood, Kansas office.
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. As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.