HRB 121 - 1) Finalized 2016 ACA Reporting Forms 1094 and 1095 Series; 2) Section 1557 Nondiscrimination Notice Requirement; 3) Transitional Reinsurance Fee Reminder; and 4) IRS Warns of Fake ACA Tax Bills (Article)
1) Finalized 2016 ACA Reporting Forms 1094 and 1095 Series; 2)
Section 1557 Nondiscrimination Notice Requirement; 3) Transitional Reinsurance
Fee Reminder; and 4) IRS Warns of Fake ACA Tax Bills
Released October 20, 2016 I Download as a PDF
2016 ACA Reporting Forms 1094 and 1095 Series
Internal Revenue Service (IRS) issued final 2016 forms for the annual reporting
that will be due in 2017 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 6055 and 6056 reporting requirements. The
Form 1094-B and 1095 B-series is used for reporting MEC. The Form 1094-C and 1095-C series is used for
reporting employer provided coverage by an applicable large employer (“ALE”) subject
to the ACA’s shared responsibility requirement who employ 50 or more full-time
size is determined as of December 31st in the year prior to the
reporting year. For 2016 reporting
purposes, employer size is determined as of December 31, 2015. Below are links to the particular forms and
Insurance Coverage Reporting by Insurers and Sponsors of Self-funded Plans (IRC
for 2016 Forms 1094-B and 1095-B (PDF or HTML)
Health Insurance Reporting Requirement (IRC § 6056)
for 2016 Forms 1094-C and 1095-C (PDF or HTML)
Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage
Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
for Filing and Distributing Forms 1094 and 1095
reporting and disclosure obligations remain substantially the same as last
year. The 2016 Forms 1094-B and 1095-B, and
the 2016 Forms 1094-C and 1095-C reports must be submitted to the IRS no later
than February 28, 2017; or by March 31, 2017 if filing electronically. Individuals listed in the 2016 Forms 1094 and
1095 must be furnished copy of the relevant Form 1095 by January 31, 2017.
There is no indication at this time that these
filing dates will be extended. The good
faith standard for compliance available for the 2015 reporting year would not
necessarily be available for the 2016 reporting year. However, a reasonable cause situation which
may render an ALE incapable of meeting the reporting deadlines might be considered
by the IRS.
these forms are similar to the 2015 forms. Narrowing our focus on the C series
of the forms, following are a few clarifications and modifications:
forms of transitional relief were available in 2015. To the extent the relief is no longer
available, references to this relief have been removed.
Definition of full-time
employee. For purposes of determining full-time status,
the instructions clarify that a monthly method or look back method are the only
two ways to determine full-time status.
Reporting ALE members. With regard to the Form 1094-C, if an ALE
member belongs to an aggregated ALE group and checks “Yes” on Line 21 of the
Form 1094-C, then it must also complete Part IV of the Form. This section of the form requires the names
and EINs of other ALE members of the aggregated ALE group who were members at
any time during the calendar year. The
instructions clarify that the reporting ALE member need not include itself in
Part II, Employee Offer
of Coverage - Form 1095-C, Lines 14-16
In Lines 14 to 16, the
employer reports on offers of coverage, affordability and any applicable safe
harbor codes. Of particular note, certain codes are used in Line 14 to specify
the type of coverage offered and in Line 16 to specify any safe harbor codes
that may apply, such as the employee is no longer employed or not a full-time
offers of spousal coverage. The 2016 instructions provide for two new
codes 1J and 1K which address conditional offers of spousal coverage. A
conditional offer is defined as an offer of coverage that is subject to one or
more reasonable, objective conditions such as offering coverage to an
employee’s spouse only when the spouse is ineligible for Medicare or group
health coverage sponsored by another employer.
Code 1J would be used to indicate MEC providing minimum value offered to
employee and conditionally offered to spouse but not offered to
dependents. Code 1K indicates MEC
providing minimum value was offered to employee, MEC was offered to dependents,
and MEC conditionally offered to the spouse.
clarify that Code 1G is used to report individuals offered coverage who are not
full-time. This code can only be used
if, in fact, the individual was not full-time for the entire year.
COBRA continuation coverage. The method for reflecting offers of coverage for an individual
entitled to COBRA due to termination of employment differ from reporting COBRA
due to a reduction In hours. If COBRA is
offered to a former employee or his/her spouse and dependents due to
termination of employment, code 1H (no offer of coverage) would be entered on
Line 14 for any month that COBRA applies; and code 2A (employee not employed
during the month) would be entered on Line 16, without regard to whether the
employee and his/her spouse and dependents actually enroll in COBRA coverage. In the event of a reduction in hours, an offer of
COBRA made to the employee and his/her spouse and dependents would be reported
on line 14 as an offer of coverage, but only for the individuals who were offered
COBRA coverage. If the
employee’s dependent initially declines coverage and thus, not entitled to
COBRA, the reporting would reflect that there was no offer of coverage. This would preserve the dependent’s potential
eligibility for premium tax credits and potentially reduce the ALE’s risk of
penalty for failure to offer dependent coverage.
Example. During an open enrollment period, ABC
Company offers MEC that meets the minimum value standard to Tom and his spouse
and dependents. Tom elects to enroll in
employee-only coverage starting January 1. On June 1, Tom experiences a
reduction in hours that results in loss of eligibility for coverage under the
plan. As of June 1, ABC Company terminates Tom’s existing coverage and offers
COBRA coverage but does not extend the offer to his spouse and dependents. ABC
Company would enter code 1E (MEC providing minimum value offered to employee
and at least MEC offered to dependent(s) and spouse) on line 14 for months
January to May, and then enter code 1B (MEC providing minimum value offered to
employee only) on line 14 for months June to December.
In Line 16, an ALE would enter a Section 4980H safe harbor or other relief codes. There are instances when more than one code may apply to the same employee in the same month. The general rule of thumb is, if MEC is offered, then code 2C would apply. However, this code would not apply where there is a multi-employer plan or when individuals are offered COBRA. Further, the instructions clarify that a safe harbor code used to identify one of the three affordability standards, i.e., W-2 (code 2F), federal poverty level (code 2G) or rate of pay level (code 2H) should not be entered on line 16 for any month that the ALE did not offer MEC to at least 95% of its full-time employees and their dependents.
Coverage in more than one type of comprehensive health coverage. In Part III of the Form 1095-C, the instructions follow prior guidance, as well as proposed regulations issued on August 15, 2016, relating to reporting of more than one type of coverage. If an employer sponsors a health reimbursement arrangement (HRA) in conjunction with a comprehensive self-funded plan, the information provided in Part III of the Form 1095-C need only reflect the comprehensive health plan. If an individual is covered by an insured plan of the employer and an HRA, the employer would not complete Part III. If the individual is covered by HRA and comprehensive coverage of another employer, for example, a spouse’s employer plan, then Part III reporting would be required to reflect coverage under the HRA.
Soliciting Taxpayer Identification Numbers (TIN). For purposes of the MEC reporting required by IRC Section 6055 and reported on the Form 1095–B and Form 1095–C, Part III, the above-mentioned proposed regulations provide some clarifications to assist reporting entities in obtaining taxpayer identification numbers (TIN) needed to complete the filings. These rules also apply to self-insured employers who are required to file Part III of the Form 1095–C.
Missing TINs. An initial request for an individual’s TIN may be solicited at the time the insurer or employer receives application for new coverage, or when adding an individual to existing coverage. If the TIN is not received, then a second solicitation may be made within 75 days, and if necessary, a third solicitation be made by December 31st of the year following the initial solicitation. Where a reporting entity is unable to obtain the TIN, the birth date of a covered individual could be used.
Incorrect TINs. In the event of an incorrect TIN, the existing rules under the tax code apply. These rules require three attempts to obtain TINs or Social Security Numbers for all covered lives:
The first occurs when the individual becomes covered by the plan.
The second occurs by December 31st of the first year of coverage; however, if the coverage begins in December, the second solicitation can occur by January 31st of the next year.
The third and final solicitation must occur by the next December 31st (or January 31st if applicable).
And finally, the proposed rules address instances of soliciting TINs of covered individuals. A solicitation for a TIN requested from the primary insured would be treated as a solicitation of all individuals covered under the primary insured’s plan. However, in the event where individuals are added to the coverage, then a separate individualized solicitation must be made to each individual when they are added to the plan.
Information reporting penalties. The instructions include updated penalties for failure to provide the information return or provide correct payee statement.
The penalty for failure to file a correct information return is $260 for each return for which the failure occurs, with the total penalty cap of $3,193,000 for a calendar year.
The penalty for failure to provide a correct payee statement is $260 for each statement for which the failure occurs, with the total penalty cap of $3,193,000 for a calendar year.
Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to file the returns and furnish the required statements.
information relating to ALE obligations including the ACA Information Returns
(AIR) system, can be found on the IRS’s dedicated webpage, ACA Information Center
for Applicable Large Employers (ALEs). Also
1557 Nondiscrimination Notice Requirement
a follow-up to our prior discussion relating to the ACA’s Section 1557
nondiscrimination rules (see Final HHS Rules Address
Nondiscrimination in Health Plans,
CBIZ Health Reform Bulletin 118, 6/1/16), affected covered entities are
required to provide certain notification to individuals beginning October 16,
background, Section 1557 of the ACA provides for open access to health
coverage, programs and activities by all individuals. In other words,
individuals cannot be discriminated against or prohibited from participating in
health related programs or denied health coverage on the basis of race, color,
national origin, sex, age, or disability.
Generally, these regulations apply to insurers and third party
administrators receiving federal funding, as well as self-funded employers
receiving federal funding such as hospitals and nursing homes. These rules do
not apply to employers sponsoring self-funded plans as long as the employer
does not receive federal funding, which may include Medicare Part D retiree
covered entity is required to provide initial and on-going notification to
beneficiaries, enrollees, applicants, and members of the public. The purpose of the notification is to inform
them that the covered entity does not discriminate on the basis of race, color,
national origin, sex, age, or disability in its health programs and
activities. In addition, the notice must
provide information relating to the availability of:
auxiliary aids and services, including qualified interpreters for individuals
with disabilities and information in alternate formats, free of charge and in a
timely manner, together with an explanation of how to obtain the aids and
assistance services, including translated documents and oral interpretation,
free of charge and in a timely manner, when such services are necessary to
provide meaningful access to individuals with limited English proficiency;
procedures together with an explanation of how to file a grievance, as well as
how to file a discrimination complaint with the HHS Office of Civil Rights.
posting must be placed in a conspicuous location of the covered entity. Notifications and taglines can be included in
communications routinely provided to beneficiaries, enrollees, applicants, and
members of the public, as well as made available through the entity’s website.
HHS Office of Civil Rights has prepared a model notice, a model
nondiscrimination statement, and a model tagline, all available in 64 different
languages. These can be found on OCR’s translated
resources webpage. OCR has also provided a table displaying the
top 15 languages spoken by individuals with limited English proficiency in each
state and the U. S. territories. The
table, together with FAQs, can be accessed from OCR’s dedicated web page.
information about Section 1557, including FAQs can be obtained from
the HHS’ Office of Civil Rights website.
Transitional Reinsurance Fee Reminder
will be the last year for collection of the transitional reinsurance fee. As
background, the Affordable Care Act imposes the transitional reinsurance fee,
the goal of which is to help stabilize premiums in the individual market due to
enrollment of higher risk individuals in the marketplace. All insurers and plan
sponsors of self-funded plans providing major medical coverage are required to
contribute to this reinsurance fund over a three year period from 2014 through
contribution rate for the 2016 benefit year is $27 per covered life.
Contributions can be made in one payment of $27 per covered life (combined
collection); or, made in two-part payment of $21.60 per covered life (first
collection) and $5.40 per covered life (second collection).
annual enrollment count (based on first 9 months of the calendar year) must be
submitted by November 15, 2016 on the “ACA
Transitional Reinsurance Program Annual Enrollment Contributions Submission
Form” available via www.pay.gov. The reporting form will
auto-calculate contribution amounts and allow payments to be made in one or two
If making one payment
of the fee, the 2016 ACA Transitional
Reinsurance Program Annual Enrollment Contributions Submission Form must be
submitted by November 15, 2016; the full fee must be paid by January 17, 2017.
If opting to make two
payments, the Form must be filed by November 15, 2016; the first part of the
two payments must be paid by January 17, 2017; the second payment is due by
November 15, 2017.
Centers for Medicare and Medicaid Services released a 2016 Reinsurance Contributions
that provides additional information.
IRS Warns of Fake ACA Tax Bills
IRS is alerting taxpayers to be on guard against fake emails purporting to
contain an IRS tax bill relating to the Affordable Care Act. Generally, the
scam involves an email which contains a fraudulent version of CP2000 notices
for tax year 2015 as an attachment.
Additional information to assist in identifying these scams is available
on the IRS website.
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 Kansas City office.
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.