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November 14, 2019

HRB 146 - 1) IRS Releases Draft 2019 Forms 1094/1095 Series; and 2) Revised Summary of Benefits and Coverage (SBC) Templates for 2021

HRB 146 - 1) IRS Releases Draft 2019 Forms 1094/1095 Series; and 2) Revised Summary of Benefits and Coverage Templates for 2021 (Article)
Issued November 14, 2019 I Download as a PDF

IRS Releases Draft 2019 Forms 1094/1095 Series

On November 13, 2019, the IRS released draft versions of the Form 1094/1095 series.  These forms are used to satisfy the annual reporting obligations imposed by IRC Section 6055 minimum essential coverage reporting, and by IRC Section 6056, employer shared responsibility reporting.  As background:

  • The minimum essential coverage (MEC) reporting obligation is accomplished on the Form 1094-B transmittal and Form 1095-B statement to individuals.  Generally, this reporting is accomplished by the insurer if the plan is insured.  If the plan is self-funded, the employer is obligated to complete the MEC reporting and disclosure. 
  • Employers subject to employer shared responsibility (those employing 50 or more employees as of December 31, 2018 for the 2019 reporting year), can accomplish the MEC obligation by completing Part III on the Form 1095-C. Employers not subject to employer shared responsibility reporting accomplish the MEC reporting obligation by reporting on the B series described above.  The employer shared responsibility reporting obligation is accomplished on the Form 1094-C transmittal and the Form 1095-C statement to individuals.

The 2019 reporting forms and instructions are available for viewing and downloading from the IRS website.  However, it is important to reiterate that these are only draft versions at this point and subject to change: 

Health Insurance Coverage Reporting by Insurers and Sponsors of Self-funded Plans (IRC Section 6055)

       Employer Health Insurance Reporting Requirement (IRC Section 6056)

Deadlines for Filing and Distributing Forms 1094 and 1095

  • Statements to individuals for both the B and C series must be furnished by January 31, 2020. Entities can request an extension for furnishing the statements by sending a letter to the IRS (see the instructions for the required content of the letter to request the extension and mailing address).
  • Electronic filing of the forms must be accomplished by March 31, 2020; or, February 28, 2020 if filing by paper (paper filing is only available to employers filing fewer than 250 returns per year).  At this point, no delay has been granted for filing these forms.  An automatic 30-day extension is available by filing a Form 8809.

Information reporting penalties.  The penalties for failure to provide the information return or provide correct payee statement are subject to indexing.  Following are the adjusted penalties applicable for the 2020 tax year:

  • The penalty for failure to file a correct information return is increased to $280 (up from $270 in 2019) for each return for which the failure occurs, with the total penalty cap of $3,392,000 (up from $3,339,000 in 2019) for a calendar year.
  • The penalty for failure to provide a correct payee statement is increased to $280 (up from $270 in 2019) for each statement for which the failure occurs, with the total penalty cap of $3,392,000 (up from $3,339,000 in 2019) 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.

As a reminder, an employer subject to the ACA’s employer shared responsibility who employs 50 or more employees on business days during the preceding calendar year must offer adequate and affordable health coverage to its full-time employees, or risk a penalty.  For 2020, coverage under an employer-sponsored plan is deemed affordable to a particular employee if the employee's required contribution to the plan does not exceed 9.78% (indexed for 2020; decreased from 9.86% in 2019) of the employee's household income for the taxable year, based on the cost of single coverage in the employer’s least expensive plan.

With regard to potential penalties, the amount of penalties for purposes of calculating the ‘no coverage’ excise tax (Code Section 4980H(a)), and the ‘inadequate or unaffordable’ excise tax (Code Section 4980H(b)) is subject to annual indexing.  Below is a chart reflecting the penalties for 2018 to 2020. These amounts are based on the HHS inflationary percentage contained in its annual benefit and payment parameter standards for the relevant year, and as officially released by the Internal Revenue Service. 

‘No Coverage’ Excise Tax

IRC  Section 4980H(a)

‘Inadequate or Unaffordable’ Excise Tax

IRC  Section 4980H(b)

2018

$2,320

2018

$3,480

2019

$2,500

2019

$3,750

2020

$2,570

2020

$3,860

 

Revised Summary of Benefits and Coverage (SBC) Templates for 2021

The Affordable Care Act requires individual and group health plans to provide participants with a written summary of benefits and coverage (SBC) of the plan.   On November 8, 2019, the CMS’ Center for Consumer Information & Insurance Oversight (CCIIO) released revised model SBC templates, uniform glossary and related materials.  These documents must be used by plan sponsors and insurers for policy/plan years beginning on or after January 1, 2021 (relates to coverage for plan years beginning on or after that date).  For plans and insurers that do not use an annual open enrollment period, the revised SBC template is to be used beginning on the first day of the first plan year that begins on or after January 1, 2021.

Only minor changes have been made to the templates from the 2017 editions.  Of particular note, references to the individual shared responsibility penalty have been omitted in light of the repeal of the penalty by the Tax Act and Jobs Credit.  The majority of changes involve the coverage examples.  

All of these revised documents are available on CCIIO’s website in 5 languages (English, Spanish, Chinese, Tagalog and Navajo).  As a reminder, the SBC must be provided to participants upon application, by the first day of coverage, within 90 days of special enrollment period, upon contract renewal and upon request.

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 Kansas City 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.

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