Newslink: Health and Welfare

September 2016
Affordable Care Act Draft 2016 1094 & 1095 Forms Released

UPDATE 11-22-2016: Under the Affordable Care Act, Applicable Large Employers (50+ full time employees plus full-time equivalents), are required to furnish 1095-C forms to their full-time employees. Also, insurance carriers are required to provide 1095-B forms to individuals enrolled in fully insured health plans. These forms are typically due the same time as W-2 forms, but last year the IRS granted an extension of time for employers and insurers to provide the 2015 forms to employees, covered individuals and the IRS. The 2016 1095-C and 1095-B forms would typically be due January 31, 2017 to employees and covered individuals but last week the IRS provided an extension of time to furnish the 2016 forms. The extended deadline is March 2, 2017.

The IRS did NOT extend the deadline to furnish the forms to the IRS, however. If employers and insurers are not filing electronically with the IRS, the forms are due to the IRS by February 28, 2017. If filing electronically, the forms are due to the IRS by March 31, 2017.

In addition, the IRS is extending good-faith transition relief from penalties for incomplete or incorrect forms as long as employers or insurers can show that they made good-faith efforts to comply with the reporting requirements, both furnishing forms to individuals and filing with the IRS. This relief applies to missing and inaccurate Social Security Numbers and dates of birth, as well as other information required to be reported.

This is welcome news to many as employers. Insurers are still working to perfect their reporting information for the forms. The extension only applies to the 2016 forms, not future forms.

IRS Notice 2016-70: https://www.irs.gov/pub/irs-drop/n-16-70.pdf

UPDATE 10-17-2016: The IRS has now released the final versions of the 2016 forms.  The only notable change in the final version of the forms compared to the draft forms is the IRS note about code 1G.  To use code 1G, employers should either complete the "all 12 months" box or complete each monthly box for the entire calendar year. All other changes to the forms outlined in our previous NewsLink article remain the same. The IRS instructions for Code 1G are below:

1G. Offer of coverage for at least one month of the calendar year to an individual who was not an employee for any month of the calendar year or to an employee who was not a full-time employee for any month of the calendar year (which may include one or more months in which the individual was not an employee) and who enrolled in self-insured coverage for one or more months of the calendar year.

Note: Code 1G applies for the entire year or not at all. Therefore, if code 1G applies, an Applicable Large Employer (ALE) Member must enter code 1G on line 14 in the “All 12 Months” column or in each separate monthly box (for all 12 months).

Please review the information about the 2016 form deadlines and penalties for noncompliance below.  These rules have changed for 2016 and the IRS is no longer granting "good faith effort" relief for the 2016 form so penalties can be significant if forms are not accurately prepared and provided timely.

Links to Forms:

Instructions for 2016 1094-C & 1095-C
https://www.irs.gov/pub/irs-pdf/i109495c.pdf?_ga=1.67062822.988205682.1470250437

2016  1094-C Form
https://www.irs.gov/pub/irs-pdf/f1094c.pdf

2016  1095-C Form
https://www.irs.gov/pub/irs-pdf/f1095c.pdf?_ga=1.231195543.988205682.1470250437

Starting for calendar year 2015, the Affordable Care Act (ACA) required applicable large employers to prepare reporting forms to full-time employees and the Internal Revenue Service (IRS). The IRS has published the draft 2016 1094-C & 1095-C forms and instructions. The IRS also released the draft 2016 1094-B & 1095-B forms and instructions, but our focus in this article is on the C forms that applicable large employers must complete. Not surprisingly, there are minimal changes to the forms. Since we are more than halfway through the 2016 year, the IRS would be remiss if they changed the forms too drastically. Other modifications were only clarifying changes to the forms. Below is the list of the most noticeable changes.

2016 1094-C (Transmittal) Changes

  • Line 22: Box B has changed to "Reserved." In the 2015 form, Box B was for "Qualifying Offer Method Transition Relief" which no longer applies in 2016.
  • Part III, column (b): The IRS added the words "Section 4980H" to the column header before the words "Full-Time Employee Count for ALE Member." The IRS clarifies that the definition of full-time for this column should be based on the ACA's definition of full-time employee. No other definition of full-time can be used in this column.

2016 1095-C Changes

  • Part II "Plan Start Month (enter 2-digit number)": The IRS has made this optional again for 2016. This item will need to be completed for 2017.
  • Line 14: Code 1I, "Qualifying Offer Transition Relief - 2015" no longer applies, so this code has been changed to "Reserved."
  • Line 14: The IRS has added 2 new codes, 1J and 1K. According to the IRS instructions, these new codes address conditional offers of spousal coverage (also referred to as "coverage offered conditionally"). A conditional offer is an offer of coverage that is subject to one or more reasonable, objective conditions. An example of this is 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. Using new codes 1J and 1K, an applicable large employer member may report a conditional offer to a spouse as an offer of coverage, regardless of whether the spouse meets the reasonable, objective condition.
    • 1J: Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage conditionally offered to spouse; minimum essential coverage not offered to dependent(s).
    • 1K: Minimum essential coverage providing minimum value offered to employee; at least minimum essential coverage offered to dependents; and at least minimum essential coverage conditionally offered to spouse.
  • Line 16: The 2I code, "Non-calendar Year Transition Relief" no longer applies in 2016.

Clarifications by IRS

The IRS has also clarified the following:

  • In 1094-C, where an employer has more than one entity or multiple divisions, the IRS has provided additional guidance on how to report on 1094-C for the group and provides examples which better clarify the "authoritative transmittal" rules. Each employer with its own tax ID number should file a 1094-C form and there should be no "authoritative transmittal" filed. Where employers have divisions (no separate Tax ID numbers) and you file separate forms, there does need to be an authoritative transmittal form filed reflecting all employees of the employer.
  • Multiemployer relief: The IRS has indicated that the relief for multiemployer plans is extended for 2016.
  • There is a new definition in the instructions for "Employee Required Contribution": Line 15 of the 1095-C form where employers report cost of self-only coverage refers to this new definition. This field may not change from 2015, but check with your broker/consultant or ACA reporting provider for any potential changes for 2017 based on recent guidance by the IRS on certain contributions, e.g. opt-out payments to employees when they decline employer-sponsored coverage.
  • Instructions: The IRS clarifies that many ACA transition relief provisions for 2015 are no longer available in 2016, with the exception of non-calendar year plans where the plan year beginning in 2015 continues into 2016. The transition relief is only available for those remaining 2016 months in the plan year beginning in 2015.

Will these changes affect the data being reported to ACA reporting providers?

At TRI-AD, we don't believe the form and instruction changes will require you to provide different data to your ACA reporting providers, in most cases. The reporting provider may need to make changes on their end for the new codes and other clarifications, but most will have the data necessary to make the changes. Although these draft forms and instructions are not finalized yet, we suggest you inquire about any expected reporting changes with your ACA reporting vendors.

Deadlines for the forms have changed

The 2016 forms are now due much sooner than the 2015 forms. Because the forms were new for 2015, the IRS allowed additional time for employers to file the forms but that extension no longer applies. Below are the 2016 form deadlines. Employers can still file for a 30-day extension before the deadlines.

  • 1095-C deadline to employees: The forms to employees are due by January 31, 2017. This is the same deadline as 2016 W-2 forms.
  • 1094-C deadline to IRS: If you are filing paper forms to the IRS, the deadline is February 28, 2017. If you are filing electronically, the forms are due March 31, 2017.

No relief from penalties by the IRS for the 2016 forms

For the 2015 forms, if the employer can show that they made good faith efforts to comply, the IRS is not going to impose penalties if employers reported incorrect or inaccurate information. This relief from penalties is not available for the 2016 reporting forms. Failure to file a correct information return or failure to provide a correct payee statement is penalized at $260 per failure, with a maximum cap of $3,193,000 during a calendar year. Penalties may be waived if the failure was due to reasonable cause and not willful neglect.

Links to IRS Forms