IRS Issues Proposed Rules On Information Reporting Under ACA

The Internal Revenue Service has issued two sets of proposed rules to implement the information reporting requirements under the Patient Protection and Affordable Care Act (ACA). The regulatory proposals reflect an ongoing dialogue with representatives of employers, insurers, other reporting entities and individual taxpayers. The regulations are proposed to apply for calendar years beginning after Dec. 31, 2014. Both rules were published in the September 9 Federal Register.

One set of rules provides guidance to employers that are subject to the information reporting requirements under Code Sec. 6056 (known as “applicable large employers” (ALEs)). ALEs must report to the IRS information about their compliance with the employer shared responsibility provisions of Code Sec. 4980H and about the health care coverage they have offered employees.

The other set of rules provide guidance to providers of minimum essential health coverage that are subject to the information reporting requirements of Code Sec. 6055. Health insurance issuers, certain employers, and others that provide minimum essential coverage to individuals must report to the IRS information about the type and period of coverage and furnish related statements to covered individuals.

Options to streamline rules. The proposed rules describe a variety of options to potentially reduce or streamline information reporting, including:

• Replacing Code Sec. 6056 employee statements with Form W-2 reporting on offers of employer-sponsored coverage to employees, spouses, and dependents.

• Eliminating the need to determine whether particular employees are full-time if adequate coverage is offered to all potentially full-time employees.

• Allowing employers to report the specific cost to an employee of purchasing employer-sponsored coverage only if the cost is above a specified dollar amount.

• Allowing self-insured group health plans to avoid furnishing employee statements under both Code Secs. 6055 and 6056 by furnishing a single substitute statement.

• Limiting reporting for certain self-insured employers offering no-cost coverage to employees and their families.

• Permitting health insurance issuers to forgo reporting under Code Sec. 6055 on individual coverage offered through a marketplace.

• Permitting health insurance issuers, employers, and other reporting entities under Code Sec. 6055 to forgo reporting the specific dates of coverage, the amount of any cost-sharing reductions, or the portion of the premium paid by an employer.

Applicable large employers. Code Sec. 6056 directs an ALE to file an information return with the IRS that reports for each employee who was a full-time employee for one or more months during the calendar year certain information about the health care coverage the employer offered to that employee (or, if applicable, that the employer did not offer health care coverage to that employee). Code Sec. 6056 also requires such employers to furnish, by January 31 of the calendar year following the calendar year for which the return must be filed, a related statement to each full-time employee for whom information is required to be included on the return.

Information required to be reported. The proposed regulations provide that every ALE will report on the information return the following information:

1. the name, address, and employer identification number of the ALE member, the name and telephone number of the applicable large employer’s contact person, and the calendar year for which the information is reported;

2. a certification as to whether the ALE member offered to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, by calendar month;

3. the number of full-time employees for each month during the calendar year;

4. for each full-time employee, the months during the calendar year for which coverage under the plan was available;

5. for each full-time employee, the employee’s share of the lowest cost monthly premium (self-only) for coverage providing minimum value offered to that full-time employee under an eligible employer-sponsored plan, by calendar month; and

6. the name, address, and taxpayer identification number of each full-time employee during the calendar year and the months, if any, during which the employee was covered under an eligible employer-sponsored plan.

Use of indicator codes. In an effort to simplify and streamline the reporting process, the proposed rules indicate that certain information as applied to a particular full-time employee will be reported to the IRS, and furnished to the full-time employee, through the use of a code rather than by providing specific or detailed information. A code will be used for information about whether or not the ALE offered minimum essential coverage meeting minimum value and whether or not the ALE met one of the affordability safe harbors.

Statements to full-time employees. The proposed regulations provide that an ALE that is required to file a Code Sec. 6056 return must furnish an employee statement to each of its full-time employees that includes the name, address and EIN of the ALE and the information required to be shown on the return with respect to the full-time employee. The employee statement is not required to include a copy of the transmittal form that accompanies the returns.

The proposed regulations provide that the employee statement may be made by furnishing a copy of the return on Form 1095-C (or another form the IRS designates) or a substitute employee statement for that full-time employee. Under the proposed regulations, a substitute statement must include the information required to be shown on the return filed with the IRS with respect to that employee and must comply with applicable revenue procedures or other published guidance relating to substitute statements.

Time for filing. The proposed regulations provide that the returns must be filed with the IRS annually, no later than February 28 (March 31 if filed electronically) of the year immediately following the calendar year to which the return relates. This is the same filing schedule applicable to other information returns with which employers are familiar such as Forms W-2 and 1099.

Because IRS Notice 2013-45 provided transition relief for Code Sec. 6056 reporting for 2014, the first returns required to be filed are for the 2015 calendar year and must be filed no later than March 1, 2016 (Feb. 28, 2016, being a Sunday), or March 31, 2016, if filed electronically. In addition, the regulations propose that the employee statements be furnished annually to full-time employees on or before January 31 of the year immediately following the calendar year to which the employee statements relate. This means that the first employee statements (meaning the statements for 2015) must be furnished no later than Feb. 1, 2016 (Jan. 31, 2016, being a Sunday).

Manner of filing. The proposed regulations require electronic filing of Code Sec. 6056 information returns except for an ALE filing fewer than 250 returns during the calendar year. The proposed regulations permit electronic furnishing of employee statements if certain notice, consent, and hardware or software requirements are met. To provide rules for electronic furnishing with which employers are already familiar, the proposed regulations adopt by analogy the process currently in place for the electronic furnishing of employee statements (that is, Forms W-2) pursuant to applicable regulations.

Minimum essential coverage. The proposed regulations provide that the following persons must file the information return and transmittal form required under Code Sec. 6055 to report minimum essential coverage:

1. Health insurance issuers or carriers,

2. Plan sponsors of self-insured group health plan coverage,

3. The executive department or agency of a governmental unit that provides coverage under a government-sponsored program, and

4. Any other person that provides minimum essential coverage to an individual.

The proposed regulations clarify that health savings accounts are not minimum essential coverage, and, thus, Code Sec. 6055 reporting is not required for them. Additionally, reporting is not required for arrangements such as health reimbursement arrangements that supplement minimum essential coverage.

Information required to be reported. The proposed regulations provide that the information return must include the name of each individual enrolled in minimum essential coverage and the name and address of the primary insured or other related person (for example, a parent or spouse) who submits the application for coverage (the responsible individual). The return also must report the TIN and months of coverage for each individual who is covered under the policy or program and other information specified in forms, instructions, or published guidance.

For employer-provided coverage, the proposed regulations require reporting the name, address, and EIN of the employer maintaining the plan and whether coverage was enrolled in through the SHOP.

Statements furnished to individuals. The proposed regulations provide that a reporting entity must furnish a statement to the covered individual providing the policy number and the name, address, and a contact number for the reporting entity, and the information required to be reported to the IRS. The proposed regulations permit substitute statements that include the information required to be shown on the return filed with the IRS and that comply with applicable requirements in published guidance relating to substitute statements.

The proposed regulations permit electronic delivery of statements to individuals if the recipient consents. In response to concerns about the need to furnish a statement to each individual, the proposed regulations also permit furnishing only one statement per address.

Comments requested. Comments must be submitted by Nov. 5, 2013, and can be submitted electronically via http://www.regulations.gov (IRS REG-132455-11 and REG-136630-12); or by mail to: CC:PA:LPD:PR (REG-132455-11 and REG-136630-12), Room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044.

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