The Affordable Care Act requires “applicable large employers” (generally, employers with 50 or more full-time employees and full-time employee equivalents) to provide individual statements to their full-time employees and to report to the IRS certain information about their employer-sponsored health coverage. This rule is first effective with respect to coverage offered in 2015. Employers will want to be aware of some of the pitfalls and processes stemming from this first reporting year.
Automatic Due Date Extensions – For 2015 Reporting Only
These statements and reports are generally due at the same time as W-2 statements and reports. However, there is some good news – for this first reporting year, the IRS has provided automatic extensions with respect to both the individual employee statements and IRS reporting. Under these extensions:
- Individual Employee Statements – Form 1095-B and 1095-C must be furnished to employees no later than March 31, 2016 (January 31 under the general rule)
- IRS Reports – Paper filings of Form 1094-B, 1095-B, and 1095-C are due to the IRS by May 31, 2016 (February 28 under the general rule) and electronic filings are due June 30, 2016 (March 31 under the general rule)
It is important to note that these deadlines apply regardless of whether a plan uses a calendar year or non-calendar year plan year. Also, unless the IRS issues subsequent guidance, the general due dates will apply next year.
Practical Pointers – Employee Statements
Consider Sending Notice to Employees Regarding Delayed Form 1095-C
Given the IRS extensions for this year, many employees will complete their individual income tax returns before they receive Form 1095-C. The individual income tax return instructions explain that employees do not need to wait for their Form 1095-C to complete their tax returns. As this explanation may be overlooked, some employers who are taking advantage of the extension are sending employees a notice to inform them about the delay in furnishing the form and remind them that they generally do not need the Form 1095-C to complete their individual income tax returns. Employers are not required to send this notice, so this is simply an option to consider.
Review Forms 1095-C Auto-Populated by Service Provider
If you are using a service provider to auto-populate Forms 1095-C on your behalf, it may be a good idea to conduct “spot reviews” of these forms. A large employer with many employees obviously does not have time to review every form, but it may be prudent to review a portion of these forms to check for any regularly occurring inaccuracies. For example, we have noticed that some service providers and large employer filers have struggled with reporting offers of COBRA coverage. Generally, the final instructions for Form 1095-C provide that offers of COBRA coverage made to a former employee upon termination should not be reported as an offer of coverage, irrespective of whether the former employee enrolled in such coverage.
Take Advantage of the Good Faith Exception
This is the first year of reporting, and it is a painstaking and confusing process. Recall that the IRS has stated, for 2016 reporting of 2015 coverage, it will not impose penalties on a large employer filer for reporting incorrect or incomplete information if the filer can show that it made good faith efforts to comply with the information reporting requirements. However, large employer filers cannot take advantage of the good faith exception if reporting is not completed in a timely manner, so filers should take note of the reporting deadlines noted above.