On September 5, 2013, the Department of the Treasury and the IRS finally released the notices of proposed rule making on information reporting requirements under IRC USC § 6055 and § 6056 as enacted by the Affordable Care Act (ACA).
For those who may have forgotten this requirement, here is a recap: Under section 6055, employers who offer self-insured plans as well as insurers must generally file a return with the IRS and provide a statement to each individual regarding who is covered by plans that offer minimum essential coverage. Under section 6056, large employers subject to the employer mandate must file a return with the IRS and provide a statement to each full-time employee with information regarding the offer of employer-sponsored healthcare coverage. Under the proposed regulations, the first mandatory filings and statements must be for calendar year 2015, filed in early 2016.
The proposed rules were filed and published in the Federal Register on September 9, 2013, and comments are due, after a 60-day comment period, by November 8, 2013. A public hearing on reporting under section 6056 is scheduled for November 18, 2013, and a public hearing on reporting under section 6055 is scheduled for November 19, 2013.
Let’s review what we already know about the Affordable Care Act since the confusion continues as more and more regulations are released. The ACA enacted three separate information reporting provisions, each for a particular purpose:
1. Section 6051 requires employers to report on an annual basis all wage information on a form W-2. In 2012 (form provided in January 2013), employers who filed 250 or more W-2s are required to report the aggregate cost of medical coverage offered to employees. This was done to give employees a view into the value of their provided coverage.
2. Section 6055 requires all employers with self-insured group health plans, insurance issuers, and governmental units to report to the IRS and provide a statement to individuals with information regarding Minimum Essential Coverage. This is for only those employees enrolled in coverage. The complicated part is that this annual filing tabulates the employee coverage information on a monthly basis. Section 6055 was enacted to assist the IRS in administering the individual mandate.
3. Section 6056 requires applicable large employers (those with 50 or more full-time equivalent employees) to report to the IRS and provide a statement to all full-time employees with information about the offer of employer-sponsored coverage, whether or not the coverage was accepted. This annual filing tracks and reports the offer of coverage on a monthly basis. Section 6056 was enacted to assist the IRS in administering the employer mandate and the premium tax credit program for individuals.
In summary, employers must complete three separate filings to the IRS, all due on the same date, and three separate statements for the employees, all due on the same date. In all the months we have been waiting for these regulations to be released, employers, associations, and insurance issuers have been raising the concern that they will be subject to duplicative reporting requirements. The Treasury Department and IRS have acknowledged these comments, and are looking for feedback on how to streamline, if possible. For this release, however, the proposed regulations generally do not permit combined reporting because each provision requires different information and a different time frame (6051 is annual, 6055 and 6056 are monthly). As stated, these departments are considering ways to combine, possibly by using an indicator on the W-2 in certain circumstances. Following are some concrete proposals for combined reporting in unique cases:
- When an employer offers an insured health plan to its employees and an agreement is entered into with a health insurance issuer, the employer may include information required under 6056 with the return and a statement they provide to the issuer under 6055.
- When an employer offers a no cost or very low cost (not defined) employer-provided self-insured coverage, the employer may report only on the section 6055 return to the IRS and the Form W-2 provided to the employee.
- Employers sponsoring a self-insured group health plan may fulfill the obligation to furnish an employee statement under both sections 6055 and 6056 through the use of a single substitute statement, as long as all the required information is included and the integrity of tax administration is maintained.
Let’s take a look at a summary of sections 6055 and 6056 and the requirements of each. The proposed regulations for both combined came to 114 pages, so this is condensed for our purposes.
Section 6055: Information Reporting of Minimum Essential Coverage
Section 6055 is focused on IRS administration of the individual mandate. Essentially, it gives taxpayers the information they need to establish they were covered and gives the IRS the information needed to verify the taxpayers were covered by minimum essential coverage and the exact months that coverage was in place through the enrollment process. All health insurance issuers, employers offering self-insured group health plans, government entities, and other providers of minimum essential coverage must report under section 6055.
Persons required to report:
• Insurers of qualified health plans on an Exchange are not required to submit section 6055 returns because the Exchanges must report to individuals and the IRS. However, insurers are required to report on any qualified health plans enrolled through a shop Exchange because annual reporting by Exchanges does not include these plans.
Information required to be reported:
• Name, address, and TIN of the primary insured and each individual covered under the policy and the months of coverage. Where the TIN of a dependent cannot be collected, proposed regulations allow the enrollee’s date of birth to be reported. There are no penalties for not including a TIN as long as a reasonable effort has been made to gather the information.
Statement to individuals:
As stated, a statement to each covered employee (only one per address for all covered individuals in a family) must be delivered by January 31 each year. The proposed regulations permit electronic delivery of the statements as long as the individual consents to such delivery.
There is also flexibility to provide a substitute statement (a government form will be created and released at a later date) and report using the IRS truncated TIN program. Filing to the IRS is due by March 31 if filing electronically (February 28 otherwise).
Section 6056: Employer Reporting on Coverage Offered
Section 6056 requires employers to collect and report information regarding all full-time employees and the offer of employer-sponsored coverage. As outlined previously, there are some proposals for streamlined reporting , but the general method of reporting continues to require employers to report detailed information on the plans, the number of employees who are employed, and offered coverage on a monthly basis. The simplified methods may work for some employers (those with very little change or turnover), but most will need to default to the general method.
The following information required to be reported on a month-by-month basis includes:
• The number of full-time employees for each month during the calendar year
• The months for which coverage was available for each full-time employee
• The employee’s share of the lowest-cost monthly premium for self-only coverage minimum value plan offered to that employee, by month
• The IRS is likely to request additional information, including:
• whether the employee had the opportunity to enroll his or her spouse in a plan with minimum value coverage;
• whether coverage was offered to employees who are not full-time;
• total number of employees by calendar month;
• whether the employee’s effective date of coverage was affected by a waiting period;
• if the large employer was not conducting business during any particular month, by month;
• if the large employer expects that it will not be a large employer the following year;
• information regarding whether the employer is part of a controlled group, and the name and EIN of each member of the controlled group making up the large employer;
• if a designated entity is conducting the reporting on behalf of a large employer, the name, address, and EIN of that designated person or entity;
• if an applicable large employer is a part of a multiemployer plan, whether a full-time employee is treated as eligible to participate due to the employer’s contribution to the multiemployer plan; and
• if the administrator of a multiemployer plan is reporting on behalf of the large employer with respect to the employer’s full-time employees, the name, address, and EIN of the administrator.
Every employer is required to file a section 6056 return with the IRS and furnish a section 6056 statement to each of its full-time employees. Same filing schedule for 6055 is in place for 6056. If filing electronically, it is due by March 31 (February 28 otherwise). Employee statements are due by January 31.
As stated, there are several potential methods for streamlined reporting. Large employers would be able to use different methods for different employees at their discretion, but the administration of this could be extremely difficult. For example:
• Minimum value coverage offered to all or potentially all (95% rule): IRS and Treasury are considering allowing an employer to certify that all employees who did not receive an offer of coverage during the calendar year were not full-time or were otherwise ineligible due to initial measurement and wait periods. This method would allow large employer to forgo identifying the full-time status of its employees and make a filing with the IRS under section 6056 that would not be required to identify the number of full-time employees or specify the full-time status of a specific individual. This alternative may be attractive to those employers who have designated their healthcare plans offered to all full-time employees. It does not, however, release the employer from the individual 6056 statements to employees; and if a premium tax credit is claimed, the IRS could ask the employer to confirm whether the individual was a full-time employee during the calendar year.• Self-insured employers offering employees, spouses, and dependents mandatory no-cost minimum coverage: Under this proposal, the IRS and Treasury Department are considering whether the employer could file and furnish only the 6055 return, a code on the W-2, and summary information provided in the 6056 transmittal.
We knew the reporting regulations would be complicated and elicit comments from the employer and insurance issuer community. We expect the final regulations and government forms and transmittal details to be released early in 2014, since they are requesting that large employers voluntarily report for 2014. Much remains to be seen, but having the proposed regulations and information required will assist in getting the data requirements lined up and tested well before the real due date. Remember, all data must begin to be collected on a monthly basis beginning January 1, 2015.