Under a new IRS reporting statute, larger employers will be required to file reports annually with the IRS and provide statements annually to employees regarding health insurance coverage they offered to employees in the preceding year, which could result in penalties if reports are late, incomplete, or indicate coverage was not offered as required. Reporting becomes mandatory for the 2015 calendar year, with reports and statements due in early 2016, as more fully discussed below.
The new IRS reporting statute concerning larger employers is IRS Section 6056, which imposes reporting requirements on employers that employed an average of at least 50 full-time employees, including full-time equivalents, during the preceding calendar year, referred to as applicable large employers (“ALEs”). An employee employed at least 30 hours per week, on average, is considered full-time. Full-time equivalents (“FTEs”) will also be factored in, as under this example: 40 full-time employees employed 30 or more hours per week on average plus 20 employees employed 15 hours per week on average are equivalent to 50 full-time employees. An employer is considered to be an ALE “member” if it is a member of an aggregated group of related entities, such as parent and subsidiary or other affiliated entities, which together employ at least 50 full-time employees, including FTEs. Each separate entity of the aggregated group must file reports with the IRS and provide statements to employees. Those employers who have to submit reports to the IRS will also be required to provide their employees with certain health care coverage information.
ALE’s and ALE members must report on the health care coverage offered to their full-time employees and FTEs for the calendar year and any full-time employees or FTEs who were not offered coverage, and also furnish related information to employees. Even if the ALE or ALE member does not offer coverage to any of its full-time employees or FTEs, it must file returns to the IRS and furnish statements to each of its full-time employees and FTE’s specifying that coverage was not offered. The IRS will use the information reported to verify employer-sponsored coverage and administer the Affordable Care Act’s shared responsibility provisions for large employers, which may result in penalties for those not offering affordable, minimum value coverage to their full-time employees, FTEs and dependents, if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on an insurance exchange or marketplace such as Covered California.
Employers may have a third party administrator or service provider file the return to the IRS and furnish statements to employees, but this arrangement will not transfer to the third party any potential liability the employer may have, although if the third party is a tax return preparer, it will be subject to the requirements generally applicable to tax preparers.
Employers with fewer than 50 full-time employees including FTEs need not report unless they fall into one of the reporting groups under IRS Section 6055. Under this statute, those required to report include employers of any size that also sponsor a self-insurance plan, provide “minimum essential coverage,” are health insurance issuers or carriers, or otherwise fall into one of the reporting groups, but an employer of under 50 full-time employees including FTEs, that sponsors a plan by purchasing insurance from a health insurance issuer is not required to report. An employer provides minimum essential coverage when it provides coverage purchased in the individual market, in the small or large group market within a state, a grandfathered health plan offered in a group market, COBRA coverage and retiree coverage, and certain other coverage, as is more fully set forth under the section entitled “Who is Required to Report,” here. Employers required to report to the IRS under IRS Section 6055 are also required to furnish statements annually regarding coverage to the person named in the coverage application.
The reporting requirements found in IRS Sections 6055 and 6066 were originally supposed to take effect in 2014, but the Treasury Department announced that employers will have an extra year to comply, so that the reporting requirements take effect in 2015. Reporting is optional for 2014, although the IRS encourages coverage providers to file information returns voluntarily for coverage offered in 2014, which are due to be filed and furnished in early 2015, and will have no impact on tax liability of the health coverage provider or the individuals affected. But, beginning 2015, reporting by employers subject to reporting requirements will be mandatory.
Reporting forms under both IRS statutes are required to be filed annually with the IRS by February 28, or March 31, if filed electronically, of the year immediately following the calendar year to which the return relates. As February 28 of 2016 falls on a Sunday, the filing date deadline for 2015 information is February 29, 2016, or March 31, 2016, if filed electronically. ALEs and ALE members must also provide full-time employees and FTEs with a written statement, and self-insurers and any provider of minimum essential coverage must provide a statement to the person named on the coverage application, by January 31 of the next calendar year. Because January 31, 2016 also falls on a Sunday, the deadline for employee and other statements for 2015 would be February 1, 2016. Employers who will file over 250 or more of any reporting form during the calendar year generally must file them electronically.
The IRS has indicated that there will be short-term relief by providing additional time for compliance or relief from reporting penalties for late or incomplete or incorrect filings, if employers can show they have made good faith efforts to comply.
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