Provided by: Clarus Benefits Group
3000 Weslayan Street, Suite 390
Houston, TX 77027
Tel: 713-668-7210
Introduction .............................................................. 3
Plan Design and Coverage Issues:
2014 and Beyond ...................................................... 4
Employer Obligations............................................. 10
Notice and Disclosure Requirements ................... 19
Wellness Programs ................................................ 26
Health Plan Fees..................................................... 27
Plan Design and Coverage Issues:
Prior to 2014............................................................ 30
This Toolkit is not intended to be
exhaustive nor should any
discussion or opinions be
construed as legal advice.
Readers should contact legal
counsel for legal advice. The
contents of this document may be
affected by future regulations and
sub-regulatory guidance.
The health care reform law—the Affordable Care Act (ACA)—has many complex
requirements for employers and health plans. Because many of the ACA’s major
provisions took effect in 2014, it is more important than ever for employers to
understand these rules.
This Affordable Care Act Toolkit is your one-stop guide for ACA concerns. It is
designed to help you address ACA issues, topic-by-topic, step-by-step.
Each section of the toolkit focuses on a single subject and includes:
An executive summary;
An action checklist to help you take the appropriate actions to achieve compliance;
and
A list of supporting documents that Clarus Benefits Group can provide, upon
request.
As new regulations and guidance are released, the Affordable Care Act Toolkit
will continue to expand and be updated. Please contact Clarus Benefits Group as
new regulations are released to request an updated copy.
This Affordable Care Act Toolkit is centered on large employers, and will take
you through the ACA considerations for these employers.
What is a large employer?
The ACA doesn’t have a consistent answer for that. An employer might be
considered “large” for one rule, but not another. For this Toolkit, a large employer
is one that has 50 or more employees.
Most of the sections in this guide apply to employers of this size. However,
certain provisions apply only to even larger employers (such as those with 200 or
more employees). Certain sections of this Toolkit briefly describe some rules that
apply to these larger employers. Those sections can help you understand which
ACA provisions apply to your company now, and which ones may apply in the
future if your business grows.
The provisions in this section took effect in 2014. Some of these issues have
been addressed in agency guidance; others are still awaiting more information.
As developments on these topics occur, additional content will be provided.
Annual Limits
Who is Covered? When?
Health plans Currently effective
Effective for plan years beginning on or after Jan. 1, 2014, health plans may not
place annual dollar limits on essential health benefits (EHBs). However, plans
may impose annual limits on specific covered benefits that are not EHBs.
“Restricted annual limits” were permitted for EHBs for plan years beginning
before Jan. 1, 2014. However, restricted annual limits are no longer allowed
for plan years beginning on or after Jan. 1, 2014.
EHBs are a core set of items and services intended to reflect the scope of
benefits covered by a typical employer. Each state selects a benchmark
insurance plan and, as a general rule, the items and services included in a
state’s benchmark plan comprise the EHBs that insured health plans in the
state’s individual and small group markets must cover.
Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered
plans in the individual and small group markets are required to cover EHBs. The
requirement to cover EHBs does not apply to grandfathered plans, self-insured
group health plans and health plans offered in the large group market. To
determine which benefits are EHBs for purposes of removing annual limits, a
self-insured group health plan, large group market health plan or grandfathered
plan may choose any benchmark plan from any state that was approved by HHS.
Also, self-insured group health plans, large group market health plans and
grandfathered plans can still exclude all benefits for a condition without being
considered an annual limit, as long as no benefits are provided for the condition.
Action Items:
Ensure that no annual limit is imposed on EHBs for the 2015.
For a non-GF plan in the individual or small group market, use the state’s
benchmark plan to determine which benefits are EHBs. For a self-insured
group health plan, large group market health plan or GF plan, choose a
benchmark plan from any state that was approved by HHS to determine
which benefits are EHBs.
Documents Available from Clarus Benefits Group:
Health Care Reform: Lifetime and Annual Limits
Health Care Reform: Compliance Checklist for Lifetime and Annual Limits
Health Care Reform: Temporary Waiver Program for Annual Limits
Health Care Reform: Application of Annual Limit Restrictions to HRAs
Limit on Cost-sharing (Non-GF Plans Only)
Who is Covered? When?
Currently effective
Out-of-pocket maximum—all
non-GF health plans and issuers
Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered
group health plans are subject to limits on total enrollee cost-sharing for essential
health benefits (EHBs), known as an out-of-pocket maximum.
For 2015, out-of-pocket expenses may not exceed $6,600 for self-only coverage and
$13,200 for family coverage.
For 2016, out-of-pocket expenses may not exceed $6,850 for self-only coverage and
$13,700 for family coverage.
Beginning with the 2016 plan year, HHS clarified that the self-only annual limit on
cost-sharing applies to each individual, regardless of whether the individual is
enrolled in self-only coverage or family coverage. Thus, HHS’ guidance
effectively embeds an individual out-of-pocket maximum in group health
coverage with a family deductible that exceeds the ACA’s out-of-pocket
maximum for self-only coverage.
For the first plan year beginning on or after Jan. 1, 2014, special transition relief
was available for plans that use more than one service provider to administer
benefits. Under this transition relief, where a group health plan or group health
insurance issuer uses more than one service provider to administer benefits that
are subject to the out-of-pocket maximum, the annual limit will be satisfied if:
The plan complies with the out-of-pocket maximum with respect to its major
medical coverage (excluding, for example, prescription drug coverage and pediatric
dental coverage); and
To the extent there is an out-of-pocket maximum on coverage that does not consist
solely of major medical coverage (for example, if a separate out-of-pocket maximum
applies with respect to prescription drug coverage), this maximum does not exceed
the ACA’s out-of-pocket maximum.
For plan years beginning on or after Jan. 1, 2015, non-grandfathered group
health plans and group health insurance coverage are required to have an out-of-
pocket maximum which limits overall out-of-pocket costs on all EHBs. Because
the cost-sharing limit applies only to EHBs, plans are not required to apply the
annual limitation to benefits that are not EHBs.
Action Item:
Be aware that non-GF plans have limitations on out-of-pocket expenses.
Document Available from Clarus Benefits Group:
Health Care Reform: Cost-Sharing Limits for Health Plans
Excessive Waiting Periods
Who is Covered? When?
Group health plans—insured and self-funded Currently effective
Health insurance issuers
A group health plan or issuer may not impose a waiting period that exceeds 90
days. A waiting period is the period of time that must pass before coverage for an
employee or dependent who is otherwise eligible to enroll becomes effective.
Eligibility conditions that are based solely on the lapse of time are permissible for
no more than 90 days. However, other conditions for eligibility are permissible, as
long as they are not designed to avoid compliance with the 90-day waiting period
limit. Permissible eligibility conditions include:
Being in an eligible job classification;
Achieving job-related licensure requirements specified in the plan’s terms; or
Satisfying a reasonable and bona fide employment-based orientation period.
A special rule applies if a group health plan conditions eligibility on an employee
regularly working a specified number of hours per pay period (or working full
time), and it cannot be determined that a newly hired employee is reasonably
expected to regularly work that number of hours per period (or work full time).
In this type of situation, the plan may take a reasonable period of time to
determine whether the employee meets the plan’s eligibility condition. This may
include a measurement period that is consistent with the employer shared
responsibility provisions (even if the employer is not a large employer). The time
period for determining whether a variable hour employee meets the plan’s
eligibility condition will comply with the 90-day waiting period limit if coverage is
effective no later than 13 months from the employee’s start date, except where a
waiting period that exceeds 90 days is imposed after the measurement period. If
an employee’s start date is not the first of the month, the time period can also
include the time remaining until the first day of the next calendar month.
Action Items:
Review whether your plans impose a waiting period for participation.
If a waiting period is imposed, ensure that it does not exceed 90 days.
If it is unclear that a new employee will work the required number of hours,
set a measurement period to determine whether the hours requirement will
be met in the future.
Documents Available from Clarus Benefits Group:
Health Care Reform: 90-day Waiting Period Limit
Final Regulations Released on ACA Waiting and Orientation Periods
Health Care Reform: 90-day Waiting Period Limit—Permitted Orientation Periods
Pre-existing Condition Exclusions
Who is Covered? When?
Group health plans—insured and self-funded Currently effective
Health insurance issuers
Effective for plan years beginning on or after Jan. 1, 2014, group health plans
and health insurance issuers may not impose pre-existing condition exclusions
on any covered individual, regardless of the individual’s age. Prior to the 2014
plan year, pre-existing condition exclusions were already prohibited for
individuals under age 19. A pre-existing condition exclusion is a limitation or
exclusion of benefits related to a condition based on the fact that the condition
was present before the individual’s date of enrollment in the employer’s plan.
Action Item:
Ensure that no pre-existing condition exclusion is imposed on any individual.
Documents Available from Clarus Benefits Group:
Health Care Reform: Pre-existing Condition Exclusions
Health Care Reform: Compliance Checklist for Pre-existing Condition Exclusions
Coverage for Clinical Trial Participants (Non-GF Plans
Only)
Who is Covered? When?
Group Health plans—insured and self-funded Currently effective
Health insurance issuers
Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered
group health plans and insurance policies may not: (1) Terminate coverage
because an individual chooses to participate in a clinical trial for cancer or other
life-threatening diseases; or (2) Deny coverage for routine care that they would
otherwise provide just because an individual is enrolled in such a clinical trial.
Action Item:
Ensure that plan terms and operations do not discriminate against
participants who participate in clinical trials.
Document Available from Clarus Benefits Group:
Health Care Reform: Coverage for Participants in Clinical Trials
Health FSAs, HRAs and Cafeteria Plans
Who is Covered? When?
Health flexible spending accounts (health FSAs) Currently effective
Health reimbursement arrangements (HRAs)
Cafeteria plans
For plan years beginning in 2014, the availability of health FSAs and HRAs is
limited, although the IRS has relaxed the “use-or-lose” rule for health FSAs. The
IRS also provided a special mid-year election change rule for cafeteria plans with
non-calendar year plan years. For these plans to meet all ACA requirements:
Health FSAs must qualify as “excepted benefits” to be permissible. Health FSAs
qualify as excepted benefits if they satisfy availability and maximum benefit
requirements.
HRAs must be integrated with other group health coverage to be permissible. The
IRS and DOL have provided specific guidance on two ways for an HRA to be
considered integrated with another group health plan. Stand-alone HRAs (other than
retiree-only HRAs and limited-scope vision or dental HRAs) will be prohibited in
2014.
Under the relaxed “use-or-lose” rule for health FSAs, beginning with the 2013
play year, employers may allow participants to carry over up to $500 in unused
funds into the next year. However, the relaxed “use-or-lose” rule only applies if a
plan does not also incorporate an extended deadline—or grace period—after the
end of the plan year to use health FSA funds.
Also, the IRS is allowing cafeteria plans to permit mid-year election changes in
certain situations related to the availability of Exchange coverage. A cafeteria
plan may allow an employee to prospectively revoke his or her election for
coverage under the employer’s group health plan during a period of coverage, as
long as the plan provides minimum essential coverage and is not a health FSA,
in the following situations:
The employee’s hours of service are reduced so that the employee is expected to
average less than 30 hours per week, but the reduction does not affect eligibility for
coverage under the employer’s group health plan; or
The employee would like to cease coverage under the employer’s group health plan
and purchase coverage through an Exchange, without having a period of either
duplicate coverage or no coverage.
Certain conditions must be met for the change to be permitted. Also, an election
to revoke coverage on a retroactive basis is not allowed.
Action Items:
Ensure that your health FSA or HRA is designed to comply with the ACA.
If you have a health FSA, consider amending the plan to allow for carryovers.
If you have a cafeteria plan, consider amending your plan for the mid-year
election change rules. Cafeteria plans can be amended retroactively to
implement these rules, if the retroactive amendment is made on or before the
last day of the plan year and is communicated to participants.
Documents Available from Clarus Benefits Group:
Health Care Reform: Health FSAs—Changes for 2014
Health Care Reform: Health Reimbursement Arrangements (HRAs)—Changes for
2014
Health FSA Carryovers
Health Care Reform: Pay or Play Penalty—Cafeteria Plan Elections
Nondiscrimination for Fully-Insured Plans (Non-GF
Plans Only)
Who is Covered? When?
Non-GF insured group health plans When regulations are issued and applicable
Non-grandfathered fully-insured group health plans will have to comply with
federal nondiscrimination rules related to compensation, which prohibit
discrimination in favor of highly-compensated employees. Under the ACA, these
plans will have to follow rules similar to the nondiscrimination rules applicable to
self-funded plans (found in Internal Revenue Code Section 105(h)), which require
plans to pass both an eligibility test and a nondiscrimination test.
Because these restrictions will apply to non-grandfathered plans only,
grandfathered plans that discriminate in favor of highly compensated employees
may wish to retain their grandfathered status.
Compliance with the new nondiscrimination rules will not be required until after
guidance is issued. Therefore, this nondiscrimination requirement has been
delayed indefinitely, pending the issuance of regulations.
Action Items:
Identify whether your organization’s plans are GF or non-GF.
Monitor IRS guidance for further rules on nondiscrimination requirements.
For GF plans, consider maintaining GF status if the current plan design is
potentially discriminatory.
Document Available from Clarus Benefits Group:
Health Care Reform: Nondiscrimination Rules for Fully-Insured Group Health Plans
Employer Shared Responsibility Penalties for Not
Offering Required Coverage
Who is Covered? When?
Applicable Large Employers— Starting in 2015 for employers with 100 or
employers with 50 or more full-time more full-time employees (including FTEs)
employees (including full-time
equivalent employees, or FTEs) Starting in 2016 for employers with 50-99 full-
time employees (including FTEs)
Applicable large employers (ALEs)—those with 50 or more full-time employees
(including full-time equivalent employees, or FTEs) —that do not offer affordable,
minimum value health coverage to their full-time employees (and dependents)
will be subject to penalties if any full-time employee receives a subsidy for health
coverage through an Exchange. These employer mandate requirements are
known as the “employer shared responsibility” or “pay or play” rules.
Delayed Effective Date
The employer shared responsibility rules were set to take effect on Jan. 1, 2014.
However, on July 2, 2013, the Treasury delayed the employer mandate
penalties and related reporting requirements for one year, until 2015.
Therefore, these payments did not apply for 2014.
On Feb. 10, 2014, the IRS released final regulations on the ACA’s employer
shared responsibility rules. Under the final regulations:
ALEs with 100 or more full-time and FTE employees must comply with the
employer shared responsibility rules starting in 2015.
However, medium-sized ALEs (those with fewer than 100 full-time and FTE
employees) generally have an additional year, until 2016, to comply with the
employer shared responsibility rules. Medium-sized ALEs must satisfy specific
criteria to qualify for this delay.
Determining Employer Size
The employer’s size for purposes of the employer shared responsibility rules is
based on the average employee count for the prior calendar year. Part-time
employees are included in the calculation according to a formula, but do not have
to be offered coverage. Special rules apply for counting certain types of
employees, including seasonal employees, volunteer employees and foreign
employees. Companies with common ownership may have to be combined for
purposes of this rule.
Penalty Amount
The penalty amount for not offering health coverage to substantially all full-time
employees (and dependents) is $2,000 annually for each full-time employee,
excluding the first 30 employees. For 2015, an ALE with at least 100 full-time and
FTE employees may exclude the first 80 full-time employees, instead of the first
30, under this calculation. An ALE will not be liable for this penalty for 2015 if it
offers coverage to at least 70 percent of its full-time employees. In 2016 and
beyond, an ALE will not be liable for this penalty if it offers coverage to all but 5
percent (or, if greater, five) of its full-time employees and dependents.
The penalty for ALEs who offer health coverage, but whose employees receive
tax credits because the coverage is unaffordable or does not provide minimum
value, is $3,000 annually for each full-time employee receiving a tax credit,
with a maximum annual fine of $2,000 per full-time employee, excluding the first
30 full-time employees (80 employees for 2015 for employers with 100 or more
full-time and FTE employees).
These penalty amounts will be adjusted annually for inflation, beginning in years
after 2014. According to the IRS, the one-year delay for the employer shared
responsibility rules, until 2015, does not affect this inflation adjustment.
Safe Harbor Guidance and Transition Relief
The IRS has provided guidance for ALEs on determining:
Who is considered a full-time employee (and must be offered coverage);
How penalties will apply when there is a waiting period for coverage;
How to measure a plan’s affordability; and
How to determine a plan’s minimum value (including a calculator).
The final regulations also provide transition relief for non-calendar year plans,
which applies for the period before the first day of the first non-calendar year plan
year beginning in 2015 (the 2015 plan year) for ALEs that maintained non-
calendar year plans as of Dec. 27, 2012, if the plan year was not modified after
Dec. 27, 2012 to begin at a later date. In general, the final regulations provide
transition relief for the period before the first day of the 2015 plan year with
respect to:
All employees who, under the plan’s eligibility terms in effect on Feb. 9, 2014, are
eligible as of the first day of the 2015 plan year for coverage under a non-calendar
year plan, and who are offered affordable, minimum value coverage no later than the
first day of the 2015 plan year;
All other employees (or all other full-time employees) of the employer who are
offered affordable, minimum value coverage as of the first day of the 2015 plan year
(unless the employees who are offered coverage comprise an insufficient percentage
of the employer’s employees (or the employer’s full-time employees)).
Action Items—Determine Employer Size:
Count the number of employees according to the steps below to determine
whether your organization will be subject to the employer shared
responsibility rules and whether it will qualify for the 2015 transition relief for
medium-sized ALEs. Include all common law employees in the calculation,
and count employees of all related companies according to the IRS
controlled group and affiliated service group rules in Code Section 414.
o Calculate the number of full-time employees (including seasonal
employees) for each calendar month in the preceding calendar year. A
full-time employee for any month is an employee who is employed, on
average, for at least 30 hours of service per week.
o Calculate the number of FTE employees (including seasonal employees)
for each calendar month in the preceding calendar year by adding up the
aggregate number of hours of service (but not more than 120 hours of
service for any employee) for all employees who were not full-time
employees for that month and dividing the total hours of service by 120.
o Add up the number of full-time employees and FTE employees (including
fractions) calculated above for each of the 12 months in the preceding
calendar year.
o Add up the 12 monthly numbers from the preceding step and divide the
sum by 12. Disregard fractions.
Action Items—Determine Whether Coverage Is Offered to Full-time
Employees (and Dependents):
To predict whether your organization will be subject to an employer shared
responsibility penalty, determine whether your organization offers coverage
to substantially all full-time employees (and dependents).
Coverage need not be provided during a permissible waiting period.
All common law employees that work an average of at least 30 hours per
week must be considered full-time.
If your organization has variable hour or seasonal employees where it is
uncertain if they will work the requisite number of hours, establish a
measurement period of 3-12 months to determine the average hours worked,
in accordance with the separate rules for ongoing and new employees.
If measurement periods are established for an employee, establish a stability
period that is at least six months long and as long as the measurement
period for treating the employee as full-time or not, depending on the results
of the measurement period. An administrative period of up to 90 days may be
established as well.
Action Items—Determine Whether Coverage Is Affordable:
To predict whether your organization will be subject to a penalty for not
providing affordable coverage, assess the affordability of your organization’s
health coverage under one of the IRS’s affordability safe harbors. Note: The
ACA’s affordability contribution percentage is adjusted annually. Employer-
sponsored coverage will generally be considered affordable if the employee’s
required contribution for self-only coverage does not exceed 9.56 percent of
the employee’s household income for plan years beginning in 2015, or
9.66 percent of the employee’s household income for plan years
beginning in 2016. However, employers using an affordability safe harbor
may have to continue using a contribution percentage of 9.5 percent to
measure their plan’s affordability.
o Under the Form W-2 safe harbor, determine if the employee portion of
the self-only premium does not exceed 9.5 percent of the employee’s W-
2 wages.
o Under the rate of pay safe harbor, determine if coverage is affordable
based on an employee’s rate of pay. The employee's monthly
contribution amount (for the self-only premium) is affordable if it is equal
to or lower than 9.5 percent of the computed monthly wages.
o Under the federal poverty line (FPL) safe harbor, determine if coverage
is affordable based on the FPL for a single individual in effect six months
prior to the beginning of the plan year. Employer-provided coverage is
considered affordable if the employee’s cost for self-only coverage does
not exceed 9.5 percent of the FPL for a single individual.
Action Items—Determine Whether Coverage Provides Minimum Value:
Review whether the plan provides minimum value by covering at least 60
percent of the cost of benefits. To make this determination, use one of the
three available methods (minimum value calculator, safe harbor checklists or
actuarial certification).
o Under the calculator approach, enter plan design data into the minimum
value calculator to determine minimum value.
o Under the safe harbor checklist approach, determine if the plan provides
minimum value. If the plan’s terms are consistent with or more generous
than any one of the safe harbor checklists, the plan will be treated as
providing minimum value.
o If neither the calculator nor the checklists can be used because a plan
has nonstandard features, seek an actuary’s certification that the plan
provides minimum value.
Documents Available from Clarus Benefits Group:
Health Care Reform: Pay or Play—Employer Shared Responsibility Penalties
Health Care Reform: FAQs on the Employer Shared Responsibility Rules
Health Care Reform: One Year Delay of Employer Mandate Penalties & Reporting
Requirements
Health Care Reform: Employer Mandate Delayed Until 2016 for Medium-sized
Employers
Health Care Reform: Large Employers Subject to the Pay or Play Penalties
Affordable Care Act—Are You an Applicable Large Employer?
New Employer Mandate Transition Relief for 2015
Employer Mandate Transition Relief Extended for 2015
Health Care Reform: Pay or Play Penalty—Identifying Full-Time Employees: The
Look-Back Measurement Method
Health Care Reform: Pay or Play Penalty—Identifying Full-Time Employees: The
Monthly Measurement Method
Health Care Reform: Pay or Play Penalty – When to Begin Tracking Employee
Hours
Pay or Play Penalty—Coverage for Substantially All Full-time Employees and
Dependents
Health Care Reform: Pay or Play Penalty—Common Ownership Aggregation Rules
Health Care Reform: Pay or Play Penalty—Transition Relief for Non-calendar Year
Plans
Health Care Reform: Pay or Play Penalty—Affordability Safe Harbors
Health Care Reform: Determining Minimum Value of Health Plan Coverage
Tools Available from Clarus Benefits Group:
Health Care Reform Pay or Play Calculator
Health Care Reform Large Employer Calculator
Health Care Reform Full-time Employee Tracker (Standard Edition and Expanded
Edition)
Employer Reporting of Health Coverage (Code
Sections 6055 and 6056)
Who is Covered? When?
Applicable large employers (those with 50 or more First due in 2016, related to 2015
full-time and FTE employees) coverage
Employers with self-insured health plans
The ACA created new reporting requirements under Internal Revenue Code
Sections 6055 and 6056. Under these new reporting rules, certain employers will
be required to provide information to the IRS about the health plan coverage they
offer (or do not offer) to their employees (such as information on the design and
cost of their plans, as well as employees covered by the plan). Related
statements must also be provided to employees.
These new reporting requirements apply to:
Employers with self-insured health plans (Code Section 6055)—Every health
insurance issuer, sponsor of a self-insured health plan, government agency that
administers government-sponsored health insurance programs and any other entity
that provides minimum essential coverage must file information returns with the IRS
reporting information for each individual who is provided with this coverage during
the calendar year. Related statements must also be provided to covered individuals.
Applicable large employers (ALEs) (Code Section 6056)—ALEs subject to the
ACA’s employer shared responsibility rules must file information returns with the
IRS that reports the terms and conditions of the health care coverage provided to the
employer’s full-time employees for the calendar year. Related statements must also
be provided to full-time employees.
These reporting requirements were set to take effect in 2014. However, on July
2, 2013, the Treasury delayed these requirements for one year, until 2015.
The first returns will be due in 2016 for coverage offered or provided in 2015.
Returns must be filed with the IRS annually, no later than Feb. 28 (March 31, if
filed electronically) of the year following the calendar year to which the return
relates. Individual statements must be provided on or before Jan. 31 of the year
immediately following the calendar year to which the statements relate.
The employer shared responsibility rules were delayed for medium-sized ALEs
(those with 50-99 full-time and FTE employees in 2014) for one year, until 2016.
ALEs eligible for this delay must still report under Section 6056 for 2015.
ALEs reporting under Section 6056 will use Forms 1094-C and 1095-C. In
general, entities reporting under Section 6055 will use Forms 1094-B and 1095-
B. However, ALEs that sponsor self-insured plans must report under both
Section 6055 and Section 6056. These employers will use a combined reporting
method on Forms 1094-C and 1095-C to report the information required under
both Section 6055 and Section 6056.
Penalties of $100 per return generally apply for any failures to file correct
information returns or provide correct individual statements by the deadlines.
However, short term relief from penalties is available in 2015 for reporting entities
that make good faith efforts to comply with the reporting requirements.
Action Items:
Determine whether your organization is a sponsor of a self-insured health
plan or an ALE.
Begin tracking and recording the information that must be reported for the
calendar year under Section 6055 and/or Section 6056, as applicable.
When the reporting requirements become effective, provide required
information regarding plan coverage and participation to the IRS and to
individuals, in accordance with information return requirements.
Documents Available from Clarus Benefits Group:
HCR: Employer Reporting of Health Coverage—Code Sections 6055 & 6056
Q&As on Employer Reporting of Health Coverage (Section 6056)
Health Care Reform: Code Section 6056—What Information Must Be Reported?
Affordable Care Act—Reporting Requirements for Applicable Large Employers
(Section 6056)
&As on Reporting by Health Coverage Providers (Section 6055)
Health Care Reform: Code Section 6055—What Information Must Be Reported?
QAffordable Care Act—Responsibilities for Health Coverage Providers (Section
6055)
IRS Releases Final Forms and Instructions for ACA Reporting
Tools Available from Clarus Benefits Group:
Section 6056 Reporting Workbook
Section 6055 Reporting Workbook
Additional Medicare Tax
Who is Covered? When?
All employers Currently effective
Effective Jan. 1, 2013, the Medicare Part A (hospital insurance) tax rate
increased by 0.9 percent (from 1.45 percent to 2.35 percent) on wages over
$200,000 for individual taxpayers, and $250,000 for married couples filing jointly.
An employer must withhold the additional Medicare tax on wages or
compensation it pays to an employee in excess of $200,000 in a calendar year.
An employer has this withholding obligation even though an employee may not
be liable for the additional Medicare tax because, for example, the employee’s
wages or other compensation together with that of his or her spouse (when filing
a joint return) does not exceed the $250,000 liability threshold. Any withheld
additional Medicare tax will be credited against the total tax liability shown on the
individual’s income tax return (Form 1040).
Action Items:
Monitor employee wages to be aware of the date an employee reaches
$200,000 in wages in a single year.
Once an employee has earned $200,000, change the Medicare hospital
insurance tax withholding rate to 2.35 percent.
Documents Available from Clarus Benefits Group:
Health Care Reform: Final Rules on the Additional Medicare Tax
Health Care Reform: Questions and Answers on Additional Medicare Tax
High Cost Plan Excise Tax (Cadillac Tax)
Who is Covered? When?
Applicable employer-sponsored coverage Taxable years beginning in 2018
A 40 percent excise tax (the “Cadillac tax”) will be imposed on the excess benefit
of high cost employer-sponsored health insurance. The annual limit for purposes
of calculating the excess benefit is $10,200 for individuals and $27,500 for other
than individual coverage. The amount of the tax for each employee’s coverage
will be calculated by the employer and paid by the coverage provider who
provided the coverage. The “coverage provider” can be the insurer, the employer
or a third-party administrator. There are a number of exceptions and special rules
for high coverage cost states and different job classifications.
Action Item:
Monitor ACA developments for additional guidance on the Cadillac tax.
Document Available from Clarus Benefits Group:
Health Care Reform: Cadillac Tax on High-cost Health Coverage
IRS Invites Comments on Cadillac Tax Implementation for 2018
Automatic Enrollment
Who is Covered? When?
Employers subject to the FLSA with more Unknown (after regulations are issued and
than 200 full-time employees become effective)
Large employers that are subject to the Fair Labor Standards Act (FLSA) will be
required to automatically enroll new full-time employees in one of the employer’s
health benefits plans (subject to any waiting period authorized by law), and to re-
enroll current employees in a health benefits plan offered through the employer.
For purposes of this rule, a large employer is one that has more than 200 full-
time employees. Employees must be notified of the enrollment and given the
opportunity to opt out of any coverage in which the employee was automatically
enrolled.
Before this requirement can take effect, the DOL must issue implementing
regulations. According to the DOL, employers are not required to comply with
automatic enrollment requirement until final regulations are issued and become
applicable.
Action Items:
Monitor ACA developments for DOL regulations on automatic enrollment.
Once regulations are issued clarifying how employees should be counted,
determine whether your organization is a large employer under this rule.
If your organization qualifies as a large employer, implement processes to
automatically enroll and re-enroll employees in your organization’s health
plan in accordance with the regulations.
Establish a process for notifying employees of their automatic enrollment and
right to opt out of coverage in accordance with the regulations.
Establish a process for dis-enrolling employees that opt out of coverage in
accordance with the regulations.
Document Available from Clarus Benefits Group:
Health Care Reform: Automatic Enrollment Requirements
Notice of Exchange
Who is Covered? When?
Employers subject to the FLSA
Currently effective—provide to new hires at
time of hiring
Employers must provide all new hires and current employees with a written
notice about the ACA’s health insurance exchanges (Exchanges). Employers
were required to provide the notice to current employees no later than Oct. 1,
2013. As an ongoing requirement, employers must provide the notice to each
new employee at the time of hiring.
In general, the notice must:
Inform employees about the existence of the Exchange and give a description of the
services provided by the Exchange;
Explain how employees may be eligible for a subsidy if the employer's plan does not
meet certain requirements; and
Inform employees that if they purchase coverage through the Exchange, they may
lose any employer contribution toward the cost of employer-provided coverage, and
that all or a portion of this employer contribution may be excludable for federal
income tax purposes.
The DOL also provided model Exchange notices for employers to use, which
require some customization. The notice may be provided by first-class mail, or
may be provided electronically if the requirements of the DOL’s electronic
disclosure safe harbor are met.
According to the DOL, there is no fine or penalty under the ACA for failing to
provide the notice. This means that employers cannot be fined for failing to
provide employees with notice about the Exchanges.
Action Items:
Customize the appropriate model Exchange notice.
Confirm that the notice has been provided to all current employees.
Prepare to provide the customized notice to all new employees when hired.
Documents Available from Clarus Benefits Group:
Health Care Reform: Exchange Notice Requirements for Employers
Health Care Reform: Model Exchange Notice for Employers that Offer Health Plans
Health Care Reform: Model Exchange Notice for Employers that Do Not Offer
Health Plans
Summary of Benefits and Coverage
Who is Covered? When?
Health insurance issuers Currently effective—provide at various
Health plans—insured and self-funded points after first effective date
Health plans (both insured and self-funded) must provide a Summary of Benefits
and Coverage (SBC) to participants and beneficiaries. The SBC is a succinct
document that provides simple and consistent information about health plan
benefits and coverage in plain language. For insured plans, issuers must provide
an SBC to the plan sponsor and may also send the SBC to participants and
beneficiaries on behalf of an insured health plan.
Plans and issuers were initially required to provide the SBC to participants and
beneficiaries for plan years beginning on or after Sept. 23, 2012. In addition,
ongoing requirements for providing the SBC also apply. For group health plans,
there are two different scenarios under which the SBC must be provided: (1) by a
group health insurance issuer to a group health plan; and (2) by the issuer or
plan to participants and beneficiaries.
A health insurance issuer must provide an SBC to a group health plan (or the
plan’s sponsor):
Upon application for health coverage;
By the first day of coverage, if there was any change in information required to be in
the SBC that was provided upon application and before the first day of coverage;
When the issuer renews or reissues the policy; and
Upon request.
A health insurance issuer or health plan must provide an SBC to participants and
beneficiaries with respect to each benefit package for which the participant or
beneficiary is eligible. The SBC must be provided:
As part of any written application materials that are distributed by the plan or issuer
for enrollment;
If the plan or issuer does not distribute written application materials, no later than the
first date that the participant is eligible to enroll in coverage;
By the first day of coverage, if there was any change to information required to be in
the SBC that was provided upon application and before the first day of coverage;
To special enrollees, no later than the deadline for providing the summary plan
description (SPD) (that is, within 90 days of enrollment);
Upon renewal, if participants and beneficiaries must renew in order to maintain
coverage; and
Upon request (the uniform glossary must also be provided upon request).
The Departments provided an updated SBC template and sample completed
SBC for later years of applicability. Until further guidance is issued, health plans
and issuers should continue to use these documents. In addition, certain safe
harbors and other enforcement relief that were provided by the Departments
related to the requirement to provide an SBC and a uniform glossary for the first
year of applicability have been extended until further guidance is issued.
The Departments have stated that their approach to implementation is, and will
continue to be, marked by an emphasis on assisting (rather than imposing
penalties on) plans, issuers and others that are working diligently and in good
faith to understand and come into compliance with the new law. Therefore, until
further guidance is issued, the Departments have said that they will not impose
penalties on plans and issuers that are working diligently and in good faith to
comply with the SBC requirement.
Action Items:
Confirm that an SBC has been developed for each health plan that the
company offers.
Confirm that the SBC is being provided to participants and beneficiaries in
accordance with the required deadlines.
Documents Available from Clarus Benefits Group:
Health Care Reform: Summary of Benefits and Coverage
Health Care Reform: FAQs on Summary of Benefits and Coverage
Health Care Reform: FAQs on Summary of Benefits and Coverage for the
Second Year of Applicability and Beyond
Health Care Reform: Template for Summary of Benefits and Coverage
Health Care Reform: Instructions for Summary of Benefits and Coverage
Health Care Reform: Compliance Checklist for Providing the SBC and
Uniform Glossary
60-Day Notice of Plan Changes
Who is Covered? When?
Health insurance issuers Currently effective—provide 60 days in
Health plans—insured and self-funded advance of material modifications
A health plan or issuer must provide 60 days’ advance notice of any material
modifications to the plan that are not related to renewals of coverage.
Specifically, the advance notice must be provided when a material modification is
made that would affect the content of the SBC and the change is not already
included in the most recently provided SBC.
A “material modification” is any change to a plan’s coverage that would be
considered by the average plan participant to be an important change in covered
benefits or other terms of coverage.
A material modification may include an enhancement in covered benefits or
services or other more generous plan or policy terms, a material reduction in
covered services or benefits or more strict requirements for receiving benefits.
Notice can be provided in an updated SBC or a separate summary of material
modifications. This 60-day notice requirement becomes effective when the SBC
requirement goes into effect for a health plan.
Action Items:
Analyze proposed plan changes that are not related to renewal to determine
if they are material modifications to the plan.
If the mid-year changes are material modifications, provide notice of the
change using a new SBC or a summary of material modifications at least 60
days before the change is scheduled to be effective.
For insured plans, determine whether the carrier will provide this notice.
Document Available from Clarus Benefits Group:
Health Care Reform: 60-Day Advance Notice of Plan Changes
Statement of Grandfathered Status (GF Plans Only)
Who is Covered? When?
Grandfathered plan administrators Currently effective—provide periodically with
and issuers participant materials
Grandfathered (GF) plans are those that existed on March 23, 2010 and have not
made certain prohibited changes. In order to retain GF status, these plans must
provide a statement of GF status to participants. The first statement was required
to be provided before the first plan year beginning on or after Sept. 23, 2010. The
statement must continue to be provided on a periodic basis with participant
materials describing plan benefits.
If certain prohibited changes are made to the plan, the plan will no longer be
considered GF. A statement of GF status does not have to continue to be
provided to plan participants if the plan loses GF status.
Action Items:
Confirm whether the plan is GF or non-GF.
If GF, include the model statement in participant plan materials.
If the plan loses GF status, a statement does not have to be provided to plan
participants. Confirm that the plan includes all of the additional patient rights
and benefits required by the ACA. This includes, for example, coverage of
preventive care without cost-sharing requirements.
Documents Available from Clarus Benefits Group:
Health Care Reform: Overview of Grandfathered Plans
Health Care Reform: Grandfathered Plans—Permitted and Prohibited Changes
Health Care Reform: Model Notice for Grandfathered Plans
Form W-2 Reporting
Who is Covered? When?
Employers that had to file 250 or more Forms
W-2 in the prior calendar year (see Currently effective
exceptions below)
Large employers are required to report the aggregate cost of employer-
sponsored group health plan coverage on their employees’ Forms W-2. The
purpose of the reporting requirement is to provide information to employees
regarding how much their health coverage costs. The reporting does not mean
that the cost of the coverage is taxable to employees.
In general, all employers that provide applicable employer-sponsored coverage
must comply with the Form W-2 reporting requirement. This includes government
entities, churches and religious organizations, but does not include Indian tribal
governments or tribally chartered corporations wholly owned by an Indian tribal
government.
Employers that do not meet the definition of “large employer” for this section may
be subject to this reporting in the future. The IRS has delayed the reporting
requirement for these smaller employers by making it optional for these
employers until further guidance is issued.
An employer is considered a small employer if it had to file fewer than 250 Forms
W-2 for the prior calendar year. Thus, if an employer was required to file fewer
than 250 Forms W-2 for 2013, the employer would not be subject to the reporting
requirement for 2014. The IRS has indicated that the Internal Revenue Code’s
corporate aggregation (common ownership) rules do not apply for purposes of
determining whether an employer filed fewer than 250 Forms W-2 for the prior
year. However, if an employer files fewer than 250 Forms W-2 only because it
uses an agent to file them, the employer does not qualify for the small employer
exemption.
The coverage that must be reported is “applicable employer-sponsored
coverage,” which is group health plan coverage provided to an employee by the
employer and which is excludable from the employee’s gross income. The IRS
has excluded certain types of coverage from the reporting requirement and has
made reporting of other types optional.
The amount that must be reported is the aggregate cost of the coverage,
including both the employer and employee portions of the cost. The cost must be
determined on a calendar years basis. The IRS has identified a few different
methods for calculating the cost, which are also used for calculating the cost of
COBRA coverage.
Action Items:
Determine whether your organization is subject to the requirement by
reviewing the number of W-2 Forms filed for the prior tax year.
If your organization is subject to the reporting requirement, identify the types
of coverage provided that must be reported.
Calculate the total cost of coverage (employer plus employee portions) under
each plan.
Determine the coverage that was provided to each employee over the course
of the applicable tax year.
Include the value amount of that coverage during the W-2 preparation
process.
Documents Available from Clarus Benefits Group:
Health Care Reform: Form W-2 Reporting Requirements
Health Care Reform: Types of Coverage Subject to Form W-2 Reporting
Health Care Reform: IRS Q&As on Form W-2 Reporting
Notice of Rescission
Who is Covered? When?
Group health plans
Health insurance issuers Currently effective—provide 30 days
before any rescission
Group health plans and health insurance issuers may not rescind coverage for
covered individuals, except in the case of fraud or intentional misrepresentation
of a material fact. A “rescission” is a cancellation or discontinuance of coverage
that has a retroactive effect. A termination of coverage that has a retroactive
effect is permissible if it is due to the participant’s failure to pay required
premiums or contributions for the coverage.
This prohibition applies to grandfathered and non-grandfathered health plans,
whether in the group or individual market, and whether coverage is insured or
self-funded.
If a rescission is permitted, the plan administrator or issuer must provide a notice
of rescission to affected participants at least 30 days before the rescission
occurs.
Action Items:
Before terminating coverage for a participant, review whether the termination
will have a retroactive effect.
If yes, confirm that the retroactive termination is due to fraud, intentional
misrepresentation or non-payment for coverage. Rescissions are not
permitted based on an inadvertent misstatement or to correct a plan error
(such as mistakenly covering an ineligible employee).
Before terminating coverage retroactively, provide 30 days’ advance notice to
the affected participant.
Document Available from Clarus Benefits Group:
Health Care Reform: Prohibition on Rescissions
Notice of Patient Protections and Selection of
Providers (Non-GF Plans Only)
Who is Covered? When?
Non-GF group health plans
Issuers of non-GF plans Currently effective—provide with SPD or
similar description of benefits
Non-GF group health plans and health insurance issuers that require designation
of a participating primary care provider must permit each participant, beneficiary
and enrollee to designate any available participating primary care provider
(including a pediatrician for children). Non-GF group health plans and issuers
that provide obstetrical/gynecological care and require a designation of a
participating primary care provider may not require preauthorization or referral for
obstetrical/gynecological care.
Plan administrators or issuers of these plans must provide a notice of patient
protections/selection of providers whenever the summary plan description (SPD)
or similar description of benefits is provided to a participant. The first notice
should have been provided no later than the first day of the plan year beginning
on or after Sept. 23, 2010.
Action Items:
Determine whether the plan is GF or non-GF.
If non-GF, incorporate the Notice of Patient Protections into the SPD or
benefits description.
Documents Available from Clarus Benefits Group:
Health Care Reform: Patient Protections
Health Care Reform: Compliance Checklist for Patient Protections
Health Care Reform: Model Notice on Patient Protections
Wellness Programs
Who is Covered? When?
Health-contingent wellness programs Currently effective
Effective for plan years beginning on or after Jan. 1, 2014, employers may offer
increased incentives to employees under health-contingent wellness programs.
Health-contingent wellness programs require individuals to satisfy a standard
related to a health factor in order to obtain a reward. There are two types:
Activity-only wellness programs require an individual to perform or complete an
activity related to a health factor in order to obtain a reward (for example, walking,
diet or exercise programs).
Outcome-based wellness programs require an individual to attain or maintain a
certain health outcome in order to obtain a reward (for example, not smoking,
attaining certain results on biometric screenings or meeting exercise targets).
To protect consumers from unfair practices, health-contingent wellness programs
are required to follow certain nondiscrimination standards, including a limit on the
maximum reward that can be offered. The maximum reward is generally 30
percent of the cost of coverage. However, the maximum permissible reward may
be up to 50 percent of the cost of health coverage for programs designed to
prevent or reduce tobacco use.
The other common type of wellness programs, participatory wellness programs,
does not require an individual to meet a standard related to a health factor in
order to obtain a reward or does not offer a reward at all (such as a fitness center
reimbursement program or a program that reimburses employees for the costs of
smoking cessation programs, regardless of whether the employee quit smoking).
There is no limit on financial rewards for participatory wellness programs.
Action Items:
Review your organization’s current wellness program offerings to determine
whether they are health-contingent or participatory wellness programs.
If the wellness program is health-contingent, consider whether to raise the
reward and ensure that it complies with applicable nondiscrimination rules.
Document Available from Clarus Benefits Group:
Health Care Reform: Implications for Workplace Wellness Programs
Health Care Reform: Workplace Wellness Program Nondiscrimination Rules
Health Care Reform: Workplace Wellness Program Incentives
Patient-Centered Outcomes Research Institute
(PCORI) Fees
Who is Covered? When?
Health insurance issuers
Self-funded health plans Currently effective—will not apply for plan years
ending on or after Oct. 1, 2019
Health insurance issuers and self-funded group health plans must pay fees to
finance comparative effectiveness research. These research fees are called
Patient-Centered Outcomes Research Institute fees (PCORI fees), although they
may also be called research fees, PCOR fees or comparative effectiveness
research (CER) fees. The fees apply for plan years ending on or after Oct. 1,
2012. The PCORI fees do not apply for plan years ending on or after Oct. 1,
2019. For calendar year plans, the research fees are effective for the 2012
through 2018 plan years. The PCORI fees are due by July 31 of the calendar
year following the plan year to which the fee applies.
For plan years ending before Oct. 1, 2013 (that is, 2012 for calendar year plans),
the research fee was $1 multiplied by the average number of lives covered under
the plan. For plan years ending on or after Oct. 1, 2013, and before Oct. 1, 2014,
the fee is $2 multiplied by the average number of lives covered under the plan.
For plan years ending on or after Oct. 1, 2014, and before Oct. 1, 2015, the fee
amount was adjusted to $2.08. For plan years ending on or after Oct. 1, 2015,
the PCORI fee amount will grow based on increases in the projected per capita
amount of National Health Expenditures.
A health reimbursement arrangement (HRA) is not subject to a separate
research fee if it is integrated with another self-insured plan providing major
medical coverage, as long as the HRA and the plan are established and
maintained by the same plan sponsor and have the same plan year. If an HRA is
integrated with an insured group health plan, the plan sponsor of the HRA and
the issuer of the insured plan will both be subject to the research fees, even
though the HRA and insured group health plan are maintained by the same plan
sponsor. The same analysis applies to health flexible spending accounts (FSAs)
that do not qualify as excepted benefits.
Action Items:
Review your organization’s health coverage to determine the plan(s) subject
to the research fees.
If a plan is insured, the carrier is responsible for paying the fee, although the
carrier may shift the fee to your organization through a premium increase.
If there is an HRA, determine whether it qualifies for the exception for
multiple self-funded plans, or whether it is subject to the research fee.
If your organization is required to pay the fee for any self-funded plans, select
a method for counting covered lives.
Documents Available from Clarus Benefits Group:
Health Care Reform: Patient-Centered Outcomes Research Institute Fees (PCORI
Fees)
Health Care Reform: PCORI Fees Due July 31, 2014
Health Care Reform Fees—Special Rules for HRAs
Reinsurance Fees
Who is Covered? When?
Health insurance issuers
Self-funded health plans Currently effective—three-year period from 2014
through 2016
Health insurance issuers and self-funded group health plans must pay fees to a
transitional reinsurance program for the first three years of health insurance
exchange operation (2014-2016). The fees will be used to help stabilize
premiums for coverage in the individual market. Fully-insured plan sponsors do
not have to pay the fee directly.
Certain types of coverage are excluded from the reinsurance fees, including
HRAs that are integrated with major medical coverage, HSAs, health FSAs and
coverage that consists solely of excepted benefits under HIPAA (such as stand-
alone vision and dental coverage). Also, self-insured group health plans that do
not use a third party administrator for their core administrative functions are
exempt from the requirement to make reinsurance contributions for the 2015 and
2016 benefit years.
The reinsurance program’s fees will be based on a national contribution rate,
which HHS will announce annually. The reinsurance fee is calculated by
multiplying the average number of covered lives by the national contribution rate.
The annual contribution rate is: $5.25 per month ($63 per enrollee per year) for
2014; $3.67 per month ($44 per enrollee per year) for 2015; and $2.25 per month
($27 per enrollee per year) for 2016.
The reinsurance contributions will be collected by HHS in two installments—one
at the beginning of the calendar year following the applicable benefit year, and
one at the end of that calendar year. For example, the $63 per capita reinsurance
contribution for 2014 will be collected in two installments: $52.50 in January 2015
and $10.50 late in the fourth quarter of 2015.
Action Items:
Review your organization’s health coverage to determine the plan(s) subject
to the reinsurance fees.
If a plan is insured, the carrier is responsible for paying the fee, although the
carrier may shift the fee to your organization through a premium increase.
If your organization is required to pay the fee for any self-funded plans, select
a method for counting covered lives.
Documents Available from Clarus Benefits Group:
Health Care Reform: Reinsurance Fees Will Cost Group Health Plans
Health Care Reform Fees—Special Rules for HRAs
Health Care Reform: Reinsurance Fees—Exemption for Certain Self-Insured Plans
Health Insurance Providers Fee
Who is Covered? When?
Any entity that provides health Sept. 30 of each calendar year,
insurance for any U.S. health risk beginning in 2014
Beginning in 2014, the ACA imposes an annual, non-deductible fee on the health
insurance sector, allocated across the industry according to market share. The
fee, which is treated as an excise tax, is required to be paid by Sept. 30 of each
calendar year.
The health insurance providers fee applies to all “covered entities,” defined as
entities that provide health insurance for any United States health risk. The fee
will be assessed on health insurers’ premium revenue with respect to health
insurance above $25 million. The fee program specifically excludes self-insured
employers.
The term “health insurance” does not include coverage for specific diseases,
accident or disability only, hospital indemnity, long-term care or Medicare
supplemental health insurance. However, limited dental and vision coverage are
included for purposes of this fee.
The aggregate annual fee for all covered entities will be apportioned among the
covered entities according to their respective market shares, as measured by net
premiums written for health insurance. The aggregate annual fee for all covered
entities is expected to be $8 billion for 2014, $11.3 billion for 2015 and 2016,
$13.9 billion for 2017 and $14.3 billion for 2018. Beginning in 2019, the cost of
the fee will increase based on the rate of premium growth.
Action Item:
Watch for communications from the insurance carrier as to how this fee
might impact costs for the plan.
Document Available from Clarus Benefits Group:
Health Care Reform: Health Insurance Providers Fee
$2,500 Contribution Limit for Health FSAs
Who is Covered? When?
Health FSAs Currently effective
Taxes and Fees under the Affordable Care Act
Effective for plan years beginning on or after Jan. 1, 2013, an employee’s annual pre-tax salary reduction contributions to
a health flexible spending account (FSA) through a cafeteria plan must be limited to $2,500. The health FSA limit
remained unchanged at $2,500 for the taxable years beginning in 2014. However, the limit increased to $2,550 for taxable
years beginning in 2015. The health FSA limit will potentially be further increased for cost-of-living adjustments for later
years.
Health FSA plan sponsors are free to impose an annual limit that is lower than the ACA limit for employees’ health FSA
contributions. Also, the $2,500 limit does not apply to employer contributions to the health FSA and it does not impact
contributions under other employer-provided coverage. For example, employee salary reduction contributions to an FSA
for dependent care assistance or adoption care assistance are not affected by the $2,500 health FSA limit.
In addition, the IRS relaxed the “use-or-lose” rule for health FSAs. Under the relaxed rule, employers may allow
participants to carry over up to $500 in unused funds into the next year. This modification applies only if the plan does not
also incorporate the grace period rule. This carryover rule does not affect the $2,500 limit on salary reduction
contributions. This means the plan may permit the individual to elect up to $2,500 in salary reductions in addition to the
$500 that may be carried over.
Action Items:
Determine whether the health FSA limits the amount of money an employee can set aside into the FSA on a pre-tax
basis per plan year.
If yes, ensure that the limit is at or below $2,500 for 2014, or $2,550 for 2015.
If there is no limit or a limit above the permitted dollar amount for the year, establish a limit that does not exceed
$2,500 for 2014, or $2,550 for 2015.
Documents Available from Clarus Benefits Group:
Health Care Reform: Changes to Health Accounts
Health Care Reform: The $2,500 Health FSA Limit
Health FSA Limit Will Increase for 2015
Health FSA Carryovers
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
10/13; BK 5/15
30
Taxes and Fees under the Affordable Care Act
Preventive Care Services (Non-GF Plans Only)
Who is Covered? When?
Non-GF health plans Currently effective
Effective for plan years beginning on or after Sept. 23, 2010, non-GF health plans must cover specific preventive care
services without cost-sharing requirements. The covered preventive care services include:
Evidence-based items or services that have in effect a rating of A or B in the current recommendations of the United States
Preventive Services Task Force;
Immunizations for routine use in children, adolescents and adults that are currently recommended by the Centers for Disease
Control and Prevention (CDC) and included on the CDC’s immunization schedules;
For infants, children and adolescents, evidence-informed preventive care and screenings provided for in the Health Resources and
Services Administration (HRSA) guidelines; and
For women, evidence-informed preventive care and screening provided in guidelines supported by HRSA (for plan years
beginning on or after Aug. 1, 2012).
The complete list of recommended preventive services that must be covered can be found at
www.HealthCare.gov/center/regulations/prevention.html.
Action Item:
Confirm that non-GF health plans cover the recommended preventive services without imposing any cost-sharing
(such as deductibles, copayments or coinsurance) for the services.
Documents Available from Clarus Benefits Group:
Health Care Reform: Preventive Care Coverage Guidelines
Health Care Reform: Preventive Care Guidelines for Women
Health Care Reform: Contraceptive Coverage Requirements for Religious Employers
Religious Accommodations Expanded Under the Contraceptive Mandate
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
10/13; BK 5/15
31
Taxes and Fees under the Affordable Care Act
Dependent Coverage Up to Age 26
Who is Covered? When?
Currently effective
Group health plans and health insurance issuers
that provide dependent coverage of children
Effective for plan years beginning on or after Sept. 23, 2010, group health plans and health insurance issuers that provide
dependent coverage of children must make coverage available for adult children up to age 26, regardless of the child’s
student or marital status. There is no requirement to cover the child or spouse of a dependent child.
This requirement applies to GF and non-GF plans. However, prior to the 2014 plan year, GF plans were not required to
cover adult children who were eligible for other employer-sponsored coverage, such as coverage through their own
employer.
ACA also added a tax provision related to health insurance coverage for these adult children. Effective March 30, 2010,
amounts spent on medical care for an eligible adult child can generally be excluded from taxable income. In addition, all
states should now be in conformity with this federal tax law change.
Action Items:
Confirm that the plan provides dependent coverage up to age 26 on a tax-free basis.
If the plan is GF, confirm that it will make coverage available to adult children up to age 26 regardless of whether they
are eligible for other employer-sponsored group health coverage, effective for the 2014 plan year and beyond.
Documents Available from Clarus Benefits Group:
Health Care Reform: Dependent Coverage Up to Age 26
Health Care Reform: IRS Guidance on Tax-Free Coverage for Children Under Age 27
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
10/13; BK 5/15
32
Taxes and Fees under the Affordable Care Act
Patient Protections (Non-GF Plans Only)
Who is Covered? When?
Non-GF group health plans Currently effective
Health insurance issuers of non-GF plans
The ACA imposes three new requirements on group health plans and health insurance coverage that are referred to as
“patient protections.” These patient protections relate to the choice of a health care professional and requirements relating
to benefits for emergency services.
Non-GF group health plans and health insurance issuers that require designation of a participating primary care provider must
permit each participant, beneficiary and enrollee to designate any available participating primary care provider (including a
pediatrician for children).
Non-GF group health plans and health insurance issuers that provide obstetrical/gynecological care and require a designation of a
participating primary care provider may not require preauthorization or referral for obstetrical/gynecological care.
Non-GF group health plans and health insurance issuers that provide hospital emergency room benefits must provide those
benefits without requiring prior authorization, and without regard to whether the provider is an in-network provider. Also, the
plan or issuer may not impose requirements or limitations on out-of-network emergency services that are more restrictive than
those applicable to in-network emergency services. Cost sharing requirements, such as copayments or coinsurance rates imposed
for out-of-network emergency services, cannot exceed the cost-sharing requirements for in-network emergency services.
Action Items:
If the plan requires participants to choose a primary care provider, allow participant to choose any available
participating primary care provider or pediatrician.
Permit participants to obtain OB/GYN care without a pre-authorization or referral.
Eliminate pre-authorization requirement for emergency services.
Eliminate increased coinsurance or copayment requirements for out-of-network emergency services.
Document Available from Clarus Benefits Group:
Health Care Reform: Patient Protections
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
10/13; BK 5/15
33
Taxes and Fees under the Affordable Care Act
Lifetime Limits
Who is Covered? When?
Health plans Currently effective
Health insurance issuers
Effective for plan years beginning on or after Sept. 23, 2010, health plans and health insurance issuers are prohibited
from imposing lifetime limits on the dollar value of essential health benefits.
Action Item:
Confirm that the plan does not impose lifetime limits on essential health benefits.
Document Available from Clarus Benefits Group:
Health Care Reform: Lifetime and Annual Limits
Rescissions
Who is Covered? When?
Group health plans Currently effective
Health insurance issuers
Group health plans and health insurance issuers may not rescind coverage for covered individuals, except in the case of
fraud or intentional misrepresentation of a material fact. A “rescission” is a cancellation or discontinuance of coverage that
has a retroactive effect. A termination of coverage that has a retroactive effect is permissible if it is due to the participant’s
failure to pay required premiums or contributions for the coverage.
This prohibition applies to GF and non-GF health plans, whether in the group or individual market, and whether coverage
is insured or self-funded.
Action Item:
Confirm that the plan does not rescind coverage except in the case of fraud or intentional misrepresentation of fact.
Document Available from Clarus Benefits Group:
Health Care Reform: Prohibition on Rescissions
Employer Reporting of Health Coverage—Code Sections 6055 & 6056
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
The Affordable Care Act (ACA) created new reporting requirements under Internal Revenue Code (Code) Sections
6055 and 6056. Under these new reporting rules, certain employers must provide information to the IRS about the
health plan coverage they offer (or do not offer) to their employees.
The additional reporting is intended to promote transparency with respect to health plan coverage and costs. It will
also provide the government with information to administer other ACA mandates, such as the large employer shared
responsibility penalty and the individual mandate.
OVERVIEW
TYPE OF REPORTING AFFECTED EMPLOYERS REQUIRED INFORMATION EFFECTIVE DATE
Code §6055—Reporting of Employers with self-insured Information on each individual Delayed until 2015
health coverage by health health plans provided with coverage (helps
insurance issuers and the IRS administer the ACA’s The first returns will
sponsors of self-insured plans Applicable large employers individual mandate) be due in 2016 for
(those with at least 50 full- coverage provided in
Code §6056—Applicable time employees, including Terms and conditions of health
large employer (ALE) health full-time equivalents) plan coverage offered to full- 2015
coverage reporting time employees (helps the IRS
administer the ACA’s employer
shared responsibility penalty)
Guidance
On March 5, 2014, the Internal Revenue Service (IRS) released two final rules on these reporting requirements,
which apply for calendar years beginning after Dec. 31, 2014. This date reflects a one-year delay provided in IRS
Notice 2013-45. However, the IRS is encouraging voluntary compliance for 2014. The IRS also released Q&As on
Section 6055 and Q&As on Section 6056, which were updated in May 2015. In addition, the IRS released a separate
set of Q&As on Employer Reporting using Form 1094-C and Form 1095-C, on May 28, 2015.
On Feb. 8, 2015, the IRS released final versions of forms and instructions that employers will use to report under
Sections 6055 and 6056 for 2014. These forms are not required to be filed for 2014, but reporting entities may
voluntarily file them in 2015 for 2014 coverage. On June 16, 2015, the IRS released 2015 draft versions of Forms
1094-B, 1095-B, 1094-C and 1095-C. 2015 draft instructions for Forms 1094-B and 1095-B and draft instructions
for Forms 1094-C and 1095-C were released on Aug. 7, 2015. These 2015 forms and instructions are draft
versions only, and should not be filed with the IRS or relied upon for filing. The IRS may make changes prior
to releasing final 2015 versions.
Except for a few minor changes, the 2015 draft forms and instructions are largely unchanged from the 2014 versions.
However, the 2015 draft instructions also include a proposed automatic 30-day filing extension, upon request
(under certain hardship conditions, reporting entities may apply for an additional 30-day extension), and a proposed
waiver from the requirement to file returns electronically.
Also, on June 29, 2015, President Obama signed the Trade Preferences Extension Act of 2015 into law, which
increases the penalties for failure to file correct information returns or provide individual statements under either
Section 6055 or Section 6056. These changes are effective for information returns and individual statements
required to be filed or provided after Dec. 31, 2015.
Filing Requirements
Under both Sections 6055 and 6056, each reporting entity will be required to file all of the following with the IRS:
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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A separate statement for each individual who is provided minimum essential coverage (MEC) (for ALEs, this
includes only full-time employees); and
A single transmittal form for all of the returns filed for a given calendar year.
Under Code Section 6055, reporting entities will generally file Forms 1094-B (a transmittal) and 1095-B (an
information return). Under Code Section 6056, entities will file Forms 1094-C (a transmittal) and 1095-C (an
information return) for each full-time employee for any month. Entities that are reporting under both Sections 6055
and 6056 will file using a combined reporting method, using Form 1094-C and Form 1095-C.
ALEs that sponsor self- ALEs that sponsor insured Non-ALEs that sponsor Non-ALEs that
insured plans plans
self-insured plans sponsor insured plans
Complete: Complete: File: These employers are
Form 1094-B not required to report
Form 1094-C Form 1094-C + under either Section
Form 1095-B 6055 or Section 6056.
+ +
To satisfy the Section
Both sections of Form The section of Form 1095-C 6055 reporting
1095-C addressing the information requirements. These
employers are not
under Section 6056 required to report under
Section 6056.
To report: To satisfy the Section 6056
reporting requirements. These
(1) Information under employers are not required to
Section 6055 about health report under Section 6055.
coverage provided; and
(2) Information under
Section 6056 about offers
of health coverage.
DEADLINES FOR FILING WITH THE IRS AND FURNISHING STATEMENTS TO INDIVIDUALS
The Code Sections 6055 and 6056 reporting requirements were set to take effect in 2014. However, on July 2, 2013,
the Treasury announced that employers will have an additional year to comply with these health plan reporting
requirements. Thus, the Code Sections 6055 and 6056 reporting requirements become effective in 2015.
The first returns will be due in 2016 for coverage provided in 2015.
On July 9, 2013, the IRS issued Notice 2013-45 to provide transition relief for 2014 for Code Sections 6055 and
6056. Under the transition relief, employers are encouraged to voluntarily comply with the reporting requirements for
2014 (that is, by filing and furnishing Section 6056 returns and statements in early 2015). However, compliance is
optional for 2014 and no penalties will be applied for failing to comply.
Deadlines for Filing with the IRS
Forms must be filed with the IRS annually, no later than Feb. 28 (March 31, if filed electronically) of the year
following the calendar year to which the return relates. Due to the one-year delay, the first returns required to be filed
are for the 2015 calendar year, and must be filed no later than Feb. 29, 2016 (Feb. 28, 2016, being a Sunday), or
March 31, 2016, if filed electronically.
The 2015 draft instructions propose to allow reporting entities an automatic 30-day extension of time to file with
the IRS. To receive the automatic extension, employers must complete and file Form 8809, Application for Extension
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
of Time To File Information Returns, by the due date of the returns. The form may be submitted on paper, or through
the FIRE System either as a fill-in form or an electronic file. No signature or explanation is required for the extension.
Under certain hardship conditions, employers may also apply for an additional 30-day extension. See the instructions
for Form 8809 for more information.
Deadlines for Furnishing to Individuals
Each reporting entity will also be required to furnish statements annually to individuals who are provided MEC (for
ALEs, this includes only full-time employees) on or before Jan. 31 of the year immediately following the calendar year
to which the statements relate. This means that the first statements (the statements for 2015) must be furnished no
later than Feb. 1, 2016 (Jan. 31, 2016, being a Sunday). Extensions may be available in certain circumstances.
The final rules do not allow an alternate filing date for employers with non-calendar year plans. Although employers
may collect information on a plan year basis, employees will need to receive their individual statements early in the
year in order to have the requisite information to correctly and completely file their income tax returns for that year.
However, the 2015 draft instructions propose to allow reporting entities to request an extension of time to furnish the
statements to recipients by sending a letter to Internal Revenue Service, Information Returns Branch, Attn: Extension
of Time Coordinator, 240 Murall Drive, Mail Stop 4360, Kearneysville, WV 25430. The letter must include:
The filer’s name, TIN and address;
The type of return;
A statement that extension request is for providing statements to recipients;
A reason for delay; and
The signature of the filer or authorized agent.
A request must be postmarked by the date on which the statements are due to the recipients. If the request for an
extension is approved, providers will generally be granted a maximum of 30 extra days to furnish the recipient
statements.
MANNER OF FILING AND FURNISHING
Any reporting entity that is required to file at least 250 returns under Section 6055 or Section 6056 must
file electronically. The 250-or-more requirement applies separately to each type of return and separately to each
type of corrected return. Entities filing fewer than 250 returns during the calendar year may choose to file in paper
form, but are permitted (and encouraged) to file electronically.
Individual statements may also be furnished electronically if certain notice, consent and hardware and software
requirements are met (similar to the process currently in place for the electronic furnishing of employee Forms W-2).
The consent must specifically identify each form; an employee’s consent to receive a Form W-2 electronically may not
be considered a consent to also receive the employee statement under Sections 6056 or 6056 electronically. It is not
sufficient for an entity to simply post the information on a website accessible to the individual (similar to the current
process for furnishing SBCs), or to provide the information only upon request.
Electronic filing will be done using the ACA Information Returns (AIR) Program. Pub. 5165, Guide for Electronically
Filing ACA Information Returns for Software Developers and Transmitters (Processing Year 2015) provides very
detailed technical information regarding standards for software developers and transmitters that plan to facilitate this
electronic reporting for calendar year 2015 through the AIR System. To develop software for use with the AIR system,
software developers, transmitters and issuers (providers filing their own Forms 1094-B and 1095-B) should use the
guidelines provided in Pub. 5165 along with the Extensible Markup Language (XML) Schemas published on IRS.gov.
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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More information on the AIR Program is available on the IRS website. The AIR System is expected to be available for
production in the fall of 2015.
Proposed Waiver of the Electronic Reporting Requirement
The 2015 draft instructions propose a waiver from the requirement to file returns electronically. To receive a
waiver, reporting entities must submit Form 8508, Request for Waiver From Filing Information Returns Electronically,
at least 45 days before the due date of the returns. Reporting entities cannot apply for a waiver for more than one tax
year at a time, and must reapply at the appropriate time for each year in which a waiver is required. Any approved
waivers should be kept for the reporting entity’s records only. A copy of an approved waiver should not be sent to the
service center where paper returns are filed.
If a waiver for original returns is approved, any corrections for the same types of returns will be covered under the
waiver. However, if original returns are submitted electronically, but the reporting entity wants to submit corrections
on paper, a waiver must be approved for the corrections if the reporting entity must file 250 or more corrections.
Without an approved waiver, a reporting entity that is required to file electronically but fails to do so may be subject
to a penalty of up to $250 per return, unless it can establish reasonable cause. However, reporting entities can file up
to 250 returns on paper; those returns will not be subject to a penalty for failure to file electronically.
APPLICABLE LARGE EMPLOYER HEALTH COVERAGE REPORTING (CODE § 6056)
Code Section 6056 requires applicable large employers (ALEs) subject to the ACA’s employer shared responsibility
rules to file information returns with the IRS and provide statements to their full-time employees about the health
insurance coverage the employer offered. The IRS will use the information provided on the information return to
administer the ACA’s employer shared responsibility rules, which impose penalties on ALEs that do not offer
affordable, minimum value coverage to their full-time employees and dependents.
The ACA’s employer penalties were set to take effect on Jan. 1, 2014, but they have been delayed until
2015. The IRS and the ALE’s employees will use the information provided as part of the determination of whether an
employee is eligible for a premium tax credit for coverage purchased through an Exchange under the ACA. On March
5, 2014, the IRS released a final rule on the Section 6056 reporting requirements, which finalizes proposed
regulations issued on Sept. 5, 2013. Q&As on Section 6056 were also released in August 2014, and were updated in
May 2015. A separate set of Q&As on using Form 1094-C and Form 1095-C were issued on May 28, 2015.
In addition, on Feb. 8, 2015, the IRS released final versions of the following forms, along with related instructions,
that employers will use to report under Section 6056, as well as for combined reporting by ALEs who report under
both Sections 6055 and 6056:
Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Return; and
Form 1095-C, Employer-Provided Health Insurance Offer and Coverage.
These forms and instructions are 2014 versions that may be used for filing in 2015 related to 2014 coverage. These
forms are not required to be filed for 2014, but reporting entities may voluntarily file them in 2015 for 2014
coverage.
On June 16, 2015, the IRS released 2015 draft versions of Forms 1094-C and 1095-C. 2015 draft instructions
were released on Aug. 7, 2015. These 2015 forms and instructions are draft versions only, and should not be
filed with the IRS or relied upon for filing. The IRS may make changes prior to releasing final 2015 versions.
Except for a few minor changes, the 2015 draft forms and instructions are largely unchanged from the 2014 versions.
However, the 2015 draft instructions also include a proposed automatic 30-day filing extension, upon request
(under certain hardship conditions, reporting entities may apply for an additional 30-day extension), and a proposed
waiver from the requirement to file returns electronically. In addition, the following minor changes were
included in the 2015 draft versions of the Forms:
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
The 2015 draft Form 1095-C includes an additional field, titled “Plan Start Month.” This new field is optional
for 2015, but will be required for 2016 and beyond. For 2015, ALEs can choose to:
o Add this field and provide plan year information;
o Add this field and enter “00”; or
o Leave this new field out (thus using the 2014 format).
The 2015 draft Form 1095-C includes a “Continuation Sheet” that filers will use if they need to report
coverage information for more than six individuals.
The 2015 draft Form 1094-C moved line 19 (regarding the authoritative transmittal) to be included in Part I.
Line 19 was previously included as the first line of Part II.
The 2015 draft Form 1094-C seems to allow information to be entered in the “All 12 months” box in Part III,
column (b): Full-Time Employee Count for ALE Member (this box is no longer grayed).
In addition, according to a note on the 2015 draft Form 1095-C, the IRS intends to include two additional “Offer of
Coverage” codes for 2016 and beyond. Although the “Offer of Coverage” codes will remain unchanged for 2015, the
IRS plans to include these additional codes in 2016 and beyond that an employer would use, if applicable, to indicate
that the employer’s offer of coverage to the spouse is a conditional offer.
Affected Employers
The Section 6056 reporting requirements apply to “applicable large employers” (ALEs) subject to the ACA’s employer
shared responsibility rules. An ALE is an employer that employed an average of at least 50 full-time employees,
including full-time equivalents (FTEs), on business days during the preceding calendar year. Full-time employees are
those employed, on average, at least 30 hours of service per week. Whether an employee qualifies as a full-time
employee is determined under either the look-back measurement method or the monthly measurement method, as
described in the employer shared responsibility final regulations.
Section 6056 applies to all employers that are ALEs, regardless of whether coverage is offered to full-time employees,
and regardless of the employer is a tax-exempt or government entity (including federal, state, local and Indian tribal
governments). However, only ALEs with full-time employees are subject to the Section 6056 requirements (and only
with respect to their full-time employees). Thus, ALEs without any full-time employees are not subject to the
Section 6056 reporting requirements.
Controlled Group Rules
For purposes of the Section 6056 reporting requirements, related employers are treated as a single employer for
determining employer size if they meet certain IRS criteria. Thus, all persons treated as a single employer under Code
Sections 414(b), (c), (m) or (o) are combined and treated as a single employer for purposes of determining whether
or not the employer has at least 50 full-time employees (including FTEs) and together will be an ALE (called an
Aggregated ALE Group). When the combined total of full-time employees (including FTEs) meets the threshold, each
separate company (or ALE member) is subject to the Section 6056 reporting requirements, even if any particular
company individually does not employ enough employees to meet the 50-full-time-employee threshold.
However, each ALE (and each member of a group of related companies that constitute an ALE) is responsible for its
own reporting obligations. For purposes of the information reporting requirements under Section 6056, each ALE
member must file an information return with the IRS and furnish a statement to its full-time employees, using its own
employer identification number (EIN).
Reporting for Medium-sized ALEs
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
The employer shared responsibility final regulations included transition relief delaying compliance for medium-sized
ALEs for one year, until 2016. Medium-sized ALEs are those with at least 50 full-time employees (including full-time
equivalents), but fewer than 100 full-time employees (including full-time equivalents).
ALEs eligible for this transition relief will still report under Section 6056 for 2015.
As part of the transition relief from the employer shared responsibility rules for medium-sized ALEs, the ALE must
certify by checking a box on its Section 6056 transmittal form (Form 1094-C) for calendar year 2015 (that is, for the
Section 6056 transmittal form that will be filed in 2016) that it meets the following eligibility conditions:
The ALE employs a limited workforce of at least 50 full-time employees (including full-time equivalents),
but fewer than 100 full-time employees (including full-time equivalents) on business days during 2014;
Between Feb. 9, 2014, and Dec. 31, 2014, the ALE does not reduce the size of its workforce or the
overall hours of service of its employees in order to satisfy the workforce size condition; and
During the coverage maintenance period (that is, the period ending Dec. 31, 2015, or the last day of the plan
year that begins in 2015), the ALE does not eliminate or materially reduce the health coverage, if any,
it offered as of Feb. 9, 2014.
ALEs with non-calendar year plans will also certify with regard to their 2015 plan year, including:
The months of their 2015 plan year that fall in calendar year 2015, on the Section 6056 transmittal form for
2015 (that is, the form that will be filed in 2016); and
The months of their 2015 plan year that fall in calendar year 2016, on the Section 6056 transmittal form for
2016 (that is, the form that will be filed in 2017).
The IRS noted that the delay for medium-sized ALEs is solely for the employer for purposes of the employer shared
responsibility rules, and does not affect the employee’s potential eligibility for the premium tax credit. Accordingly,
regardless of whether the employer is eligible for this delay, the Form 1095-C for each full-time employee
must accurately reflect the health coverage offered to that employee (if any) during that period,
including, if applicable, the required employee contribution.
Thus, reporting for medium-sized ALEs is not a simplified method of reporting.
ALEs That Sponsor Self-Insured Plans
ALEs that sponsor self-insured group health plans also are required to report information under Section 6055 about
the health coverage they provide. The IRS and individuals will use the information provided under Section 6055 to
administer the ACA’s individual mandate. These ALEs file with the IRS and furnish to employees the information
required under both Sections 6055 and 6056 on a single form, using a combined reporting method. This combined
reporting method is described in more detail below.
Excluded Employers
Employers that are not subject to the ACA’s employer shared responsibility rules are not required to report under
Section 6056. Thus, employers that employed fewer than 50 full-time employees (including FTEs) during the prior
year are not subject to the reporting requirements. However, any employer that sponsors a self-insured health plan is
required to report under Section 6055, even if the employer has fewer than 50 full-time employees.
Reporting Required for All Full-time Employees
Under Section 6056, each ALE is required to report information about the health coverage, if any, offered to its full-
time employees (and their dependents), including whether an offer of health coverage was (or was not)
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
made. This requirement applies to all ALEs, regardless of whether they offered health coverage to all, none or some
of their full-time employees. For each full-time employee, regardless of whether health coverage was offered to the
employee, the ALE is required to file a return with the IRS and furnish a statement to the employee reporting:
Whether an offer of health coverage was or was not made to the employee; and
If an offer was made, the required information about the offer.
Therefore, even if an ALE does not offer coverage to any full-time employees, it must file returns with the IRS and
furnish statements to each of its full-time employees to report information specifying that coverage was not offered.
An ALE is not required to file a Form 1095-C for an individual who, for all months of a calendar year, is either not an
employee of the ALE or is in a limited non-assessment period (for example, an employee who was hired mid-
year and then was in an initial measurement period that continued into the following year). However, for the months
in which the employee was an employee of the ALE, he or she would be included in the total employee count reported
on Form 1094-C. Also, if the employee enrolled in self-insured employer-sponsored coverage during the limited non-
assessment period, the ALE must file a Form 1095-C for the employee to report coverage information for the year.
Information Required to Be Reported on the IRS Return
The ALE’s return filed with the IRS must include the following information:
The ALE’s name, address and employer identification number (EIN);
The name and telephone number of the ALE’s contact person;
A certification of whether the ALE offered to its full-time employees (and their dependents) the opportunity to
enroll in minimum essential coverage (MEC) under an eligible employer-sponsored plan, by calendar month;
The months during the calendar year for which MEC under the plan was available;
Each full-time employee’s share of the lowest cost monthly premium for self-only coverage providing
minimum value offered to that employee under an eligible employer-sponsored plan, by calendar month;
The number of full-time employees for each month during the calendar year;
The name, address (including country code) and Social Security number (SSN) or other taxpayer identification
number (TIN) of each full-time employee during the calendar year and the months (if any) during which the
employee was covered under the eligible employer-sponsored plan during the calendar year; and
Any other information required by the IRS.
Most employer-sponsored health plans will qualify as MEC. The ACA broadly defines MEC to include both insured and
self-insured group health plans, as well as plans with grandfathered status under the ACA. However, MEC does not
include specialized coverage, such as coverage only for vision care or dental care, workers’ compensation, disability
policies or coverage only for a specific disease or condition.
Each ALE will also have to report the name, address and EIN of any third party reporting on behalf of the ALE and
whether the ALE is a member of an Aggregated ALE Group. The final regulations do not require employers to report
whether they expect to be an ALE the following year. Some of the information will be provided through the use of
indicator codes, rather than detailed explanations or summaries. If multiple codes apply with respect to a full-time
employee for a particular calendar month, the reporting format will accommodate the necessary codes.
Information Required to Be Reported on the Employee Statement
An ALE generally must furnish to each full-time employee a written statement showing the ALE’s name, address and
EIN, and the information required to be shown on the Section 6056 return with respect to the full-time employee (and
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
his or her spouse and dependents). Employee statements may truncate the TIN or SSN of an employee (or any family
member of the employee receiving coverage) on any statements furnished to employees, by showing only the last
four digits of the TIN or SSN and replacing the first five digits with asterisks or Xs. Truncation is not allowed on forms
filed with the IRS. In addition, an EIN may not be truncated on any forms.
Methods of Reporting
The final rule provides:
A general method that all ALEs may use for filing forms with the IRS and furnishing statements to full-time
employees; and
Two alternative reporting methods for eligible ALEs.
If an ALE cannot use an alternative reporting method for certain employees, the ALE must use the general method for
those employees. In any case, the alternative reporting methods are optional, so that an employer may choose to
report for all of its full-time employees using the general method even if an alternative reporting method is available.
General Reporting Method
As a general method, each ALE may satisfy the requirement to file a Section 6056 return with the IRS by filing:
A transmittal on Form 1094-C for all of the returns filed for a given calendar year; and
A separate employee statement on Form 1095-C for each full-time employee.
Substitute forms may be used, as long as they include all of the required information and comply with IRS procedures
or other applicable guidance. Entities using substitute forms instead of the official IRS versions may develop substitute
forms themselves or buy them from a private printer. Currently in draft form, Publication 5223, General Rules &
Specifications for Substitute ACA Forms 1094-B, 1095-B, 1094-C, and 1095-C and Certain Other Information, explains
the requirements for the format and content of substitute statements to recipients. Only forms that conform to the
official form and the specifications in Publication 5223 are acceptable for filing with the IRS.
An ALE that maintains a self-insured plan also uses Form 1095-C to satisfy the reporting requirements under Section
6055. The Form 1095-C has separate sections to allow ALEs that sponsor self-insured plans to combine reporting to
satisfy both the Section 6055 and 6056 reporting requirements, as applicable, on a single return. More information on
combined reporting is available in the “Combined Reporting” section below.
The Section 6056 employee statement may be made by furnishing a copy of Form 1095-C for that full-time
employee (or another form the IRS designates) or a substitute employee statement for that full-time employee (as
long as it includes all of the required information and complies with IRS procedures or other applicable guidance). The
employee statement is not required to include a copy of the transmittal form (Form 1094-C).
Alternative Methods
The final rule provides two alternative methods of reporting under Section 6056 that are intended to minimize the cost
and administrative tasks for employers. In certain situations, the alternative reporting methods may allow employers
to provide less detailed information than under the general method. The two alternative reporting methods are:
Reporting Based on Certification of Qualifying Offers (the Qualifying Offer Method); and
Option to Report Without Separate Identification of Full-Time Employees if Certain Conditions Related to Offers
of Coverage Are Satisfied (the 98 Percent Offer Method).
In addition, transition relief is available under the Qualifying Offer Method for 2015.
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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According to the IRS, in some circumstances, only some of the information required under the general method is
necessary. Accordingly, the alternative reporting methods identify specific groups of employees for whom simplified
alternative reporting would provide sufficient information. If an ALE is not eligible to use an alternative method of
reporting with respect to one or more full-time employees, the ALE must use the general method of reporting for
those employees. In addition, the alternative methods of reporting are all optional. An employer is not required to use
any alternative reporting method, even if it is eligible, and may instead report the more detailed information under the
general method of reporting.
Combined Reporting
The final rules under Sections 6055 and 6056 provide for combined reporting for employers that are subject to both
reporting provisions (generally, ALEs that sponsor self-insured group health plans). To allow these ALEs to satisfy both
reporting requirements on a single return, Form 1095-C has separate sections for reporting under Section 6055 and
for reporting under Section 6056. More information on combined reporting is available in the “Combined Reporting”
section below.
REPORTING OF HEALTH COVERAGE FOR ISSUERS AND SELF-INSURED PLANS (CODE § 6055)
The ACA requires every health insurance issuer, sponsor of a self-insured health plan, government agency that
administers government-sponsored health insurance programs and any other entity that provides minimum essential
coverage (MEC) to file an annual return with the IRS reporting information for each individual who is provided with
this coverage. Related statements must also be provided to individuals.
The IRS will use the information from the returns to implement the ACA’s individual mandate (that is, the requirement
that individuals obtain acceptable health insurance coverage for themselves and their family members or pay a
penalty). The ACA’s individual mandate became effective in 2014.
On March 5, 2014, the IRS released a final rule on the Section 6055 reporting requirements. This rule finalizes
proposed regulations issued on Sept. 5, 2013. Q&As on Section 6055 were also released in August 2014, and were
updated in May 2015. In addition, on Feb. 8, 2015, the IRS released final versions of the following forms, along with
related instructions, that employers will use to report under Section 6055:
Form 1094-B, Transmittal of Health Coverage Information Returns; and
Form 1095-B, Health Coverage.
These forms and instructions are 2014 versions that may be used for filing in 2015 related to 2014 coverage. These
forms are not required to be filed for 2014, but reporting entities may voluntarily file them in 2015 for 2014
coverage.
On June 16, 2015, the IRS released 2015 draft versions of Forms 1094-B and 1095-B. 2015 draft instructions
were released on Aug. 7, 2015. These 2015 forms and instructions are draft versions only, and should not be
filed with the IRS or relied upon for filing. The IRS may make changes prior to releasing final 2015 versions.
Except for a few minor changes, the 2015 draft forms and instructions are largely unchanged from the 2014 versions.
However, the 2015 draft instructions also include:
A proposed automatic 30-day filing extension, upon request (under certain hardship conditions, reporting
entities may apply for an additional 30-day extension); and
A proposed waiver from the requirement to file returns electronically.
Also, the 2015 draft version of Form 1095-B includes a “Continuation Sheet” that filers will use if they need to report
coverage information for more than six individuals.
Minimum Essential Coverage
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
Under the Section 6055 reporting requirements, every person that provides MEC to an individual during a calendar
year must report on the health coverage provided. MEC includes the following:
Eligible employer-sponsored coverage, including self-insured plans, COBRA coverage and retiree coverage;
Coverage purchased in the individual market (including a qualified health plan offered by an Exchange);
Medicare Part A coverage and Medicare Advantage plans;
Most Medicaid coverage;
Children's Health Insurance Program (CHIP) coverage;
Certain types of veterans health coverage administered by the Veterans Administration;
Most types of TRICARE coverage;
Coverage provided to Peace Corps volunteers;
Coverage under the Nonappropriated Fund Health Benefit Program;
Refugee Medical Assistance supported by the Administration for Children and Families;
Self-funded health coverage offered to students by universities for plan or policy years that begin on or before
Dec. 31, 2014 (for later years, sponsors of these programs may apply to HHS to be recognized as MEC);
State high-risk pools for plan or policy years that begin on or before Dec. 31, 2014 (for later years, sponsors
of these program may apply to HHS to be recognized as MEC); and
Other coverage recognized by HHS as MEC.
Section 6055 reporting is not required for coverage that is not MEC. This includes coverage that qualifies as “excepted
benefits,” such as stand-alone vision care or dental care, workers’ compensation and accident or disability policies.
Thus, no reporting is required for health savings accounts (HSAs), coverage at on-site medical clinics or for Medicare
Part B. However, Medicare Part A qualifies as MEC and is subject to reporting. Note that health flexible spending
accounts (health FSAs) must satisfy certain requirements to qualify as excepted benefits. Beginning in 2014, health
FSAs that do not qualify as excepted benefits will generally be prohibited under the ACA.
In addition, Section 6055 reporting is not required for arrangements that provide benefits in addition or as a
supplement to MEC. The final regulations clarify that MEC is considered “supplemental coverage” not subject to
reporting if it supplements a primary plan of the same plan sponsor or government-sponsored coverage (such as
Medicare). Thus, providers are not required to report the following MEC that is supplemental to other MEC:
Coverage that supplements a government-sponsored program, such as Medicare or TRICARE supplemental
coverage; or
Coverage of an individual in more than one plan or program provided by the same plan sponsor (the plan
sponsor is required to report only one type of minimum essential coverage).
According to regulations, examples of supplemental coverage to which this rule may apply (and therefore do not
require separate Section 6055 reporting) include health reimbursement arrangements (HRAs) and wellness programs
that are an element of other MEC (such as wellness programs offering reduced premiums or cost-sharing under a
group health plan).
However, the 2015 draft instructions clarify that coverage isn't provided by the same plan sponsor if they aren't
reported by the same reporting entity. Thus, an insured group health plan and a self-insured health
reimbursement arrangement covering the employees of the same employer aren't supplemental.
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
Entities Subject to Section 6055 Reporting
Under the Section 6055 reporting requirements, every person that provides MEC to an individual during a calendar
year must report on the health coverage provided. Reporting entities include:
Health insurance issuers Self-insured plan sponsors
Government-sponsored programs Other entities that provide MEC
To ensure complete and accurate reporting, Section 6055 reporting is required for all covered individuals. Reporting
entities may use third parties to facilitate filing returns and furnishing statements to comply with Section 6055
reporting requirements. However, these arrangements do not transfer the potential liability for failure to report. In
contrast, a government employer that maintains a self-insured group health plan or arrangement may designate (in
writing) another related governmental unit, agency or instrumentality as the person responsible for Section 6055
reporting, called a designated government entity (DGE).
Health Insurance Issuers
Health insurance issuers are responsible for Section 6055 reporting for all insured coverage except:
Coverage under certain government-sponsored programs (such as Medicaid and Medicare) that provide
coverage through a health insurance issuer; and
Coverage under QHPs through the individual market Exchange.
To avoid collecting duplicate or unnecessary information, issuers are not required to submit Section 6055 information
returns for QHP coverage through an individual Exchange. The Exchange will provide the necessary information to the
IRS and the individual. However, issuers must report on QHPs in the small group market enrolled in through the Small
Business Health Options Program (SHOP), because Exchanges will not be reporting information on these plans.
Self-insured Plan Sponsors
The plan sponsor is responsible for Section 6055 reporting for a self-insured group health plan. In general, the plan
sponsor is the entity that establishes or maintains the plan.
The employer is the plan sponsor for a plan established or maintained by a single employer.
Each participating employer is the plan sponsor for a plan established or maintained by more than one
employer (other than a multiple employer welfare arrangement).
For a multiemployer plan, the plan sponsor is the association, committee, joint board of trustees or other
group of representatives who establish or maintain the plan.
TYPE OF COVERAGE PLAN SPONSOR
The employer
A self-insured group health plan maintained by
a single employer Each participating employer
A plan maintained by more than one employer The association, committee, joint board of trustees or other group
that is not a multiemployer plan (as defined in of representatives of the parties who establish or maintain the plan
ERISA)
A multiemployer plan (as defined in ERISA)
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
A plan maintained solely by an employee The employee organization
organization
The person designated by plan terms or, if no person is
Any plan for which a plan sponsor is not designated, each entity that maintains the plan
identified above
For purposes of identifying the employer, the Code Section 414 employer aggregation rules do not apply. Thus,
a self-insured group health plan or arrangement covering employees of related companies is treated as sponsored by
more than one employer, and each employer is required to report for its employees. However, one member of the
group may assist the other members by filing returns and furnishing statements on behalf of all members.
Most employers that sponsor self-insured group health plans are ALEs required to report under both Section 6056 and
Section 6055. ALEs apply the rules under Section 6056 for identifying the reporting entities in a controlled group.
Employers in controlled groups that are not ALEs, and reporting entities (such as issuers) that are not reporting as
employers may report under Section 6055 as separate entities, or one entity may report for the group.
Government-sponsored Programs
Governmental units that provide coverage under a government-sponsored program must also report under Section
6055. For a government-sponsored program, the entity responsible for reporting under Section 6055 is as follows:
TYPE OF COVERAGE WHO MUST REPORT
Medicaid and CHIP coverage The state agency that administers the program
Medicare, TRICARE, benefits administered by the Department The executive department or agency of the
of Veterans Affairs and benefits for Peace Corps volunteers governmental unit that provides the coverage
Health insurance coverage under a government-sponsored The executive department or agency of the
program (such as Medicaid, CHIP or Medicare) obtained governmental unit that provides the coverage (and
through an issuer
not the issuer)
The Nonappropriated Fund Health Benefits Program
The Secretary of Defense may designate the
Department of Defense components that must report
Required Filings
In general, a reporting entity that is reporting under Section 6055 as health insurance issuers or carriers, sponsors of
self-insured group health plans that are not reporting as ALEs, sponsors of multiemployer plans and providers of
government-sponsored coverage will report using Form 1094-B and Form 1095-B, or other form designated by the
IRS. However, a reporting entity that is reporting under Section 6055 as an ALE will file under a combined reporting
method, using Form 1094-C and Form 1095-C, or other form designated by the IRS. As part of this combined
reporting method, Form 1095-C will be used by ALEs to satisfy the Section 6055 and 6056 reporting requirements, as
applicable.
Substitute statements that comply with applicable requirements may be used, as long as the required information is
included. Entities using substitute forms instead of the official IRS versions may develop substitute forms themselves
or buy them from a private printer. Currently in draft form, Publication 5223, General Rules & Specifications for
Substitute ACA Forms 1094-B, 1095-B, 1094-C, and 1095-C and Certain Other Information, explains the requirements
for the format and content of substitute statements to recipients. Only forms that conform to the official form
and the specifications in Publication 5223 are acceptable for filing with the IRS.
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
Written statements must also be provided to each responsible individual identified on the IRS return. A “responsible
individual” includes a primary insured, employee, former employee, uniformed services sponsor, parent or other
related person named on an application who enrolls one or more individuals (including him or herself) in MEC.
Statements are not required to be provided to any other individual who is not the responsible individual. Individual
statements may be made by furnishing to the responsible individual a copy of the IRS return (or a substitute
statement that includes the required information).
Information Required to Be Reported
Section 6055 requires the reporting of several data elements that are not required by taxpayers for preparing their
tax returns or by the IRS for tax administration. The return must include the following information:
The name, address and EIN of the reporting entity;
The name, address and TIN of the primary insured and each other individual covered under the policy or plan;
For each covered individual, the months for which, for at least one day, the individual was enrolled in
coverage and entitled to receive benefits; and
Any other information required by the IRS.
In addition, if coverage is through an employer’s group health plan, the return must contain the following information:
The name, address and EIN of the employer sponsoring the plan;
Whether the coverage is a QHP enrolled in through the SHOP, and the SHOP’s unique identifier; and
Any other information the IRS may require.
The individual statement must show:
The phone number for the reporting entity’s designated contact person and policy number, if any; and
The information required to be shown on the Section 6055 return for the responsible individual and each
covered individual listed on the return.
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
Requirement to Report the SSN or TIN
Under Section 6055, reporting entities are required to report the SSN or other TIN for each covered individual.
According to the IRS, reporting of TINs for all covered individuals is necessary to verify an individual’s coverage
without the need to contact the individual.
However, if reporting entities are unable to obtain an SSN or TIN after making a reasonable effort to do so, the
covered individual’s date of birth may be reported in lieu of an SSN or TIN. In this case, a reporting entity will not be
subject to a penalty if it demonstrates that it properly solicits the SSN or TIN, but does not receive it.
Under these rules, the reporting entity must make:
An initial solicitation at the time the relationship with the payee is established. However, the reporting
entity is not required to make this initial solicitation if it already has the payee's SSN or TIN and uses that SSN
or TIN for all relationships with the payee.
If the reporting entity does not receive the SSN or TIN, the first annual solicitation is generally required by
Dec. 31 of the year in which the relationship with the payee begins (Jan. 31 of the following year, if the
relationship begins in December).
Generally, if the SSN or TIN is still not provided, a second solicitation is required by Dec. 31 of the following
year.
If an SSN or TIN is still not provided, the reporting entity need not continue to solicit it. In addition, if the responsible
individual is not enrolled in the coverage, reporting entities may, but are not required to, report the responsible
individual’s SSN or TIN.
Reporting entities may truncate the covered individual’s SSN or TIN on any statements furnished to individuals, by
showing only the last four digits of the SSN or TIN, and replacing the first five digits with asterisks (*) or X’s.
However, truncation is not allowed on any forms filed with the IRS or provided to individuals.
COMBINED REPORTING
In an effort to minimize burden and streamline the reporting process, while minimizing the need for employers and
the IRS to build multiple systems to accommodate multiple forms, the final regulations allow all ALEs to use a
single combined form for reporting the information required under both Section 6055 and Section 6056.
Under this combined reporting method, Form 1095-C will be used by ALEs to satisfy the Section 6055 and 6056
reporting requirements, as applicable.
An ALE that sponsors a self-insured plan will complete both Sections of the combined Form 1095-C to report
the information required under both Sections 6055 and 6056. Therefore, these ALEs will be able to use a
single form to report information regarding whether an employee was covered.
An ALE that provides insured coverage will also report on Form 1095-C, but will complete only the Section of
Form 1095-C related to Section 6056.
Section 6055 reporting entities that are not ALEs or are not reporting in their capacity as employers (such as health
insurance issuers, self-insured multiemployer plans and providers of government-sponsored coverage) will report
under Section 6055 on Form 1095-B.
ALEs will also be providing only a single employee statement (with the Section 6056 information and, with respect to
employers with a self-insured group health plan, Section 6055 information). Employers are permitted to mail to an
employee in the same mailing one or more of the required information returns, such as the combined Section 6055
and Section 6056 employee statement and the Form W-2.
Reporting for Nonemployees Enrolled in Self-insured Coverage
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
The final instructions for Forms 1094-C and 1095-C include a new option for ALEs reporting information for
nonemployees (such as nonemployee directors, retirees or nonemployee COBRA beneficiaries). This new option allows
employers to report employer-sponsored self-insured health coverage for nonemployees (and their family members)
using either:
Forms 1094-B and 1095-B; or
Form 1095-C, Part III (note, though, that the Form 1095-C may only be used if the individual identified on
Line 1 has a SSN).
This option applies only for ALEs offering self-insured health coverage for any individual who enrolled in the coverage
for one or more calendar months of the year, but was not an employee for any calendar month of the year, such as:
A nonemployee director;
A retired employee who retired in a previous year;
A terminated employee receiving COBRA coverage who terminated employment during a previous year; and
A nonemployee COBRA beneficiary.
A nonemployee does not include an individual who obtained coverage through the employee’s enrollment, such as a
spouse or dependent obtaining coverage when an employee elects family coverage. Under this new option, ALEs may
report enrollment for these individuals using either:
Forms 1094-B and 1095-B; or
Form 1095-C, Part III (note, though, that the Form 1095-C may only be used if the individual identified on
Line 1 has a SSN).
If the Form 1095-C is used with respect to an individual who was not an employee for any month of the calendar
year, Part II must also be completed by using Code 1G on Line 14 in the “All 12 Months” box (or the box for each
month of the calendar year).
In the case of a nonemployee who enrolls in the coverage under a self-insured health plan, all family members who
are covered individuals due to the individual’s enrollment must be included on the same Form 1095-B or Form 1095-C
as the individual who is offered, and enrolls in, the coverage.
PENALTIES
A reporting entity that fails to comply with the Section 6055 or Section 6056 reporting requirements may be subject
to the general reporting penalties for:
Failure to file correct information returns (under Code Section 6721); and
Failure to furnish correct payee statements (under Code Section 6722).
However, penalties may be waived if the failure is due to reasonable cause and not to willful neglect. Penalties may be
reduced if the reporting entity corrects the failure within a certain period of time. Also, lower annual maximums apply
for entities that have average annual gross receipts of up to $5 million for the three most recent taxable years.
On June 29, 2015, President Obama signed the Trade Preferences Extension Act of 2015 into law, which
increased the penalties for failure to file correct information returns or provide individual statements under either
Section 6055 or Section 6056. These changes are effective for information returns and individual statements
required to be filed or provided after Dec. 31, 2015.
The increased penalty amounts are as follows:
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
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Taxes and Fees under the Affordable Care Act
Per Violation Annual Maximum Annual Maximum for
Employers with ≤$5 Million
Penalty Type
in Gross Receipts
Old New Old New
Amount Amount Amount Amount Old Amount New Amount
General $100 $250 $1.5 million $3 million $500,000 $1 million
Corrected within 30 days $30 $50 $250,000 $500,000 $75,000 $175,000
Corrected after 30 days, $60 $100 $500,000 $1.5 million $200,000 $500,000
but before August 1
Intentional disregard $250* $500* None N/A
*For failures due to intentional disregard of the filing requirement, the penalty will be equal to the greater of either
the listed penalty amount or 10 percent of the aggregate amount of the items required to be reported correctly.
Short-term Relief from Penalties
The final regulations also include short term relief from penalties to allow additional time to develop appropriate
procedures for data collection and compliance with these new reporting requirements. For returns and statements
filed and furnished in 2016 to report offers of coverage in 2015, the IRS will not impose penalties on
reporting entities that can show they made good faith efforts to comply with the information reporting
requirements.
This relief is provided only for incorrect or incomplete information reported on the return or statement, including
SSNs, TINs or dates of birth. No relief is provided for reporting entities that do not make good faith efforts to comply
with these regulations or that fail to timely file an information return or statement.
MORE INFORMATION
Please contact Clarus Benefits Group for more information on the Section 6055 and Section 6056 reporting
requirements.
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2013-2014 Zywave, Inc. All rights reserved.
10/13; BK 5/15
50
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