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Final regs ease reporting by applicable large employers on health insurance coverage

March 7, 2014

T.D. 9661, 03/05/2014, Reg. § 301.6056-1, Reg. § 301.6056-2

IRS has issued final regs that provide general and alternative reporting methods to employers that are subject to the Code Sec. 6056 information reporting requirements (generally, employers with at least 50 full-time employees, including full-time equivalent employees). Code Sec. 6056 requires these employers to report to IRS information on the health care coverage (if any) that they offered to full-time employees and to furnish related statements to their employees.

For recent final regs explaining the reporting requirements for minimum essential coverage providers, see ¶ 1.

Background. Code Sec. 6056 was added to the Code by the Patient Protection and Affordable Care Act (ACA; P.L. 111-148). Code Sec. 6056 requires annual information reporting by applicable large employers relating to the health insurance that the employer offers (or does not offer) to its full-time employees. Code Sec. 6056 also requires those employers to furnish related statements to their employees. The information that the employers report allows IRS to administer the Code Sec. 4980H employer shared responsibility provisions and allows their employees to determine whether, for each month of the calendar year, they may claim on their individual tax returns a Code Sec. 36B premium tax credit.

In July of 2013, IRS issued Notice 2013-45, 2013-31 IRB 116, in which it provided transition relief for 2014 from the Code Sec. 6056 information reporting requirements, as well as the Code Sec. 6055 information reporting requirements relating to the Code Sec. 5000A individual shared responsibility provisions and the Code Sec. 4980H employer shared responsibility provisions (see Weekly Alert ¶  4  07/18/2013).

In September of 2013, IRS issued proposed regs covering the Code Sec. 6056 requirements. See Weekly Alert ¶  7  09/12/2013.

In February of 2014, IRS issued final Code Sec. 4980H regs that delayed the applicability of the employer shared responsibility provisiosn to mid-sized employers (i.e., those with between 50 and 99 full-time employees) until 2016, if the employer met certain requirements (see Weekly Alert ¶  4  02/13/2014, Weekly Alert ¶  38  02/13/2014, and Weekly Alert ¶  22  02/13/2014.

Final regs. Under the final regs, an applicable large employer member (ALE member) is any person that is an applicable large employer or a member of an aggregated group (under Code Sec. 414(b), Code Sec. 414(c), Code Sec. 414(m) or Code Sec. 414(o)) that is determined to be an applicable large employer. The Code Sec. 6056 filing and statement furnishing requirements apply on a member-by-member basis to each ALE member, even though the determination of whether an entity is an applicable large employer is made at the aggregated group level. (T.D. 9661, 03/05/2014, Reg. § 301.6056-1(b))

Under the final regs, only ALE members with full-time employees are subject to the Code Sec. 6056 filing and statement furnishing requirements (and only with respect to their full-time employees). Generally, the ALE member providing the reporting is the common law employer. An ALE member that is a qualified subchapter S subsidiary or an entity described in Reg. § 301.7701-2(c)(2)(i) (collectively, a disregarded entity) is treated as an entity separate from its owner for purposes of Code Sec. 4980H and Code Sec. 6056 for periods after Dec. 31, 2014. Accordingly, the Code Sec. 6056 reporting requirements apply to an ALE member that is a disregarded entity, and not to its owner. (T.D. 9661, 03/05/2014, Reg. § 301.6056-1(a))

General reporting method. The final regs provide that a separate return is required for each full-time employee, accompanied by a single transmittal form for all of the returns filed for a given calendar year. The return can be made by filing Form 1094-C (a transmittal form) and Form 1095-C (an employee statement). Alternatively, the Code Sec. 6056 return may be made by filing other form(s) designated by IRS or a substitute form.

Under the general Code Sec. 6056 reporting rules, each ALE member must file a Code Sec. 6056 return with respect to its full-time employees. A separate return is required for each full-time employee, accompanied by a single transmittal form for all of the returns filed for a given calendar year. The final regs provide a single combined form for reporting the information required under both Code Sec. 6055 and Code Sec. 6056 for use by all ALE members.

The information to be reported to IRS is described in Reg. § 301.6056-1(d). To minimize cost and ease the administration of the reporting, the final regs do not require the reporting of: (1) the length of any permissible waiting periods under Code Sec. 4980H; (2) the employer’s share of the total allowed costs of benefits provided under the plan; (3) the monthly premium for the lowest-cost option in each of the enrollment categories (such as self-only coverage or family coverage) under the plan; and (4) the months (if any) during which any of the employee’s dependents were covered under the plan.

Every ALE member required to file a Code Sec. 6056 return has to furnish a Code Sec. 6056 employee statement to each of its full-time employees that includes the name, address and employer identification number (EIN) of the ALE member and the information required to be shown on the return with respect to the full-time employee. This statement doesn’t have to include a copy of the transmittal form that accompanies the returns. The regs provide that the employee statement may be made by furnishing a copy of the Code Sec. 6056 return on Form 1095-C (or another form IRS designates) or a substitute employee statement. (Reg. § 301.6056-1(f))

Filing deadlines. The final regs provide that Code Sec. 6056 returns must be filed with IRS annually, no later than February 28 (March 31 if filed electronically) of the year immediately following the calendar year to which the return relates—i.e., the same filing schedule applicable to Forms W-2 and 1099. Due to the reporting postponement under Notice 2013-45, the first Code Sec. 6056 returns required to be filed are for the 2015 calendar year and must be filed no later than Mar. 1, 2016 (because Feb. 28, 2016 is a Sunday), or Mar. 31, 2016, if filed electronically. (Reg. § 301.6056-1(e))

Under the final regs, the Code Sec. 6056 employee statements must be furnished annually to full-time employees on or before January 31 of the year immediately following the calendar year to which the employee statements relate. (Reg. § 301.6056-1(g)) Thus, the first employee statements (i.e., for 2015) have to be furnished no later than Feb. 1, 2016 (because Jan. 31, 2016 is a Sunday). Accordingly, a reporting entity isn’t subject to penalties if it first reports beginning in 2016 for 2015 (including the furnishing of employee statements).

Electronic reporting. The final regs allow electronic furnishing of Code Sec. 6056 employee statements if notice, consent, and hardware and software requirements modeled on existing rules are met. (Reg. § 301.6056-2) The final regs require electronic filing of Code Sec. 6056 information returns (Forms 1094-C and 1095-C), except for an ALE member filing fewer than 250 returns under Code Sec. 6056 during the calendar year. Only Code Sec. 6056 returns are counted in applying the 250 return threshold. (Reg. § 301.6011-2)

Simplified reporting. IRS has provided simplified alternatives to reporting monthly, employee-specific information. An employer is allowed to use different alternative reporting methods for different employees at the employer’s election, as specified in forms and instructions. Applicable large employers with at least 50 full-time employees but fewer than 100 full-time employees (including full-time equivalent employees) that qualify for the Code Sec. 4980H transition relief for 2015 (in the case of any non-calendar plan year that begins in 2015, the portion of the 2015 plan year that falls in 2016) still report under Code Sec. 6056 for 2015 in accordance with the final regs.

The simplified reporting methods are:

(1) Certification of qualifying offer. For employees who receive qualifying offers for all 12 months of the year, employers certifying to this can report only the names, addresses, and taxpayer identification numbers (TINs) of those employees and the fact that they received a full-year qualifying offer. A qualifying offer is an offer of minimum value coverage that provides employee-only coverage at a cost to the employee of no more than about $1,100 in 2015 (9.5% of the Federal Poverty Level), combined with an offer of coverage for the employee’s family. Employers must also give the employees a copy of that simplified report or a standard statement indicating that the employee received a full-year qualifying offer.

For employees who receive a qualifying offer for fewer than all 12 months of the year, employers will be able to simplify reporting to IRS and to employees for each of those months by simply entering a code indicating that the qualifying offer was made. (Reg. § 301.6056-1(j)(1))

(2) Reporting without separate identification of full-time employees. Under a phase-in of the simplified option, employers certifying that they have made a qualifying offer to at least 95% of their full-time employees (plus an offer to their families) can use the simplified, streamlined reporting method for their entire workforce, including for any employees who do not receive a qualifying offer for the full year. The employers can provide employees with standard statements relating to their possible eligibility for premium tax credits. (Reg. § 301.6056-1(j)(2))

Applicability date. The regs apply for calendar years beginning after Dec. 31, 2014. Entities will not be subject to penalties for failure to comply with the Code Sec. 6056 information reporting provisions for 2014 (including the provisions requiring the furnishing of employee statements in 2015 with respect to 2014). Thus, a reporting entity will not be subject to penalties if it first reports beginning in 2016 for 2015 (including the furnishing of employee statements). (Reg. § 301.6056-1(m), Reg. § 301.6056-2(b)) However, IRS encourages taxpayers to voluntarily comply with Code Sec. 6056 information reporting for 2014.