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Q&As clarify information reporting requirements for health care providers

September 15, 2014

IRS has issued 29 questions and answers (Q&As) to help providers of “minimum essential coverage” file information returns for calendar year 2015, beginning in early 2016.

Background. Beginning in 2014, under the Affordable Care Act (ACA), nonexempt individuals have the choice of maintaining “minimum essential coverage” (MEC, as defined in Code Sec. 5000A(f)) or paying an individual shared responsibility payment with their income tax returns. This requirement is generally referred to as the individual mandate. MEC may be health insurance coverage offered in the individual market (such as through an Affordable Insurance Exchange, or “Exchange”), a government-sponsored program, or an employer-sponsored plan. Eligible employer-sponsored coverage is either: (i) a self-insured group health plan under which coverage is offered by or on behalf of an employer to an employee; or (ii) group health insurance coverage offered by or on behalf of an employer to an employee that is: (1) a governmental plan, (2) a plan or coverage offered in the small or large group market within a state, or (3) a grandfathered health plan offered in a group market.

Code Sec. 6055(a) generally requires every health insurance issuer, sponsor of a self-insured health plan, government agency that administers government-sponsored health insurance programs, and other entity that provides MEC to file annual returns reporting information for each individual for whom MEC is provided. An entity filing an information return reporting MEC must furnish a written statement to each individual listed on the return that shows the information that must be reported to IRS for that individual. (Code Sec. 6055(c)(1)) The purpose of this reporting is to allow taxpayers to establish, and IRS to verify, that the taxpayers were covered by MEC and their months of enrollment during a calendar year.

Separate reporting requirements under Code Sec. 6056 apply to “applicable large employers” or ALEs (generally, employers with at least 50 full-time employees, including full-time equivalent employees) subject to the employer mandate. 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.

Code Sec. 6055 and Code Sec. 6056 were both to be effective in 2014, but transition relief was provided in conjunction with the Administration’s delayed implementation of the employer mandate (to 2015 or 2016, depending on the size of the employer). See Weekly Alert ¶  1  03/13/2014 and Weekly Alert ¶  27  03/13/2014 for more details.

New Q&As. The Q&As cover the following topics: (a) Basics of Provider Reporting (Q&As 1-4); (b) Who is Required to Report (Q&As 5-15); (c) What Information Must Providers Report (Q&As 16-19); and (d) How and When to Report the Required Information (Q&As 20-29). Highlights of the Q&As follow.

… Employer filing responsibility. An employer that sponsors an insured health plan (i.e., a health plan that provides coverage by purchasing insurance from a health insurance issuer) will not report as a provider of health coverage under Code Sec. 6055. The health insurance issuer or carrier is responsible for reporting that health coverage. However, if the employer is subject to the employer shared responsibility provisions in Code Sec. 4980H, it is responsible for reporting information under Code Sec. 6056 about the coverage it offers to its full-time employees. (Q&A 8)

RIA observation: During a recent webinar, IRS distinguished the Code Sec. 6055 and Code Sec. 6056 reporting requirements by noting that the Code Sec. 6055 information reporting requirements apply to employees who actually enroll in a health insurance plan, whereas the Code Sec. 6056 information reporting requirements apply to offers of health insurance coverage to full-time employees.

… Combined reporting. An ALE under Code Sec. 4980H that provides self-insured coverage is subject to the reporting requirements of both Code Sec. 6055 and Code Sec. 6056. To streamline and prevent duplication under each reporting requirement, ALEs with self-insured coverage will combine Code Sec. 6055 and Code Sec. 6056 reporting. An ALE with self-insured coverage will report on Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, completing separate sections to report the information required under Code Sec. 6055 and Code Sec. 6056. (Q&A 27)

… Supplemental benefits. A health coverage provider is not required under Code Sec. 6055 to report arrangements that provide benefits in addition to or as a supplement to an arrangement that is MEC. Additionally, no reporting is required under Code Sec. 6055 for the additional or supplemental benefits that are MEC if the primary and supplemental coverages have the same plan sponsor or the coverage supplements government-sponsored coverage such as Medicare. (Q&A 14)

RIA observation: IRS recently released a draft version of Form 1095-C (see Weekly Alert ¶  35  07/31/2014) and its instructions (see Weekly Alert ¶  3  09/04/2014).

… Penalty relief—2015 returns. IRS will not impose penalties on reporting entities for 2015 information returns and employee statements if they can show that they have made a good faith effort to comply with the information reporting requirements. (Q&A 3)

… Potentially applicable penalties—later years. For information returns filed and furnished in 2017 for coverage provided in 2016 and later years, a health coverage provider’s failure to comply with the Code Sec. 6055 reporting requirements may give rise to the following penalties: the penalty under Code Sec. 6721 for failure to file timely information returns, failure to include all the required information, or including incorrect information on the return; and the penalty under Code Sec. 6722 for failure to timely furnish the statement, failure to include all the required information, or including incorrect information on the statement. However, the waiver of penalty and special rules under Code Sec. 6724 and the applicable regs, including abatement of information return penalties for reasonable cause, may apply to certain failures under Code Sec. 6721 or Code Sec. 6722. (Q&A 29)

References: For return requirements for providers of minimum essential coverage, see FTC 2d/FIN ¶  S-3321  et seq.; United States Tax Reporter ¶  60,554  ; TaxDesk ¶  812,314  et seq.; TG ¶  60245  . For return requirements for employers subject to the Code Sec. 6056 information reporting requirements, see FTC 2d/FIN ¶  S-3331  ; United States Tax Reporter ¶  60,564.01  ; TaxDesk ¶  816,301  ; TG ¶  60246  .

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