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IRS issues draft instructions to forms for reporting employee health coverage

IRS has released draft versions of the instructions to Form 1095-A (Health Insurance Marketplace Statement), Form 1095-B (Health Coverage), Form 1095-C (Employer-Provided Health Insurance Offer and Coverage), Form 1094-B (Transmittal of Health Coverage Information Returns), and Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns). The drafts give taxpayers an advance look at how to complete forms that will be used by Affordable Insurance Exchanges and employers to satisfy their health care coverage reporting requirements under the Affordable Care Act (ACA).

Background. Beginning in 2014, under the 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”), an employer-sponsored plan, or a government-sponsored program.

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.

Under Code Sec. 36B(f)(3), an Exchange must report to IRS and taxpayers certain information relating to health plans provided through the Exchange. Specifically, an Exchange must furnish to each “tax filer” or “responsible adult” a written statement showing: (i) the name and address of the credit recipient; and (ii) the information described in Reg. § 1.36B-5(c)(1). Exchanges may, but are not required to, use Form 1095-A for this statement.

Form 1094-B and Form 1094-C will be used by employers subject to the Code Sec. 6056 information reporting requirements. Form 1095-B and Form 1095-C will be used by providers of MEC that are subject to Code Sec. 6055. These forms were issued in draft versions earlier this summer (see Weekly Alert ¶  35  07/31/2014).

Draft instructions released. IRS has now released draft instructions for the above forms. Highlights follow.

… Form 1095-A. The instructions state that the purpose of the form is to “report certain information to the IRS about family members who enroll in a qualified health plan through the Marketplace” and to allow certain individuals “to claim the premium tax credit, to reconcile the credit on their returns with advance payments of the premium tax credit (advance credit payments), and to file an accurate tax return.” It must be furnished by Health Insurance Marketplaces (including State, regional, subsidiary, or Federally-facilitated Marketplaces) to individuals on or before Jan. 31, 2015, for coverage in the 2014 calendar year, and it must be furnished by mail unless the credit recipient affirmatively consents to receipt in an electronic format.

Specific instructions are provided for Part I (Recipient Information—generally, information about the marketplace, recipient, and coverage provided); Part II (Coverage Household—information about each individual covered under the policy); and Part III (Household Information—certain information about premiums and advance credit payments under Code Sec. 36B).

… Forms 1094-C and 1095-C. The instructions begin with a reminder that no employers are required to file these forms for 2014, but that they may be filed voluntarily. The purpose of the forms is, for applicable large employers (ALEs), to report offers of health coverage to, and enrollment in health coverage by, their employees. The forms are also used in determining whether an employer owes payments under Code Sec. 4980H, and whether an employee is eligible for premium tax credits under Code Sec. 36B. Both forms must be filed with IRS (by February 28 if filing on paper, or March 31 if filing electronically, of the year following the calendar year to which the return relates), and Form 1095-C must be furnished to the employee by January 31 of the year following the year to which the return relates. So, for calendar year 2015, Forms 1094-C and 1095-C must be filed with IRS by Feb. 29, 2016 (Mar. 31, 2016, if filed electronically), and Form 1095-C must be furnished to individuals by Feb. 1, 2016. Similar to the Form 1095-A, the Form 1095-C must be furnished by mail unless the recipient of the form affirmatively consents to receive the statement electronically.

Specific instructions for Form 1094-C include those pertaining to information about the employer and the “Designated Governmental Entity” (DGE), if any, filing on the employer’s behalf; ALE member information; and details on the transition relief provided to ALEs for 2014.

Specific instructions for Form 1095-C include those pertaining to information about the employee and ALE member; the employee offer and coverage; Code Sec. 4980H affordability safe harbors; detailed definitions; and types of transition relief available.

… Forms 1094-B and 1095-B. The instructions begin with a reminder that these forms are not required to be filed for 2014, but may be filed voluntarily. The purpose of Form 1095-B is to report information to IRS and taxpayers about individuals who are covered by MEC and thus are not liable for the individual shared responsibility payment. Every person that provides MEC to an individual during a calendar year must file an information return and a transmittal, and most filers will use Forms 1095-B and 1094-B, respectively, for this purpose. The instructions provide descriptions of eligible employer-sponsored plans, government-sponsored programs, and other miscellaneous benefit plans that constitute MEC. The forms must be filed with IRS on or before February 28 (March 31, if filed electronically) of the year following the calendar year of coverage.

Specific instructions for Form 1094-B include those pertaining to basic information about the filer, the relevant contact person, and the number of Forms 1095-B that will be transmitted with the Form 1094-B.

Specific instructions for Form 1095-B include those pertaining to information about the responsible individual (i.e., policy holder), the employer-sponsored coverage or other coverage provider, and covered individuals.

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