hni u: aca update

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ACA ReportingCalendar Year 2016

What Employers Need to Know

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Agenda

• Background on 6055 & 6056– Including updates for 2016

• Objectives of 6055 & 6056• What is Reported and Who Must Comply• When is Reporting Required• How Reporting is Done• Penalties• Questions & Answers





Brief Background

• ACA created new reporting requirements under the Internal Revenue Code (IRC) Sections 6055 and 6056.

• On March 5, 2014, the IRS and Treasury issued final regulations on the IRC §6055 & §6056 reporting requirements. Final forms were issued October of 2016.

• 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 and their dependents.

• 6055 & 6056 are intended to identify individuals who are eligible for premium assistance, based on Federal Poverty Level, access to coverage, unaffordability of coverage and those who are not.

1 Minimum value: A health plan meets this standard if it’s designed to pay at least 60% of the total cost of medical services for a standard population.

2 Affordability: Employer coverage is considered affordable - as it relates to the premium tax credit - if the employee’s share of the annual premium for the lowest priced self-only plan is no greater than 9.66% of W-2 income.





§6055 & §6056 Objectives





Section §6055 Objective


• Section 6055 requires annual reporting to the IRS and “responsible individuals” whether coverage constitutes minimum essential coverage

• This reporting is intended to assist the IRS to enforce the individual mandate penalty under Health Care Reform

• All individuals (with certain exceptions) must be enrolled in health coverage which constitutes minimum essential coverage or pay a penalty

• Taxpayers (responsible individuals) keep the 1095-B with their tax records (change from 2015).

• Section 6055 reporting applies to all employer group health plans regardless of the employer’s size




Section §6056 Objective

• The purpose of the 6056 reporting is to assist the IRS to enforce the employer pay or play penalty and to assist full- time employees determine whether they are eligible for a premium credit





Who Must Comply?





Section §6055 – Who must comply

• If the plan is fully-insured, the insurer will assume this reporting requirement on the employer’s behalf

• If the plan is self-funded, the employer is responsible for the 6055 reporting

• Government agencies that administer government- sponsored health insurance programs and;

• Any other entity that provides minimum essential coverage (MEC)





• Section 6056 reporting is not required with respect to group health plans sponsored by small employers (less than 50 FTE) that are not subject to the pay or play rules.

• Mid-size employers (50 to 99 FTEs) are now subject to the pay or play rules.

• Entities within a controlled-group of entities must complete Section 6056 on an entity-by-entity basis, but an entity may assist other entities within the controlled-group complete Section 6056 reporting

Section §6056 – Who Must Comply





Employer and Plan Type

Type of Reporting Who Reports IRS Transmittal IRS Return Employee Statement

ALE with fully-insured group health plan

6055Health insurance issuer

or carrier 1094-B 1095-B 1095-B

6056 Employer 1094-C 1095-C 1095-C (or alternative)

ALE with self-insured group health plan

covering employees onlyCombined 6055 & 6056 Employer 1094-C 1095-C 1095-C (or alternative)

ALE with self-insured group health plan

covering employees and non-employees (e.g., directors, retirees, or

COBRA qualified beneficiaries)

Employees: Combined 6055 and 6056 Employer 1094-C 1095-C 1095-C (or alternative)

Non-employees: 6055 Employer 1094-B 1095-B 1095-B

Multiemployer plans 6055 Plan sponsor 1094-B 1095-B 1095-B

Small employer with fully- insured group health plan 6055

Health insurance issuer or carrier 1094-B 1095-B 1095-B

Small employer with self- insured group health plan

6055 Employer 1094-B 1095-B 1095-B

Reporting Summary





Calculating Full-time Employees





The sum of the employer’s full-time employees and the employer’s full-time equivalent part time employees is the number used to determine ALE status.

• Full-time Employee:o Averages at least 30 hours of service* per weeko 130 hours of service in a calendar montho 1,560 hours in a calendar year

• Full-Time-Equivalent (FTE) Employee:o a combination of employees, each of whom individually is not a full-time employee because

they are not employed on average at least 30 hours per week, but who, in combination, are counted as the equivalent of a full-time employee

* Final regulations published in February 2014 prescribe which hours must be included. Generally, “hours of service” include any hour for which an employee is paid or entitled to payment when duties are not performed such as vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence.

Full-time and Full-time Equivalent Employees





Measurement Methods

The IRS in its final regulations on 6056…“The final regulations reiterate that the requirements for use of the look-back

measurement method and the monthly measurement method prescribe minimum standards for the identification of full-time employees.”

Four types of employee for ACA purposes: FT, PT, Seasonal & Variable• Determined at the time of hire

Monthly Measurement vs. Look-Back Measurement• Monthly Measurement Method

– Each month the employer will track and measure the employee’s hours of service– For each month the employer will determine if the employee is eligible to enroll in coverage that

particular month• Processes continues throughout the calendar year for each month

• Look-Back Measurement Method– Employer establishes a look-back period (3 -12 months) to measure employee hours to determine

eligibility for health coverage for the entirety of the subsequent stability period• Standard: used to track hours for ongoing employees• Initial: used to track hours for newly hired variable hour employees





Months 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

12 Month Standard Ongoing Standard Measurement Period 1 Standard Measurement Period 21 Month Admin Admin Ad 1 Ad212 Month Stability Stability Stability Period 1

Measurement Methods (Examples)Ongoing 12-1-12

intitial Months 1 2 3 4 5 6 7 8 9 1 0 11 12

1 3 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

Assumes Spli t admin Measure Intitial Measurement Periodw here measure start Adm in I Adpost start date PT Stability PT Stability Standard Period 2 would determine next classificationcoincides w ith start FT Stability FT Stability Standard Period 2 would determine next classificationof standard period

Measure Intitial Mea surement PeriodAdm in I AdPT Stability PT Stability Standard Period 2 would determine next classificationFT Stability FT Stability Standard Period 2 would determine next classification

Measure Intitial Mea surement Per iodAdm in I AdPT Stability PT Stability Standard Period 2 would determine next classificationFT Stability FT Stability Standard Period 2 would determine next classification

Measure Intitial Mea surement PeriodAdm in I AdPT Stability PT Stability Standard Period 2 would determine next classificationFT Stability FT Stability Standard Period 2 would determine nex

Ongoing1 2I1I12 structure1 2 M ont h Standard Ongoing Standard Measurement Period 1 Standard Mea surement Period 2 Standa rd Measurement Period 31 M ont h Adm in Adm in Ad 1 Ad2 Ad 31 2 M ont h Stabil ity Stabil ity Stabil ity Period 1 Stabil ity Period 2

The intitial structure assumes a split Administ rative period where from start date to beginning of measurement period is part of t he initial admin periodAn employee is considered onIgoing and is to be measured in the first standard measurement period post Start Date

This mea ns there can m e an overlap of the FT initial stabil ity period and the standard stabil ity periodIf the employee is determined to be FT in the standard measurement period, coverage would be continuous beween the start of the initial stabil ity period and the end of the standard stabi lity period

Initial 12-1-12

Mont hs 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Ongoing34146/3 structure Ongoing Standard Period 1 Standard Period 2 Standard Period 3 Standard Period 4 Standard Period 5 Standard Period 63 M ont h Standard Admin A d 1 A d 2 A d 3 A d 4 A d 5 A d 61 M ont h Admin Stability PT PT Stability Period 1 PT Stability Period 2 PT Stability Period 3 PT Stability Period 4 PT Stability Period 5 PT Stability Period 6

6 M ont h Stability Stability FT FT Stability Period 1 FT Stability Period 3 FT Stability Period 5FT Stability Period 2 FT Stability Period 4 FT Stability Period 6

Ongoing 3-1-6-3





When Must Reporting be Done?





Important §6055 & §6056 Deadlines


Deadlines for 2016 Plan Year Reporting:

• Form 1095x to Employees:o January 31 to the individual (i.e. 1/31/17 for 2016)

• Form 1094x and copies of 1095x to IRS• February 28 if filed on paper• March 31 if filed electronically

✓ ALE’s with 250 employees or more are required to file electronically




Important §6055 & §6056 Deadlines


Expect things to go back to the original plan established in 2015:

• The IRS set deadlines with the ability to apply for employers to request extensions on an individual employer basis.

• To apply for an extension to file information return forms with the IRS, submit a Form 8809 on or before the due date of the return for an automatic extension.

• This form does not require a signature. For an additional 30-day extension, the filer or an authorized agent must sign the form




How is the Reporting Done?





• 6055 Reporting– Form 1095-B or another Form designated by the IRS

(Employee Statement)– Form 1094–B (Transmittal Form)


Reporting Forms




6056 Reporting - Form 1094-C

A transmittal form to be filed with the IRS (along with the employee statements) that requires the following information:• Part I:

– Identifying information about the employer submitting Forms 1094-C and 1095-C

• Part II:– Whether the Form 1094-C is the “authoritative transmittal”– Whether the employer is part of a controlled-group of entities– Whether the employer qualifies for “transitional relief” from the pay or play penalty or

whether the employer qualifies for alternative simplified reporting

– Line 22 Box “B” “Qualifying Offer Method Transition Relief” which was available in 2015 is no longer available and the box is marked “Reserved”


Reporting Forms




6056 Reporting - Form 1094-C (continued)Part III:– Which months the employer offered minimum essential coverage– The number of full-time employees in each calendar month– The total number of employees in each calendar month– Whether the employer is part of a controlled-group of entities in each calendar month– Whether the employer qualifies for transitional relief from the pay or play penalty in each

calendar month

Part IV:– The names and EINs of each entity that was in the same controlled- group of entities at

any point in the calendar year


§6055 & §6056 Reporting Forms




6056 Reporting - Form 1095-CAn “employee statement” to be provided to each full-time employee and requires the following information:The following language was added to the header of the 2016 form

“Do not attach to your tax return. Keep for your records.”Part I:– Identifying information about the full-time employee or responsible individual– Identifying information about the employer

Part II:– Information about the employer’s offer of coverage– Amount of the employee’s share of the lowest-cost monthly premium for self-only minimum essential

coverage– Whether the employee was enrolled in coverage or, if not, an indicator code regarding why the employee was

not enrolled in coverage

Part III:– Identifying information about any other covered individuals (plan sponsors of fully-insured plans are not

required to complete this section) – Note: Non-employees enrolled in a self-funded employer’s health plan may need to be issued a 1095-B

• Clarification of Coding for COBRA continuation coverage and post employment coverage. When an employee terminates employment, the months following the termination should not reflect an offer of coverage from the ALE Member as the employee is no longer a full-time employee for whom the ALE Member is liable to make an ACA offer of coverage


§6055 & §6056 Reporting Forms



1095-C



Form 1095-C



Line 14 “Code Series 1” for each month

1A. Qualifying Offer: Minimum essential coverage providing minimum value offered to full-time employee with employee contribution for self-only coverage equal to or less than 9.66% mainland single federal poverty line (9.69% for 2017) and at least minimum essential coverage offered to spouse and dependent(s). This code may be used to report for specific months for which a Qualifying Offer was made, even if the employee did not receive a Qualifying Offer for all 12 months of the calendar year. However, an employer may not use the Alternative Furnishing Method for an employee who did not receive a Qualifying Offer for all 12 calendar months.

1B. Minimum essential coverage providing minimum value offered to employee only.

1C. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) (not spouse).

1D. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to spouse (not dependent(s)).

1E. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse.



Line 14 “Code Series 1” for each month (cont.)

1F. Minimum essential coverage NOT providing minimum value offered to employee; employee and spouse or dependent(s); or employee, spouse and dependents.

1G. Offer of coverage to employee who was not a full-time employee for any month of the calendar year (which may include one or more months in which the individual was not an employee) and who enrolled in self-insured coverage for one or more months of the calendar year.

1H. No offer of coverage (employee not offered any health coverage or employee offered coverage that is not minimum essential coverage, which may include one or more months in which the individual was not an employee).

1I. Reserved


1J. Code 1J is used on line 14 of form 1095-C when an employee was offered coverage for all days of the month which:

– Provided minimum essential and minimum value to the employee, and– Provided at least minimum essential coverage to their spouse that was a conditional offer, but– Did not provide coverage to the dependents of the employee

1K Code 1K is used on line 14 of form 1095-C when an employee was offered coverage for all days of the month which:

– Provided minimum essential and minimum value to the employee, and– Provided at least minimum essential coverage to their spouse that was a conditional offer, but– Did provide coverage to the dependents of the employee

These codes will be used when an ALE Member makes a “conditional” offer of coverage to a spouse that imposes one or more reasonable objective conditions on the offer of coverage. e.g. an offer of coverage that is available to a spouse only if the spouse certifies he/she does not have access to health coverage from another employer, is treated as an offer of coverage to the spouse for reporting purposes only. In general, this will not affect the spouse’s eligibility for premium subsidy for Marketplace coverage if the spouse did not meet the condition and therefore did not have an actual offer of coverage.


Line 14 “New Codes” for each month (cont.)



Line 16 “Code Series 2” for each month

2A. Employee not employed during the month. Enter code 2A if the employee was not employed on any day of the calendar month. Do not use code 2A for a month if the individual was an employee of the employer on any day of the calendar month. Do not use code 2A for the month during which an employee terminates employment with the employer.

2B. Employee not a full-time employee. Enter code 2B if the employee is not a full-time employee for the month and did not enroll in minimum essential coverage, if offered for the month. Enter code 2B also if the employee is a full-time employee for the month and whose offer of coverage (or coverage if the employee was enrolled) ended before the last day of the month solely because the employee terminated employment during the month (so that the offer of coverage or coverage would have continued if the employee had not terminated employment during the month). Also use this code for January 2015 if the employee was offered health coverage no later than the first day of the first payroll period that begins in January 2015 and the coverage offered was affordable for purposes of the employer shared responsibility provisions under section 4980H and provided minimum value.

2C. Employee enrolled in coverage offered. Enter code 2C for any month in which the employee enrolled in health coverage offered by the employer for each day of the month, regardless of whether any other code in Code Series 2 (other than code 2E) might also apply (for example, the code for a section 4980H affordability safe harbor). Do not enter 2C in line 16 if code 1G is entered in the All 12 Months Box in line 14 because the employee was not a full- time employee for any months of the calendar year. Do not enter code 2C in line 16 for any month in which a terminated employee is enrolled in COBRA continuation coverage (enter code 2A).

2D. Employee in a section 4980H(b) Limited Non-Assessment Period. Enter code 2D for any month during which an employee is in a Limited Non- Assessment Period for section 4980H(b). If an employee is in an initial measurement period, enter code 2D (employee in a section 4980H(b) Limited Non- Assessment Period) for the month, and not code 2B (employee not a full-time employee). For an employee in a section 4980H(b) Limited Non-Assessment Period for whom the employer is also eligible for the multiemployer interim rule relief for the month, enter code 2E (multiemployer interim rule relief) and not code 2D (employee in a Limited Non-Assessment Period).



Line 16 “Code Series 2” for each month (cont.)

2E. Multiemployer interim rule relief. Enter code 2E for any month for which the multiemployer arrangement interim guidance applies for that employee, regardless of whether any other code in Code Series 2 (including code 2C) might also apply. This relief is described under Offer of Health Coverage in the Definitions section of these instructions.

2F. Section 4980H affordability Form W-2 safe harbor. Enter code 2F if the employer used the section 4980H Form W-2 safe harbor to determine affordability for purposes of section 4980H(b) for this employee for the year. If an employer uses this safe harbor for an employee, it must be used for all months of the calendar year for which the employee is offered health coverage.

2G. Section 4980H affordability federal poverty line safe harbor. Enter code 2G if the employer used the section 4980H federal poverty line safe harbor to determine affordability for purposes of section 4980H(b) for this employee for any month(s).

2H. Section 4980H affordability rate of pay safe harbor. Enter code 2H if the employer used the section 4980H rate of pay safe harbor to determine affordability for purposes of section 4980H(b) for this employee for any month(s). Note. Codes 2F through 2H: Although employers may use the section 4980H affordability safe harbors to determine affordability for purposes of the multiemployer arrangement interim guidance, an employer eligible for the relief provided in the multiemployer arrangement interim guidance for a month for an employee should enter code 2E (multiemployer interim rule relief), and not a code for the section 4980H affordability safe harbors (codes 2F, 2G, or 2H).

2I. Non-calendar year transition relief applies to this employee. Enter code 2I if non-calendar year transition relief for section 4980H(b) applies to this employee for the month. See the instructions later under Section 4980H Transition Relief for 2015 and 2015 Section 4980H(b) Transition Relief for Employers with Non-Calendar Year Plans (Form 1095-C, line 16, code 2I), for a description of this relief.

Leave blank if code does not apply




1094-C




• Transition relief (50-99 Transition Relief and 100 or more Transition Relief) is applicable only if the ALE Member, or any member of an ALE Member’s Aggregated ALE Group offers coverage under a health plan with a plan year beginning on a date other than January 1 (a non-calendar year plan year), and only with respect to calendar months in 2016 that fall within the plan year that began in the 2015 calendar year (the 2015 plan year).

• If an ALE Member, or different members in an Aggregated ALE Group, offer coverage under more than one health plan with different plan years, the transition relief applies through the last day of the latest of those plan years, for all ALE Members in the Aggregated ALE Group, if applicable.

Section 4980(h) Relief



• To be eligible to use the 98% Offer Method, an employer must certify that, taking into account all months during which the individuals were employees of the ALE Member and were not in a Limited Non-Assessment Period, the ALE Member offered, affordable health coverage providing minimum value to at least 98% of its employees for whom it is filing a Form 1095-C employee statement, and offered minimum essential coverage to those employees’ dependents.

• If an ALE member uses the 98% offer method, it is not required to complete the “Section 4980H Full-Time Employee Count for ALE Member” in Part III, column (b)

98% Offer Method




Penalties





§6055 & 6056 - Penalties

• Failure to file correct information return (§6721)• $260 for each return

• Failure to file correct payee information (§6722)• $260 for each payee

The annual cap on penalties doubled from $1,500,000 to $3,193,000. In the event a failure to file is due to intentional disregard, the new penalty is $260 and no annual cap applies.

Failure to file a Form 1095-C with the IRS and a failure to furnish the same Form 1095-C to the employee will result in two penalties of $260 each, or $520 per affected employee.

• There was a good faith standard for imposing 2015 reporting penalties for incorrect or incomplete filings....NOT for 2016.





• §4980H(a) - Employer must offer coverage to 95% of full- time employees or potentially pay a “no coverage” penalty

• §4980H(b) - Employer must offer affordable coverage to full- time employees or potentially pay an “affordability” penalty

Play or Pay Penalties





Play or Pay Penalties, Cont.

• No-offer Penalty• ALE member fails to offer health coverage to 95% its full-time employees (and

their dependents).• On an annual basis, the penalty equals $2,160 ($2,260 in 2017) X (multiplied)

the # of full-time employees employed by the ALE (minus the first 30)

• Unaffordable/inadequate Coverage Penalty• ALE member offers medical coverage that is unaffordable or inadequate (ex:

does not provide minimum value) and one or more of its full-time employees buys health insurance on an exchange with premium assistance.

• On an annual basis, the penalty equals $3,240 ($3,390 in 2017) X (multiplied) the # of the ALE’s full-time employees who are getting premium assistance.





IRS Responses





IRS Response to Filing

1. Accepted with No Errors Receipt ID: 1095C-16-12345678

2. Accepted with Errors Receipt ID: 1095C-16-23456789• TIN Validation Failed

• Ex. David Brach

3. Rejected Submission• TIN Validation Failed for ALE Member's EIN





Addressing Filing Errors





Errors discovered by the EmployerIdentified errors must be corrected as soon as possible after they are discovered. Penalties may apply if an employer fails to correct information returns or furnish corrected recipient statements. Such errors may be discovered by the employer or by form recipients (i.e., full-time employees or covered individuals) who report such errors to the employer.

Prior to filing with the IRS• The employer must issue a fully corrected 1095-C or 1095-B to the employee and write

“CORRECTED” on the new form (rather than marking the CORRECTED checkbox).

After filing on paper with the IRS• 1094-C (Authoritative Transmittal only): The employer must file a standalone, fully completed

Form 1094-C that includes the correct information and enter an “X” in the CORRECTED checkbox.

• 1095-C and 1095-B: The employer must issue a fully corrected 1095 to the IRS and enter an “X” in the CORRECTED checkbox. The employer should also file a Form 1094 transmittal with the corrected 1095-C; however, the employer should not mark the “CORRECTED” checkbox on the Form 1094, and the Form 1094 should not be marked as an authoritative transmittal. The employer must furnish the employee or covered individual a copy of the corrected Form 1095.

ADDRESSING ERRORS





Taxpayer ID Number Collection• Recently proposed IRS regulations clarify the steps employers with self-insured health plans must

take to collect and report the taxpayer identification number (TIN) of covered individuals. For individuals, the TIN is the social security number. The TIN reporting is intended to allow individuals to determine, and the IRS to verify, the individuals who were covered by minimum essential coverage. An information reporting penalty may be waived if the failure to collect a TIN is not due to willful neglect, and despite acting in a responsible manner the employer was unable to obtain and report the required information. Under the newly proposed regulations, the penalty for failure to timely report a proper TIN may be avoided if an employer takes the following steps:

– The TIN is requested as part of the application for new health coverage or to add an individual to existing coverage;

– If the TIN is not received, the TIN is requested again no later than 75 days after the date the employer received a substantially complete application for coverage (or if coverage is retroactive, no later than 75 days after a determination of retroactive coverage is made); and

– If the TIN is not received as a result of the second solicitation, the TIN is requested a third and final time by December 31 of the year following the year in which the employer received a substantially complete application for coverage.

• After taking these steps, there is no further obligation to request the TIN, and the employer reports the covered individual’s date of birth in place of the TIN.

ADDRESSING ERRORS





Preparing for 2016 Reporting





Preparing for 2016 ACA Reporting

• Starting in 2016, all organizations with 50 or more full-time employees or equivalents must insure 95 percent of their full-time employees to avoidliability under the ACA's shared responsibility provisions and the resulting penalties.

– It's not 95 percent (average) for the year, it's 95 percent for each one of the months If an employer had a month where they were below 95 percent, they are exposed.

• Employers that started 2016 below the 95 percent coverage threshold, expecting to ramp up, may be in for a surprise this year if they're not paying attention to that - potentially facing penalties for the months when they were below the threshold, triggered when uncovered full-time employeessought subsidized coverage through the ACA's Health Insurance Marketplace.

• The IRS is going to ask for your payroll and benefits data, to determine whether the indicator codes used on Form 1095-C are accurate. With a 70 percent threshold (2015), that was a lot easier to get by with than 95%





Preparing for 2016 ACA Reporting

• Your 2016 ALE status is based on your workforce hours in 2015

• Are you tracking hours of service for variable hour employees to determine if they should be offered coverage.

• Did you receive exchange subsidy notices? Did you respond/appeal?

• Audit of Employee TIN’s if there were errors or if you hired new staff

• Due date for forms is 1/31/2017– Have you begun to process files for reporting?– Have you selected a vendor for ACA reporting if you are not self reporting?





Questions and Answers




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