The IRS has released proposed regulations that implement two significant new reporting requirements for employer group health plans. Employers and insurers that provide minimum essential health coverage must report information to the IRS about the coverage provided to each individual for each month, with a copy of the statement to the individual. Employers with at least 50 full-time employees must report additional information to the IRS, with a copy to each full-time employee, to indicate whether the coverage they offer (if any) is affordable and provides minimum value. Both reporting requirements will become effective in 2015. Reporting entities must develop administrative systems and procedures before the effective date so that they will be able to begin collecting the required information in 2015.
Below is summary of the requirements for private employers sponsoring single-employer plans followed by a discussion of the reporting requirements.
| Section 6055 Returns | Section 6056 Returns | |
| Who Must File | Insurer, for insured plans. Employer, for self-insured plans | Employers with 50 or more full-time employees (regardless of whether or how coverage is provided) |
| Form | 1095-B | 1095-C |
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| Additional Content for Notice to Individual |
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none |
| Due Date for Returns | To the IRS: February 28 (or by March 31, if filing electronically).
To the individual: January 31 |
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Reporting Minimum Essential Coverage (Section 6055 Returns)
Starting in 2014, most individuals must either maintain minimum essential health coverage for themselves and their dependents or pay an excise tax for each month in which they lack minimum essential coverage. This requirement is known as the “individual mandate.”
Section 6055 of the Internal Revenue Code requires employers and insurers that provide minimum essential coverage to file information returns that will allow the IRS to enforce the individual mandate. The proposed regulation implements the section 6055 reporting requirement. We describe below how this reporting requirement applies to employer group health plans; but insurers that provide individual health coverage also must file section 6055 returns.
Which Group Health Plans are Subject to the Reporting Requirement?
Any employer group health plan that provides minimum essential health coverage is subject to the reporting requirement. Almost all employer group health plans (whether insured or self-insured) will provide minimum essential coverage unless they cover only “excepted benefits” such as dental or vision care. Grandfathered health plans, plans that cover only retirees, and plans maintained by small employers (those with fewer than 50 full-time employees) all require section 6055 information returns.
If the plan is a high-deductible health plan (HDHP) combined with a health savings account or health reimbursement account, only the HDHP coverage is reportable (under the rules for insured or self-insured plans, as applicable). A health savings account does not provide minimum essential coverage, and thus is not subject to the reporting requirement. The proposed regulation exempts health reimbursements accounts from the reporting requirement if they supplement minimum essential coverage provided under another plan.
Who Must File the Section 6055 Information Return?
The type of coverage determines which entity is the “reporting entity” responsible for filing the section 6055 information return and providing statements to covered individuals.
If the plan is an employer-sponsored insured plan, the insurer is the reporting entity (except in the case of insured governmental programs, such as Medicare Advantage, where the responsible government agency is the reporting entity).
If the plan is a self-insured plan maintained by a single employer or a single controlled group of employers, each participating employer is the reporting entity for its own employees. For example, if five subsidiaries participate in a single group health plan maintained by their parent company, each subsidiary is responsible for reporting the minimum essential coverage provided to that subsidiary’s employees and their spouses and dependents. The preamble of the regulation explains that one member of the controlled group may assist the other members by filing the section 6055 return and providing individual statements on behalf of all participating employers; but if the entity providing assistance does not discharge the reporting requirement correctly, the penalty will apply to each responsible employer rather than to the entity that provides assistance.
If the plan is a self-insured multiemployer plan, the joint board of trustees is the reporting entity.
If the plan is a self-insured plan maintained by a labor union for its members, the union is the reporting entity.
If the plan is a self-insured multiple employer welfare arrangement (MEWA), each participating employer is the reporting entity for its own employees.
If the plan is a self-insured governmental plan (such as a plan maintained by a state or local government for its own employees), the government employer that maintains the plan may either file the section 6055 return itself or designate another government entity as the reporting entity.
If the program is a government-sponsored program such as Medicare, Medicaid, CHIP, or TRICARE, the government sponsor (generally a state agency rather than HHS, in the case of joint federal-state programs such as Medicaid and CHIP) is the reporting entity.
What Information Must Be Reported to the IRS?
A reporting entity must file an annual information return with the IRS reporting the information listed below for each individual who is enrolled in the employer’s group health coverage. (No report is required for individuals who are eligible for coverage, but who decline to enroll.)
- The name, address, and EIN of the employer, insurer, or other entity required to file the return.
- (For an insured plan) the name, address, and EIN of the employer that sponsors the plan.
- The name, address, and TIN of each covered employee or retiree.
- The name, address, and TIN of each covered spouse or dependent.
- The months during which each individual was covered on any day in the month.
- Any other information specified in forms, instructions, or later guidance.
What Information Must Be Reported to the Individual?
The employer or insurer must provide an individual statement that includes all of the information reported to the IRS concerning each employee or retiree, spouse, and dependent who is enrolled in a plan that provides minimum essential coverage. The individual statement must also include a contact telephone number for the reporting entity and (for insured coverage) a policy number.
Although the statute states that each covered individual must receive the statement, the proposed regulation permits the reporting entity to provide the statement only to the employee or retiree who enrolls a spouse or dependents in the employer’s plan. The reporting entity is not required to provide a separate statement to the spouse or to each dependent; but the employee’s or retiree’s statement must provide the relevant information for each member of the family who is enrolled in minimum essential coverage.
How Will Employers Get TINs For Spouses and Dependents?
The preamble of the regulation recognizes that employers often do not have taxpayer identifying numbers (TINs) for an employee’s spouse or dependents. The proposed regulation requires employers and other reporting entities to make reasonable efforts to collect TINs for all covered individuals. The preamble explains that reporting entities will not be subject to penalties if they request a TIN (but do not receive one) at the spouse’s or dependent’s initial enrollment and they make the same request each of the next two years. If the reporting entity has been unable to get the TIN despite reasonable efforts, it may identify the spouse or dependent by birth date rather than by TIN.
When Is the Return Due?
Although the individual mandate becomes effective in 2014, the Treasury Department has postponed the section 6055 reporting requirement until 2015. Employers and insurers must have systems in place by January 1, 2015, to collect and store the necessary information. The first returns will be due in 2016 (reporting information for 2015).
The section 6055 return must be filed with the IRS by February 28 (or by March 31 if the reporting entity files the form electronically). The individual statement must be provided to the employee or retiree at his or her last known address by January 31. These reporting deadlines apply to fiscal year plans as well as to calendar year plans.
How Will the Return Be Filed?
The section 6055 return will be filed on IRS Form 1095-B (or an authorized substitute form), and will be transmitted to the IRS with a transmittal form, Form 1094-B. These forms are not yet available.
Reporting Large Employer Health Coverage (Section 6056 Returns)
Large employers (those with at least 50 full-time employees) are subject to an excise tax if they fail to offer adequate health coverage to full-time employees and their dependent children. One excise tax applies if the employer does not offer minimum essential coverage to at least 95% of its full-time employees and their dependent children, and at least one full-time employee obtains coverage through an Exchange and receives a premium tax credit. A different excise tax applies if the employer offers minimum essential coverage, but the coverage is not affordable or does not provide minimum value. The second tax applies only with respect to lower-income employees who purchase coverage through an Exchange and receive a premium tax credit. This tax regime is known as the “employer shared responsibility provision” or “employer mandate.”
A lower-income individual who purchases individual health coverage through an Exchange is eligible for a premium tax credit and other forms of financial assistance for a given month only if the individual is not eligible to receive affordable, minimum-value coverage from an employer group health plan for that month, and only if the individual is not actually enrolled in minimum essential coverage (whether or not the coverage is affordable or provides minimum value) for the month. For a review of the premium tax credit rules for lower-income individuals and their family members, refer to our post here.
Section 6056 of the Internal Revenue Code requires large employers to report information about the group health coverage of employees and their dependents that will allow the IRS to enforce the employer mandate and to determine whether employees and their dependents are eligible for the premium tax credit. Large employers also must provide information statements to covered employees to help them determine whether they are eligible for the premium tax credit. The Treasury Department announced in early July that it would postpone the employer mandate and related reporting requirements for a year, until 2015, to give employers and insurers more time to comply with the new reporting rules. The proposed regulation gives large employers their first look at the complex new reporting regime under section 6056.
Which Employers are Subject to the Reporting Requirement?
An employer with at least 50 full-time employees must file the section 6056 information return even if the employer provides no group health coverage to its employees. (For a review of the rules that determine whether an employer meets the 50-employee threshold, refer to our post here.)
The section 6056 information return is in addition to the section 6055 information return described above (although the proposed regulation describes ways in which some of the required information might be combined). Accordingly, if a large employer sponsors a self-insured group health plan that provides minimum essential coverage, the employer must file both information returns.
Who Must File the Section 6056 Information Return?
The large employer must file the section 6056 information return and provide the related statement to full-time employees, regardless of whether the employer’s group health plan (if any) is insured or self-insured. For this purpose, a disregarded entity (such as a single-member LLC) generally is treated as a corporation (as it is for employment tax purposes), so that the disregarded entity (rather than its owner) is subject to the reporting requirement.
As in the case of the section 6055 return, each employer in a controlled group is required to file the return with respect to its own employees. One member of the controlled group may assist other members by filing the section 6056 returns and providing individual statements on their behalf. The entity providing assistance must file a separate return under the EIN of each controlled group member; and if it fails to provide the returns and individual statements correctly, the penalty will apply to the controlled group member. Similarly, a large employer may contract with a third-party administrator to file section 6056 returns and furnish individual statements on the employer’s behalf; but the employer remains liable for penalties if the administrator does not provide the information correctly.
The proposed regulation provides a special reporting method for full-time employees who receive health coverage through a multiemployer plan to which their employer contributes. The administrator of the multiemployer plan can agree to file a section 6056 return and provide individual statements for those full-time employers who participate in the multiemployer plan, while the large employer files the section 6056 return and provides individual statements for its full-time employees who do not participate in the multiemployer plan. In this situation, too, the employer is liable for the penalties if the multiemployer plan administrator does not discharge the reporting requirement correctly.
A special rule similar to the rule for section 6055 returns applies to government employers. A government employer may designate another government entity as the entity responsible for filing the section 6056 return and providing individual statements. A government entity properly designated under this procedure becomes responsible for the reporting requirement (and liable for the penalties if it fails to satisfy the requirement).
What Information Must Be Reported to the IRS?
A large employer must file an annual information return with the IRS for each full-time employee reporting the information listed below.
- The name, address, and EIN of the employer.
- The name and telephone number of the employer’s contact person.
- The calendar year for which the information is reported.
- For each calendar month, the number of the employer’s full-time employees.
- For each calendar month, a certification as to whether the employer offered full-time employees and their dependents an opportunity to enroll in minimum essential coverage.
- The months (if any) for which coverage was available to the employee.
- For each calendar month, the employee’s share of the monthly premium for self-only coverage under the lowest-cost option offered to the employee (if any) that provides minimum value.
- The name, address, and TIN of the full-time employee and the months (if any) during which the employee was covered under an employer health plan.
- Any other information specified in forms, instructions, or later guidance.
The preamble of the proposed regulation explains that the form and instructions for the section 6056 return will require additional information that is not listed in the statute, but that is necessary to administer the employer mandate and the premium tax credit. For example, the IRS expects that the forms will request the following additional information (in some cases through the use of indicator codes similar to the codes used on Form W-2 to distinguish different types of compensation):
- Whether the coverage available to the full-time employee and his or her dependents meets the minimum value requirement of the employer mandate.
- Whether the minimum-value coverage was offered to the employee only, employee and spouse only, employee and dependent children only, or all family members.
- Whether the employer met one of the affordability safe harbors with respect to the employee.
- Whether the employee was offered coverage even though he or she was not a full-time employee.
- Whether the employee was ineligible for coverage during a month because the employee was in a waiting period, was a part-time employee, or was not employed by the employer during that month.
- The total number of employees (part-time as well as full-time), by calendar month.
- Whether the large employer was not conducting business during a month.
- Whether the large employer expects to be subject to the section 6056 reporting requirement in the following year.
- Whether the large employer is a member of a controlled group, and (if so) the name and EIN of each controlled group member.
- Whether the large employer provides health coverage to a full-time employee by contributing to a multiemployer plan.
- If the administrator of the multiemployer plan has agreed to file the section 6056 return on behalf of the large employer, the name, address, and EIN of the administrator.
What Information Must Be Reported to the Individual?
A large employer must provide an individual statement to each full-time employee that includes the employer’s name, address, and EIN and all of the information reported to the IRS concerning the employer group health coverage provided (or not provided) to the employee and his or her family.
When Is the Return Due?
As explained above, the Treasury Department has postponed the employer mandate and the related reporting requirements until 2015. The first section 6056 returns will be due in 2016 (reporting information for 2015); but large employers must have systems in place by January 1, 2015, to collect and store the necessary information.
The due dates for the section 6056 returns are the same as the due dates for the section 6055 returns. The return must be filed with the IRS by February 28 (or by March 31 if the employer files the form electronically), and the individual statement must be provided to the employee by January 31. These reporting deadlines apply to fiscal year plans as well as to calendar year plans.
How Will the Return Be Filed?
The section 6056 return will be filed for each full-time employee on IRS Form 1095-C and will be transmitted to the IRS using Form 1094-C (or authorized substitute forms). These forms are not yet available.
Procedural Rules That Apply to Both Reporting Requirements
Several features of the new reporting requirements apply both to reporting of minimum essential coverage under section 6055 and to reporting by large employers under section 6056.
Electronic Reporting
As is true of other information returns (such as Form 1099), employers that file at least 250 information returns with the IRS must file the returns under section 6055 and section 6056 electronically. Employers that file fewer than 250 information returns are permitted (but not required) to file electronically.
The employer may provide statements to covered individuals electronically only if the recipient consents. These rules are similar to the rules that currently apply if an employer wishes to provide the employee’s copy of Form W-2 electronically. The proposed regulations provide elaborate rules for obtaining consent, withdrawal of consent previously given, changes in hardware or software that might negate consent, and so on. These rules are likely to make electronic delivery of individual statements difficult, if not impossible, for most employers.
Simplified Reporting Requirements
The preambles of both proposed regulations emphasize that the IRS wishes to simplify the reporting requirements to the extent feasible, and request comments on various proposals for streamlining the required reports or combining them with other information statements. The simplified reporting methods would be optional, and in many cases would apply only to limited groups of employees (for example, high-income employees who are probably ineligible for the premium tax credit).
Penalties For Failing to File
The information returns required by sections 6055 and 6056 are subject to the same penalties and relief provisions that apply to other information returns, such as Form W-2. If an employer fails to file the return (or files an incorrect return) and does not correct the error by August 1 of the year in which the original return was due, the penalty is $100 per return, with a maximum of $1,500,000 per calendar year ($500,000 for small businesses) for all returns that the employer failed to file correctly with the IRS. An additional penalty of $100 per statement, with a maximum of $1,500,000 per calendar year ($500,000 for small businesses) applies to all information statements that are not provided (or not provided correctly) to covered individuals. These penalties are indexed for inflation.
The information-reporting penalties are reduced if the employer files a correct return with the IRS or provides a correct statement to the covered individual after the deadline but before August 1. The penalties are waived if the failure was due to reasonable cause, but only if the employer acts in a responsible manner both before and after the failure occurred.