IRS Issues Proposed Rules on Employer Reporting Requirements under ACA

The U.S. Treasury Department and Internal Revenue Service have released two new proposed rules governing employer reporting requirements under the Affordable Care Act (ACA).  The first rule would implement Section 6055 of the Internal Revenue Code, added by the ACA, which outlines minimal essential coverage reporting obligations for insurers, self-insuring employers, and other parties that provide health coverage. Another rule would implement Section 6056 of the Code, which sets forth information reporting requirements for certain large employers regarding the health coverage offered to their full-time employees. In July, the Treasury Department announced that it was postponing these reporting requirements as well as the “employer mandate” until January 2015. 

According to the first proposed rule, Information Reporting of Minimum Essential Coverage, the information provided under section 6055 “will allow taxpayers to establish and the IRS to verify that the taxpayers were covered by minimum essential coverage and their months of enrollment during a calendar year.”  Entities that fail to comply with these reporting requirements will be subject to penalties. IRS Notice 2013-45, issued after the Treasury Department announced the reporting delay, provides as transition relief that section 6055 information reporting will be optional for 2014.  Accordingly, the IRS will not impose penalties for failure to timely and accurately report under section 6055 for coverage in 2014, although it is encouraging voluntary reporting.

With respect to employer-sponsored insured group health plans, the proposed regulations provide that health insurance issuers are generally responsible for reporting under section 6055 for all insured coverage.  In addition, the proposal allows entities to use third parties to facilitate filing returns and furnishing statements to comply with reporting requirements, although potential liability for noncompliance would not be transferred in this instance. The proposed regulations provide that sponsors of self-insured health coverage are responsible for reporting under section 6055. The proposed regulations identify the employer as the plan sponsor and reporting entity for a self-insured group health plan established or maintained by a single employer. In addition, proposed regulations identify, the joint board of trustees for a multiemployer plan and the reporting entity.

Commenters suggested that applicable large employers with self-insured health plans that must report under both sections 6055 and 6056 should be allowed to combine that reporting.  The rules for section 6055 reporting in the proposed regulations do not assume full combined reporting under sections.  However, the IRS contends that they reflect other means of avoiding duplication and simplifying reporting. The agency is seeking comment on a proposal to allow “applicable large employers with self-insured plans that provide mandatory, minimum value coverage to employees, and offer that coverage to spouses and dependents, all with no employee contribution, to forgo providing section 6056 statements to those covered employees.”  Also under consideration is a proposal to allow employers in this situation to file and furnish only the return required under section 6055 and include a code on the employees’ Forms W-2.  According to the proposal, reporting entities must file the return and transmittal form on or before February 28 (or March 31 if filed electronically) of the year following the calendar year in which they provided minimum essential coverage.

As discussed in the second proposed rule, Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer-Sponsored Plans, section 6056 requires large employers (those with 50 or more full-time or full-time equivalent employees) to furnish the IRS with information about their compliance with ACA’s shared responsibility provisions regarding the type of coverage offered to employees.  The new provision also requires those employers “to furnish related statements to employees so that employees may use the statements to help determine whether, for each month of the calendar year, they can claim on their tax returns a premium tax credit.”  

The proposed regulations discuss in detail the content, manner, and timing of the information to be reported to the IRS.  The employer must report information including: a certification as to whether the employer offered to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage by calendar month; (3) the number of full-time employees for each month during the calendar year; (4) for each full-time employee, the months during the calendar year for which coverage under the plan was available; (5) the employee’s share of the lowest cost monthly premium (self-only) for coverage providing minimum value and (6) the name, address, and taxpayer identification number of each full-time employee during the calendar year and the months, if any, during which the employee was covered under an eligible employer sponsored plan. Notably, the proposal does not require the reporting of the length of any waiting period, the employer’s share of the total allowed costs of benefits provided under the plan (However, whether the employer-sponsored plan provides minimum value coverage is relevant information), 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, or the months, if any, during which any of the employee’s dependents were covered under the plan. 

The agencies claim that in an effort “to simplify and streamline” these reporting requirements, the agencies anticipate that certain information reporting regarding full-time employees “will be reported to the IRS, and furnished to the full-time employee, through the use of a code rather than by providing specific or detailed information.” Employers required to file a section 6056 return must furnish a statement to each of its full-time employees that includes the information required to be shown on the section 6056 return with respect to the full-time employee. The IRS is considering whether such information could be furnished on the Form W-2.

Comments on both of these proposals are due on or before November 8, 2013.  Information on how to submit comments can be found in the proposed rules.  The IRS has also scheduled public hearings to discuss these rules on November 18 and 19, 2013, at 10 a.m. ET.

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Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.