Internal Revenue Code section 6056 requires applicable large employers (“ALEs”) to report certain details about the group health plan coverage they offer to full-time employees annually in a similar manner as wages are reported on Forms W-2. Very recently, the IRS issued the final versions of Forms 1094-C (the ALE’s summary report of health plan coverage to the IRS) and 1095-C (the ALE’s reports to full-time employees and persons enrolled in health plan coverage), along with instructions to these Forms. The IRS also published final Form 1094-B and 1095-B, the Forms for reporting by health insurance carriers and self-funded plans required under Code section 6055. The forms and instructions contain several requirements that ALEs and certain other employers will find surprising and often difficult to administer.
As an initial matter, it is extremely important that ALEs both recognize the circumstances under which they are required to comply with the ACA’s reporting requirements and put into place the operational measures to assure their Forms 1094-C and 1095-C are filled out correctly and completely. It is the ALE who is responsible for the Form 1094-C and 1095-C reports, not the health insurance carrier or plan administrator. It is the ALE who will be liable for tax penalties if the Forms are either not submitted to the IRS and employees or are erroneous.
All employers who have 50 or more full-time plus full-time equivalent employees must report on Forms 1094-C and 1095-C for 2015, whether or not they have below 100 employees and are entitled to the transition relief that renders them ineligible for ACA penalties until 2016. The information an ALE must put together in order to complete the required forms includes the identities of employees who were offered coverage; the identities of individuals covered by the ALE’s health plan by month; the type of coverage chosen; the price of coverage; and the affordability safe harbor relied upon by the ALE. ALEs who wait until the end of the year to commence gathering and organizing the data needed for reporting will find themselves scrambling to get Forms out to full-time employees and plan participants by the February 1, 2016 deadline.
Code Section 4980H also includes a provision under which companies that have a common owner (or are otherwise generally related) are combined and treated as a single employer.1 This “controlled group” of companies must be combined for purposes of determining whether they collectively employ at least 50 FTEs (for the remainder of this page, the term FTE will refer to the sum of full-time employees and full-time equivalent employees). If the combined total meets the 50 FTE threshold, then each separate company shall be considered an ALE subject to the ACA’s Employer Shared Responsibility provisions, even those companies that individually do not employ enough employees to meet the ALE threshold on their own.
Penalties for failing to submit correct reports to the IRS and to covered individuals are $250 per report, per year, up to a $3 million cap. If the IRS determines an ALE intentionally disregarded ACA reporting requirements, the penalty is $500 per report, per year, with no monetary cap. This means, for example, that an ALE with 200 full-time employees who mistakenly fails to report, or submits erroneous reports, may be penalized $50,000 in 2016. The same ALE who intentionally disregards the reporting requirements will be penalized $100,000. These penalties are in addition to the assessable penalties under Code section 4980H that an ALE may incur if it fails to offer full-time employees minimum essential coverage that is affordable and has minimum value.