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IRS Releases Draft Instructions for Reporting Health Coverage Information

September 12, 2014, Caplin & Drysdale

At the end of August 2014, the IRS issued draft instructions and sets of frequently asked questions for completing the forms associated with two information reporting requirements under the Patient Protection and Affordable Care Act of 2010, as amended ("PPACA").  The first requirement applies to any entity that provides minimum essential coverage ("MEC") to an individual during a calendar year.  The second requirement applies only to an applicable large employer ("ALE").  We discussed these requirements in detail in our March 2014 client alert "Final IRS Regulations on Information Reporting Under PPACA."  In this client alert, we describe specific compliance steps employers can take now.

I.  Determine Which Filing Requirement Applies

For purposes of the MEC and ALE filing requirements, employers offering health coverage to their employees fall into one of three categories:

  • Employers who employ fewer than 50 full-time employees (including full-time equivalents) during the preceding calendar year and who provide health coverage by means of a fully-insured group health plan will not be subject to these filing requirements. 

  • Employers who employ fewer than 50 full-time employees (including full-time equivalents) during the preceding calendar year and who provide health coverage by means of a self-insured group health plan will be subject to the MEC filing requirement but not the ALE filing requirement.  Form 1094-B serves as the transmittal form with respect to this requirement.  Form 1095-B provides information about the health coverage offered to individual employees and must be furnished to such employees as well as the IRS. 

  • Employers who employ 50 or more full-time employees (including full-time equivalents) during the preceding calendar year will be subject to the ALE filing requirement regardless of whether they provide coverage by means of a self-insured or fully-insured group health plan (or both).  Form 1094-C serves as the transmittal form with respect to the MEC and ALE filing requirement and also provides additional information about the ALE.  Form 1095-C provides information about the health coverage offered to individual employees and must be furnished to such employees as well as the IRS.  In addition, employers wishing to assert their eligibility for transition relief from the ALE "shared responsibility" requirement must do so by means of Forms 1094-C and 1095-C.

II. Determine What Data Collection is Required for 2015

The initial MEC and ALE reporting deadlines fall in early 2016.  However, because the 2016 reporting will concern health coverage offered to employees beginning January 2015, employers should act now to identify and set up systems for collecting the appropriate data.  ALEs who meet certain criteria regarding the coverage they offer to their employees may be eligible for simplified reporting.  ALEs who can determine their eligibility for such simplified reporting will benefit from less detailed data collection requirements. 

III. Determine How Data Will be Submitted

The IRS is currently developing a publication describing the communication procedures, transmission formats, business rules, and validation procedures for electronically filed MEC and ALE reporting.  While employers may enter into a reporting relationship with a third-party service provider to furnish and file the necessary forms, employers themselves remain liable for satisfying the applicable reporting requirements.  Therefore, employers should work closely with any third-party service providers they engage in order to ensure that the reporting requirements are timely and accurately satisfied.

IV. Prepare for Employee Inquiries

Forms 1095-B and 1095-C are new forms which report information with potentially significant tax consequences to employees.  Employees will use the applicable form to report on their individual income tax returns that they had MEC for some or all months of a given calendar year.  Employees without MEC may be liable for the "individual shared responsibility" payment.  Employees may also use the forms to determine their eligibility for the premium tax credit.  These provisions of PPACA have received widespread media attention.  Employers may therefore wish to be prepared for employee inquiries as to the purpose and use of Forms 1095-B and 1095-C.

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This client alert has surveyed the MEC and ALE requirements in the context of the recently released draft forms and instructions.  Certain factual and legal determinations  are required in order to determine how these requirements apply to an employer.  For more information about the draft forms and instructions, the MEC and ALE requirements in general, or other issues concerning your employee benefit plans, please contact Joanne C. Youn at jyoun@capdale.com or at 202.862.7855.

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For half a century, Caplin & Drysdale has been a leading provider of a full range of tax, tax controversy, and related legal services to companies, organizations, and individuals throughout the United States and around the world.  With offices in New York City and Washington, D.C., the firm also provides counseling on matters relating to bankruptcy, creditors' rights, political activity, exempt organizations, complex litigation, employee benefits, private client services, corporate law, and white collar defense.  For more information, please visit us at www.caplindrysdale.com.

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Washington, DC Office:
One Thomas Circle NW
Suite 1100
Washington, DC 20005
202.862.5000
New York, NY Office:
600 Lexington Avenue
21st Floor
New York, NY 10022
212.379.6000

___________________________

Disclaimer
This communication does not provide legal advice, nor does it create an attorney-client relationship with you or any other reader. If you require legal guidance in any specific situation, you should engage a qualified lawyer for that purpose. Prior results do not guarantee a similar outcome.

Attorney Advertising
It is possible that under the laws, rules, or regulations of certain jurisdictions, this may be construed as an advertisement or solicitation.
© 2020 Caplin & Drysdale, Chartered
All Rights Reserved.

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