Common employer practices may be insufficient for new PPACA reporting requirement.

• Author: Mort, Kathy
• Position: Patient Protection and Affordable Care Act

Beginning in January 2016, "applicable large employers" (ALEs) that are subject to the Patient Protection and Affordable Care Act's (PPACA's) employer shared-responsibility provisions under Sec. 4980H will have new reporting requirements under Sec. 6056. These initial PPACA information returns will cover calendar year 2015, with information included for each month of the calendar year. The returns, to be provided to "full-time employees" as defined under PPACA (Sec. 4980H(c)(4)) with transmittal to the IRS, often are likened to Forms W-2, Wage and Tax Statement, which are provided to employees and filed annually with the Social Security Administration. However, important differences between the two reporting requirements may make it difficult for employers to comply with the new Sec. 6056 requirements. In fact, in many instances the employer of record fisted on a Form W-2 will differ from the employer required to file information returns under Sec. 6056.

Background

Sec. 6056, added to the Code by PPACA, requires common law employers to report certain information on full-time employees to assist the IRS in determining whether an employer is subject to the Sec. 4980H excise tax. This excise tax (i.e., the assessable payment) will be assessed on large employers that fail to offer "minimum essential coverage" to their employees or that provide health coverage that is not of "minimum value" or "affordable" as defined by PPACA. Sec. 6056 reporting also will be used by the IRS to determine employee eligibility for Sec. 36B premium tax credits for buying health insurance on an exchange. Sec. 6056 reporting is made on Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, which is furnished to full-time employees, and on Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, which is the transmittal form filed with the IRS.

An ALE is an employer with at least 50 full-time employees, including full-time equivalents. Sec. 4980H(c)(2) (C)(i) combines employers in the same corporate structure--using controlled group principles from Sec. 414--such as parents and subsidiaries, into a single employer for purposes of determining ALE status. However, each member of the corporate structure is treated separately for reporting purposes and for determining the excise tax liability. Thus, parents and subsidiaries are aggregated for purposes of determining whether an entity is an ALE but are...