Health care reporting: new requirements for Forms 1095-B and 1095-C.

• Author: Garverick, J. Patrick
• Position: Regulatory update

Under IRS Sec. 4980H, an applicable large employer (ALE) that does not offer minimum essential coverage (MEC) for all its full-time employees, offers MEC that is unaffordable, or offers MEC that consists of a plan under which the plan's share of the total allowed cost of benefits is less than 60 percent (i.e., does not provide minimum value), is required to pay a penalty (i.e., non-deductible excised tax) if any full-time employee is certified to the employer as having purchased health insurance through an exchange and receives a Sec. 36B premium tax credit.

An employer is an ALE with respect to any calendar year if it employed an average of at least 50 full-time employees during the preceding calendar year. In counting the number of employees for purposes of determining whether an employer is an ALE, a full-time employee (meaning, for any month, an employee working an average of at least 30 hours or more each week) is counted as one employee, and all other employees are counted on a pro-rated basis. The aggregation rules of Sec. 414(b), (c), (m), and (o) apply in determining whether an employer is an ALE.

"Unaffordable" is defined as self-only coverage with a premium required to be paid by the employee that is more than 9.5 percent (adjusted for inflation: 9.56 percent for 2015 and 9.66 percent for 2016) of the employee's household income. Because employers do not know what their employee's household income is, final regulations allow ALEs to use one or more of the affordability safe harbor rules under Sec. 54.4980H-5(e) (i.e., Box 1 of the Form W-2, rate of pay and/or federal poverty line safe harbors).

Employer Reporting of Health Insurance Coverage (Sec. 6056)

The Affordable Care Act (ACA) added IRC Sec. 6056, which requires ALEs subject to Sec. 4980H to file information returns with the IRS and provide statements to their full-time employees about health insurance coverage the employer did or did not offer. The information is used by the IRS to administer employer-shared responsibility provisions of Sec. 4980H, and by full-time employees to determine eligibility for Sec. 36B premium tax credit.

Under the general method of reporting, an ALE member must file Form 1095-C, Employer-Provided Health Insurance Offer & Other Coverage, for each of its full-time employees, and a transmittal on Form 1094-C for all of the returns filed for a given calendar year. To minimize the cost and administrative tasks for certain ALE members, final...