Posted on 08/30/2014 7:41:20 AM PDT by Citizen Zed
On August 28, 2014, the Internal Revenue Service re-released the draft forms that will be used by employer, insurers, and exchanges for reporting Affordable Care Act tax information to individuals and to the IRS for 2014 and 2015, as well as the instructions for completing those forms. The IRS also released in the Federal Register requests for public comments on three of those forms – the 1094-B, the 1094-C, and the 1095-C – under the Paperwork Reduction Act. This post reports on these forms and instructions and on a guidance released by the Centers for Medicare and Medicaid Services.
The tax forms had been published earlier and are described in an earlier post. The instructions for the forms, however, had not been available and had been eagerly awaited by employers, insurers, exchanges, and tax professionals. Forms 1094-C and 1095-C will be used by large employers with more than 50 full-time or full-time-equivalent employees to determine whether the employer is responsible for penalties under the employer shared responsibility requirements of the ACA. They will also be used to determine whether employees have received an affordable and adequate offer of coverage, rendering them ineligible for premium tax credits. Employers are required to provide each full-time employee with a form 1095-C and to file each of these together with a transmittal form 1095-B form with the IRS.
The instructions for the 1094-C and 1095-C are by far the most complex of the instructions released on August 28, filling 13 pages with dense, two column, print. Most of the complexity derives from the options for complying with the employer mandate and the transition exceptions to that mandate that the administration has created. These alternatives and exceptions were explored in my posts on the employer mandate final rule when it was issued in February, 2014. These forms are also complicated by the fact that the IRS decided to allow self-insured large employers to file only the large employer 1094-C and 1095-C, rather than requiring them to also fill out the 1094-B and 1095-B forms, which are filed by other entities that provide minimum essential coverage. Because the employer mandate has been delayed, large employers are not required to file these forms for 2014, although they may do so voluntarily.
Employers may file multiple 1094-C transmittal forms for various company divisions, but must file one “Authoritative Transmittal” providing comprehensive information on all of their employees. Related “aggregated” employers must indicate this on the form.
As of 2015, large employers who do not make a “qualifying offer” of coverage that is both adequate (60 percent or higher actuarial value) and affordable (costing 9.5 percent or less of an employee’s income for individual coverage) will owe a $3,000 per employee penalty for any employee who does not receive a qualifying offer and enrolls in coverage through an exchange, receiving premium tax credits (the 4980H(b) penalty). An employer that makes a qualifying offer to an employee for all 12 months can simply provide employees who receive such an offer with a statement (in lieu of a 1095-C form) that the employee (and his or her spouse and dependents, if any) received a qualifying offer for all 12 months and thus is ineligible for a premium tax credit.
For 2015 only, an employer that does not make a qualifying offer to all employees may provide employees who do not receive a qualifying offer with a statement, in lieu of a form 1095-C, informing the employee that he or she may be eligible for premium tax credits. For each month during 2015 that an employer makes a qualifying offer to 95 percent of its employees, the employer is eligible for transition relief from the employer mandate and can indicate this by checking a box for that month on the transmittal form 1095-B.
In lieu of indicating that it has made qualifying offers to its employees, an employer may alternately indicate on the form 1095-B the dollar amount that employees are required to contribute for the lowest-cost plan offered by the employer providing minimum value (60 percent actuarial value) coverage. The IRS will then need to determine whether coverage was affordable to the employee. Employers may also check boxes on the 1095-B indicating that they qualify for various forms of 2015 transition relief for employers with fewer than 100 full-time or full-time equivalent employees or for employers with 100 or more employees who offer coverage to at least 70 percent of their employees, do not cover dependents, or are transitioning from non-calendar year plans. Each of these forms of transition relief is discussed in my February post on the final employer responsibility rule.
Employers who offer minimum value coverage to 98 percent of their full-time employees and their dependents do not have to identify their full-time employees or complete Part III of the form 1095-B, but must provide each one with a 1095-C. Large employers that do not qualify for the 98 percent exception must complete part III of the 1095-B. They must indicate on the 1095-B for each month whether or not they offered minimum essential coverage to at least 95 percent (or all but 5) of their full-time employees, and thus are exempt from the $2,000 per employee 4980H(a) penalty. Employers must also enter for each month the number of their full-time employees who are not in a “limited non-assessment period” (such as a waiting period or an initial measurement period for variable hour employees) and the total number of their employees. Finally, employers exempt from having to provide coverage must indicate the 2015 transition relief for which they qualify.
Large employers must provide a 1095-C or alternative form to each full-time employee. The form will indicate by code for each month whether the employer offered minimum essential coverage, minimum value (60 percent actuarial value) coverage, and/or affordable coverage, and whether the coverage was offered to the employee only or also to the employee’s spouse or dependents. If the offer was not a qualifying offer, the employer must also state the employee’s share of the lowest-cost self-only minimum essential coverage offered to the employee.
Codes on the forms will also indicate months for which the employee was not a full-time employee and months in which the employee enrolled in coverage. Other codes will indicate if the employer is not required to offer coverage because the employee was in a limited non-assessment period or was offered coverage through a multiemployer plan to which the employer contributed. Employers who rely on safe harbors (explained in my earlier posts) for ensuring affordability (such as the safe harbor for employers who offer coverage for 9.5 percent or less of an employee’s W-2 wages) must indicate this. Finally, self-insured employers that offered coverage in which an employee enrolled must provide the name and Social Security number (or, if unavailable, birth date) for each individual covered. The instructions provide definitions for each of the terms used in the forms and descriptions of each form of transition relief.
The forms 1094-B and 1095-B must be completed by health insurers (other than for individual coverage provided through the exchanges or coverage through government programs, such as Medicare Advantage), self-insured employers that are not large employers subject to the employer responsibility requirement, government-sponsored programs (Medicare Part A, Medicaid, CHIP, Tricare, the VA, and others), and other entities that offer minimum essential coverage, such as self-insured student health plans (for 2014 only) or certain forms of expatriate coverage. The instructions for these forms were published on August 28. These forms will be used by the IRS to verify individual compliance with the individual responsibility provision. They will not be required for 2014.
As of 2015, a form 1095-B must be provided to each individual who receives minimum essential coverage from the filing entity, while form 1094-B is the transmittal form by which the 1095-B forms are sent to the IRS. Large employer self-insured plans do not need to file the 1094-B and 1095-B forms because they provide the same information on the 1094-C and 1095-C forms. The form is quite straightforward, identifying the entity that offers coverage, the responsible individual (policy holder) who has the coverage, and all individuals covered by the form.
Finally, the form 1095-A (instructions here) will be provided by the exchanges to each individual who has individual coverage through the exchange, including household members. The form will include total monthly premiums for the recipient and family members, monthly advance premium tax credits, and premiums for the second-lowest-cost silver benchmark plan. Individuals will use the information provided by the 1095-A for establishing compliance with the individual responsibility requirement and for reconciling premium tax credits received with those properly owed.
Forms 1095-A, 1095-B, and 1095-C must be furnished to individuals on or before January 31 of the year following the calendar year covered by the form. If these forms are provided by this deadline, they should allow the individuals covered by the forms time to file their taxes in a timely manner. The forms must be provided by mail unless the individual has agreed to electronic transmission.
The transmittal forms from large employers (1094-C) and from providers of minimum essential coverage (1094-B) are not due, however, until February 28 (March 31 if filed electronically). As these forms will be necessary to determine whether individuals have minimum essential coverage and are thus not subject to the individual mandate penalty, and to determine whether individuals qualified for affordable and adequate employer coverage and thus should not have received premium tax credits, these late filing dates raise the probability that some individuals will either not get timely refunds or will receive refunds and then be asked to pay additional taxes to the IRS. The only way that the IRS can effectively recover the individual mandate penalty is by setting it off against a refund due, since the ACA prohibits liens or levies to collect the penalty. This means that the IRS will either have to hold refunds until minimum essential coverage can be verified, or send our refunds and forgo offsetting penalties against them. Either possibility is problematic.
On August 28, 2014, HHS also issued a frequently asked questions document on casework. Individuals with marketplace coverage cancelled or terminated for non-payment of premiums may not appeal the decision through the marketplace, but may have appeal rights with state insurance departments. Individuals who are terminated or cancelled because they do not receive premium tax credits to which they believe themselves entitled may appeal the tax credit decision, however. Individuals with QHP coverage who become enrolled in Medicare cannot be terminated by their insurer, but should be informed that they must report their Medicare enrollment to the exchange and will have to pay back any premium tax credits they received while enrolled in Medicare.
What a nightmare!
“What a nightmare!”
Anything the government gets involved with usually is.
LOL…and picture our newly arrived aliens who are enrolled in CA trying to decipher government English. Each of them will have to have their own personal lawyer…paid for by thee and me, of course.
The VA for everyone....get ready.
Does this indicate that the individuals will be taxed on the amount of premium paid by the employer? ..That if the employer pays $300 of the monthly $600 premium, the employee owes tax on that annual $3,600 benefit?
bkmk
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