The Affordable Care Act (ACA) has made a number of significant changes to group health plans since the law was enacted in 2010. Many of these key reforms became effective in 2014 and 2015, including health plan design changes, increased wellness program incentives and the employer shared responsibility penalties.
Certain changes to some ACA requirements take effect in 2018 for employers sponsoring group health plans, such as increased dollar limits. To prepare for 2018, employers should review upcoming requirements and develop a compliance strategy.
This ACA Overview provides an ACA compliance checklist for 2018. Please contact Scurich Insurance for assistance or if you have questions about changes that were required in previous years.
PLAN DESIGN CHANGES
Grandfathered Plan Status
A grandfathered plan is one that was already in existence when the ACA was enacted on March 23, 2010. If you make certain changes to your plan that go beyond permitted guidelines, your plan is no longer grandfathered. However, grandfathered status does not automatically expire as of a specific date. A plan may maintain its grandfathered status as long as no prohibited changes are made. Once a plan relinquishes grandfathered status, it cannot be regained and the plan must comply with additional reforms under the ACA.
Contact Scurich Insurance if you have questions about changes you have made, or are considering making, to your plan.
Review your plan’s grandfathered status:
- If you have a grandfathered plan, determine whether it will maintain its grandfathered status for the 2018 plan year. Grandfathered plans are exempt from some of the ACA’s mandates. A grandfathered plan’s status will affect its compliance obligations from year to year.
- If your plan will lose its grandfathered status for 2018, confirm that the plan has all of the additional patient rights and benefits required by the ACA for non-grandfathered plans. This includes, for example, coverage of preventive care without cost-sharing requirements.
- If your plan will keep grandfathered status, continue to provide the Notice of Grandfathered Status in any plan materials provided to participants and beneficiaries that describe the benefits provided under the plan (such as the plan’s summary plan description and open enrollment materials). Model language is available.
Cost-sharing Limits
Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered health plans are subject to limits on cost sharing for essential health benefits (EHB). The ACA’s overall annual limit on cost sharing (also known as an out-of-pocket maximum) applies for all non-grandfathered group health plans, whether insured or self-insured. Under the ACA, a health plan’s out-of-pocket maximum for EHB may not exceed $7,350 for self-only coverage and $14,700 for family coverage, effective for plan years beginning on or after Jan. 1, 2018.
Health plans with more than one service provider may divide the out-of-pocket maximum across multiple categories of benefits, rather than reconciling claims across multiple service providers. Thus, health plans and issuers may structure a benefit design using separate out-of-pocket maximums for EHB, provided that the combined amount does not exceed the annual out-of-pocket maximum limit for that year. For example, in 2018, a health plan’s self-only coverage may have an out-of-pocket maximum of $6,000 for major medical coverage and $1,350 for pharmaceutical coverage, for a combined out-of-pocket maximum of $7,350.
Beginning with the 2016 plan year, the self-only annual limit on cost sharing applies to each individual, regardless of whether the individual is enrolled in self-only coverage or family coverage. This embeds an individual out-of-pocket maximum in family coverage so that an individual’s cost sharing for essential health benefits cannot exceed the ACA’s out-of-pocket maximum for self-only coverage.
Note that the ACA’s cost-sharing limit is higher than the out-of-pocket maximum for high deductible health plans (HDHPs). In order for a health plan to qualify as an HDHP, the plan must comply with the lower out-of-pocket maximum limit for HDHPs. HHS provided FAQ guidance on how this ACA rule affects HDHPs with family deductibles that are higher than the ACA’s cost-sharing limit for self-only coverage.
According to HHS, an HDHP that has a $10,000 family deductible must apply the annual limitation on cost sharing for self-only coverage ($7,350 in 2018) to each individual in the plan, even if this amount is below the $10,000 family deductible limit. Because the $7,350 self-only maximum limitation on cost sharing exceeds the 2018 minimum annual deductible amount for HDHPs ($2,700), it will not cause a plan to fail to satisfy the requirements for a family HDHP.
Check your plan’s cost-sharing limits:
- Review your plan’s out-of-pocket maximum to make sure it complies with the ACA’s limits for the 2018 plan year ($7,350 for self-only coverage and $14,700 for family coverage).
- If you have an HSA-compatible HDHP, keep in mind that your plan’s out-of-pocket maximum must be lower than the ACA’s limit. For 2018, the out-of-pocket maximum limit for HDHPs is $6,650 for self-only coverage and $13,300 for family coverage.
- If your plan uses multiple service providers to administer benefits, confirm that the plan will coordinate all claims for EHB across the plan’s service providers, or will divide the out-of-pocket maximum across the categories of benefits, with a combined limit that does not exceed the maximum for 2018.
- Confirm that the plan applies the self-only maximum to each individual in the plan, regardless of whether the individual is enrolled in self-only coverage or family coverage.
Health FSA Contributions
Effective for plan years beginning on or after Jan. 1, 2013, an employee’s annual pre-tax salary reduction contributions to a health FSA must be limited to $2,500 (as adjusted for inflation). The $2,500 limit was increased to $2,550 for taxable years beginning in 2015 and 2016, and then increased again to $2,600 for taxable years beginning in 2017. On Oct. 19, 2017, the IRS released Revenue Procedure 2017-58, which increased the FSA dollar limit on employee salary reduction contributions to $2,650 for taxable years beginning in 2018.
The limit does not apply to employer contributions to the health FSA, and does not impact contributions under other employer-provided coverage. For example, employee salary reduction contributions to an FSA for dependent care or adoption care assistance are not affected by the health FSA limit.
Update your health FSA’s contribution limit:
- Confirm that your health FSA will not allow employees to make pre-tax contributions in excess of $2,650 for the 2018 plan year.
- Communicate the health FSA limit to employees as part of the open enrollment process.
SUMMARY OF BENEFITS AND COVERAGE (SBC)
Health plans and health insurance issuers must provide an SBC to applicants and enrollees to help them understand their coverage and make coverage decisions. Plans and issuers must provide the SBC to participants and beneficiaries who enroll or re-enroll during an open enrollment period, as well as to participants and beneficiaries who enroll other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees).
The SBC must follow strict formatting requirements. The Departments provided templates and related materials, including instructions and a uniform glossary of coverage terms, for use by plans and issuers. On April 6, 2016, the Departments issued a new template and related materials for the SBC.
- Plans with annual open enrollment periods must start using the new template on the first day of the first open enrollment period that begins on or after April 1, 2017, with respect to coverage for plan or policy years beginning on or after that date.
- Plans without an annual open enrollment period must start using the new template on the first day of the first plan or policy year that begins on or after April 1, 2017.
Begin using the new SBC template:
- Ensure that you are using the new SBC template for the 2018 plan year.
- For self-funded plans, the plan administrator is responsible for creating and providing the SBC. For insured plans, the issuer is required to provide the SBC to the plan sponsor. Both the plan and the issuer are obligated to provide the SBC, although this obligation is satisfied for both parties if either one provides the SBC. If you have an insured plan, confirm whether your health insurance issuer will assume responsibility for providing the SBCs.
HIPAA CERTIFICATION
The ACA includes a requirement for health plans to file a statement with HHS certifying their compliance with the Health Insurance Portability and Accountability Act’s (HIPAA) electronic transaction standards and operating rules. These HIPAA requirements are often referred to as the electronic data interchange (EDI) rules.
However, on Oct. 4, 2017, HHS withdrew its proposed rule in order to re-examine the issues and explore options and alternatives to comply with the HIPAA certification requirement. As a result, group health plan sponsors will not be required to certify their HIPAA compliance until HHS issues new guidance.
Although health plans are not required to certify their HIPAA compliance at this time, there is an enforcement process in place for the EDI rules. Civil monetary penalties and criminal penalties may be imposed on a covered entity that fails to comply with the EDI rules. Thus, health plans and business associates that conduct standard transactions should confirm that they are complying with the EDI rules.
EMPLOYER SHARED RESPONSIBILITY RULES
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Under the ACA’s employer shared responsibility rules, applicable large employers (ALEs) are required to offer affordable, minimum value (MV) health coverage to their full-time employees (and dependent children) or pay a penalty. These employer shared responsibility requirements are also known as the “employer mandate” or “pay or play” rules.
An ALE will be subject to penalties if one or more full-time employees receive a subsidy for purchasing health coverage through an Exchange. An individual may be eligible for an Exchange subsidy either because the ALE:
- Does not offer coverage to that individual; or
- Offers coverage that is “unaffordable” or does not provide “minimum value.”
This checklist will help you evaluate your possible liability for an employer shared responsibility penalty for 2018. Please keep in mind that this summary is a high-level overview of the employer shared responsibility rules. It does not provide an in-depth analysis of how the rules will affect your organization. Please contact Scurich Insurance for more information on these rules and how they may apply to you.
Applicable Large Employer Status
The ACA’s employer shared responsibility rules apply only to ALEs. ALEs are employers with 50 or more full-time employees (including full-time equivalent employees, or FTEs) on business days during the preceding calendar year. Employers determine each year, based on their current number of employees, whether they will be considered an ALE for the following year.
Determine your ALE status for 2018:
- Calculate the number of full-time employees for each calendar month in 2017. A full-time employee is an employee who is employed, on average, at least 30 hours of service per week or 130 hours for the calendar month.
- Calculate the number of FTEs for each calendar month in 2017 by calculating the aggregate number of hours of service (but not more than 120 hours for any employee) for all employees who were not full-time employees for that month and dividing the total hours of service by 120.
- Add the number of full-time employees and FTEs (including fractions) calculated above for each month in 2017. Add up these monthly numbers and divide the sum by 12. Disregard fractions.
- If your result is 50 or more, you are likely an ALE for 2018.
- Keep in mind that there is a special exception for employers with seasonal workers. If your workforce exceeds 50 full-time employees (including FTEs) for 120 days or fewer during the 2017 calendar year, and the employees in excess of 50 who were employed during that time were seasonal workers, you will not be an ALE for 2018.
Offering Coverage to Full-time Employees
To correctly offer coverage to full-time employees, ALEs must determine which employees are full-time employees under the employer shared responsibility rule definition. A full-time employee is an employee who was employed, on average, at least 30 hours of service per week (or 130 hours of service in a calendar month).
The IRS provided two methods for determining full-time employee status for purposes of offering coverage – the monthly measurement method and the look-back measurement method.
MONTHLY MEASUREMENT METHOD
Involves a month-to-month analysis where full-time employees are identified based on their hours of service for each month. This method is not based on averaging hours of service over a prior measurement method. Month-to-month measuring may cause practical difficulties for employers that have employees with varying hours or employment schedules, and could result in employees moving in and out of employer coverage on a monthly basis.
LOOK-BACK MEASUREMENT METHOD
An optional safe harbor method for determining full-time status that can provide greater predictability for determining full-time status. The details of this method are based on whether the employees are ongoing or new, and whether new employees are expected to work full-time or are variable, seasonal or part-time.
This method involves a measurement period for counting hours of service, an administrative period that allows time for enrollment and disenrollment, and a stability period when coverage may need to be provided, depending on an employee’s average hours of service during the measurement period.
If an employer meets the requirements of the safe harbor, it will not be liable for penalties for employees who work full-time during the stability period, if they did not work full-time hours during the measurement period.
Determine your full-time employees:
- Use the monthly measurement method or the look-back measurement method to confirm that health coverage will be offered to all full-time employees (and dependent children). If you have employees with varying hours, the look-back measurement method may be the best fit for you.
- To use the look-back measurement method, you will need to select your measurement, administrative and stability periods. Please contact Scurich Insurance for more information.
Applicable Penalties
An ALE is only liable for a penalty under the employer shared responsibility rules if at least one full-time employee receives a subsidy for coverage purchased through an Exchange. Employees who are offered health coverage that is affordable and provides MV are generally not eligible for these Exchange subsidies. Depending on the circumstances, one of two penalties may apply under the employer shared responsibility rules—the 4980H(a) penalty or the 4980H(b) penalty.
The 4980H(a) Penalty—Penalty for ALEs Not Offering Coverage
Under Section 4980H(a), an ALE will be subject to a penalty if it does not offer coverage to “substantially all” full-time employees (and dependents) and any one of its full-time employees receives a premium tax credit or cost-sharing reduction toward his or her Exchange plan. The 4980H(a) penalty will not apply to an ALE that intends to offer coverage to all of its full-time employees, but that fails to offer coverage to a few of these employees, regardless of whether the failure to offer coverage was inadvertent.
An ALE will satisfy the requirement to offer minimum essential coverage to “substantially all” of its full-time employees and their dependents if it offers coverage to at least 95 percent—or fails to offer coverage to no more than 5 percent (or, if greater, five)—of its full-time employees (and dependents). According to the IRS, the alternative margin of five full-time employees is designed to accommodate relatively small ALEs, because a failure to offer coverage to a handful of full-time employees might exceed 5 percent of the ALE’s full-time employees.
Under the ACA, the monthly penalty assessed on ALEs that do not offer coverage to substantially all full-time employees and their dependents is equal to the ALE’s number of full-time employees (minus 30) X 1/12 of $2,000 (as adjusted), for any applicable month. After 2014, the $2,000 amount is indexed for the calendar year, as follows:
- $2,080 for 2015
- $2,160 for 2016
- $2,260 for 2017
The 4980H(b) Penalty—Penalty for ALEs Offering Coverage
ALEs that do offer coverage to substantially all full-time employees (and dependents) may still be subject to penalties if at least one full-time employee obtains a subsidy through an Exchange because:
- The ALE did not offer coverage to all full-time employees; or
- The ALE’s coverage is unaffordable or does not provide minimum value.
The monthly penalty assessed on an ALE for each full-time employee who receives a subsidy is 1/12 of $3,000 (as adjusted) for any applicable month. However, the total penalty for an ALE is limited to the 4980(a) penalty amount. After 2014, the $3,000 amount is indexed as follows:
- $3,120 for 2015
- $3,240 for 2016
- $3,390 for 2017
Affordability of Coverage
Under the ACA, an ALE’s health coverage is considered affordable if the employee’s required contribution to the plan does not exceed 9.5 percent of the employee’s household income for the taxable year (as adjusted each year). The adjusted percentage is 9.56 percent for 2018.
This is the first time since these rules were implemented that the affordability contribution percentages have been reduced.
As a result, some employers may need to reduce their employee contributions for 2018 to meet the adjusted percentage.
“Household income” means the modified adjusted gross income of the employee and any members of the employee’s family. Because an employer generally will not know an employee’s household income, the IRS provided three affordability safe harbors that ALEs may use to determine affordability based on information that is available to them. These safe harbors allow an ALE to measure affordability based on the employee’s Form W-2 wages, the employee’s rate of pay or the federal poverty level for a single individual. ALEs using an affordability safe harbor may rely on the adjusted affordability contribution percentages.
Minimum Value
Under the ACA, a plan provides MV if the plan’s share of total allowed costs of benefits provided under the plan is at least 60 percent of those costs. Three approaches may be used for determining MV: a Minimum Value (MV) Calculator, design-based safe harbor checklists or actuarial certification. In addition, any plan in the small group market that meets any of the “metal levels” of coverage (that is, bronze, silver, gold or platinum) provides MV.
In addition, plans that do not provide inpatient hospitalization or physician services (referred to as non-hospital/non-physician services plans) do not provide MV. An employer may not use the MV Calculator (or any actuarial certification or valuation) to demonstrate that a non-hospital/non-physician services plan provides MV. As a result, a non-hospital/non-physician services plan should not be adopted for the 2015 plan year or beyond.
Calculate potential penalties for 2017 and/or 2018:
- Review the cost of your health plan coverage to determine whether it’s affordable for your employees by using one or more of the affordability safe harbors.
- Determine whether the plan provides MV by using one of the four available methods.
- Calculate any penalties that may apply under these rules using the formulas above.
REPORTING OF COVERAGE
The ACA requires ALEs to report information to the IRS and to their full-time employees regarding the employer-sponsored health coverage they offer. The IRS will use the information that ALEs report to verify employer-sponsored coverage and administer the employer shared responsibility provisions. This reporting requirement is found in Code Section 6056.
The ACA also requires every health insurance issuer, sponsor of a self-insured health plan, government agency that administers government-sponsored health insurance programs and any other entity that provides MEC to file an annual return with the IRS reporting information for each individual who is provided with this coverage. Related statements must also be provided to individuals. This reporting requirement is found in Code Section 6055.
Both of these reporting requirements took effect in 2015. Returns are due in early 2018 for health plan coverage offered or provided in 2017. Returns generally must be filed with the IRS by Feb. 28 (or March 31, if filed electronically) of the year after the calendar year to which the returns relate. For the 2017 calendar year, returns must be filed by Feb. 28, 2018, or April 2, 2018 (March 31, 2018, being a Sunday), if filed electronically. Written statements generally must be provided to employees no later than Jan. 31 of the year following the calendar year in which coverage was provided. For the 2017 calendar year, individual statements must be furnished by Jan. 31, 2018.
ALEs with self-funded plans are required to comply with both reporting obligations, while ALEs with insured plans will only need to comply with Section 6056. To simplify the reporting process, the IRS allows ALEs with self-insured plans to use a single combined form for reporting the information required under both Section 6055 and 6056.
ALEs that sponsor self-insured plans
Must report:
- Information under Section 6055 about MEC provided; and
- Information under Section 6056 about offers of health coverage.
ALEs that sponsor insured plans
Must report information under Section 6056. These employers are not required to report under Section 6055.
Non-ALEs that sponsor self-insured plans
Must report information under Section 6055. These employers are not required to report under Section 6056.
Non-ALEs that sponsor insured plans
These employers are not required to report under either Section 6055 or Section 6056.
Forms Used for Reporting
Under both Sections 6055 and 6056, each reporting entity must file all of the following with the IRS:
- A separate statement for each individual; and
- A single transmittal form for all of the returns filed for a given calendar year.
Under Section 6055, reporting entities will generally file Forms 1094-B (a transmittal) and 1095-B (an information return). Under Section 6056, entities will file Forms 1094-C (a transmittal) and 1095-C (an information return) for each full-time employee for any month. Entities that are reporting under both Sections 6055 and 6056 will file using a combined reporting method, on Form 1094-C and Form 1095-C.
| REQUIREMENT |
FILE WITH THE IRS: |
FURNISH TO EACH INDIVIDUAL: |
| Section 6055 |
- One Form 1094-B; and
- A separate Form 1095-B for each responsible individual
|
A copy of his or her Form 1095-B |
| Section 6056 |
- One Form 1094-C; and
- A separate Form 1095-C for each full-time employee
|
A copy of his or her Form 1095-C |
| Both Section 6055 & 6056 |
- One Form 1094-C; and
- A separate Form 1095-C for each full-time employee and each responsible individual
|
A copy of his or her Form 1095-C |
Electronic Reporting
Any reporting entity that is required to file at least 250 returns under Section 6055 or Section 6056 must file electronically. The 250-or-more requirement applies separately to each type of return and separately to each type of corrected return. Entities filing fewer than 250 returns during the calendar year may choose to file in paper form, but are permitted (and encouraged) to file electronically. Electronic filing will be done using the ACA Information Returns (AIR) Program. More information on the AIR Program is available on the IRS website.
Individual statements may also be furnished electronically if certain notice, consent and hardware and software requirements are met (similar to the process currently in place for the electronic furnishing of employees’ Forms W-2).
Penalties
A reporting entity that fails to comply with the Section 6055 or Section 6056 reporting requirements may be subject to the general reporting penalties for failure to file correct information returns (under Code Section 6721) and failure to furnish correct payee statements (under Code Section 6722).
Penalties may be waived if the failure is due to reasonable cause and not to willful neglect, or may be reduced if the failure is corrected within a certain period of time. Also, lower annual maximums apply for reporting entities that have average annual gross receipts of up to $5 million for the three most recent taxable years. The penalty amounts for failures related to returns and statements required to be filed or furnished in 2018 are as follows:
| PENALTY TYPE
|
PER VIOLATION |
ANNUAL MAXIMUM |
ANNUAL MAXIMUM FOR EMPLOYERS WITH ≤$5 MILLION IN GROSS RECEIPTS |
| General |
$260 |
$3,218,500 |
$1,072,500 |
| Corrected within 30 days |
$50 |
$536,000 |
$187,500 |
| Corrected after 30 days, but before Aug. 1 |
$100 |
$1,609,000 |
$536,000 |
| Intentional disregard |
$530* |
None |
N/A |
*For failures due to intentional disregard, the penalty is equal to the greater of either the listed penalty amount or 10 percent of the aggregate amount of the items required to be reported correctly.
Prepare for Health Plan Reporting:
- Determine which reporting requirements apply to you and your health plans.
- Determine the information you will need for reporting and coordinate internal and external resources to help compile the required data.
- Complete the appropriate forms. Furnish statements to individuals on or before Jan. 31, 2018, and file returns with the IRS on or before Feb. 28, 2018 (April 2, 2018, if filing electronically).
EMPLOYEE NOTICE OF EXCHANGE
Employers are required to provide all new hires with a written notice about the ACA’s health insurance Exchanges. This notice must be provided at the time of hiring. In general, the notice must:
- Inform employees about the existence of the Exchange and describe the services provided;
- Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer’s plan does not meet certain requirements; and
- Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of the employer contribution to employer-provided coverage may be excludable for federal income tax purposes.
The DOL provided model Exchange notices for employers to use, which will require some customization. The notice may be provided by first-class mail, or may be provided electronically if the requirements of the DOL’s electronic disclosure safe harbor are met.
Ensure that the Exchange notice is provided to all new hires at the time of hiring:
- Customize the appropriate model Exchange notice.
- Confirm that the notice has been provided to all current employees.
- Prepare to provide the customized notice to all new employees when hired.
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On Aug. 31, 2017, a federal judge in Texas struck down the Department of Labor’s (DOL) 2016 overtime rule, stating that the DOL had exceeded its authority by issuing a new salary level requirement for white collar exempt employees.
The DOL is unlikely to appeal this court decision because the ruling does not put into question the DOL’s general authority to set any type of salary limit.
However, the DOL has also signaled its intention to propose a new overtime rule. The DOL has published a request for information (RFI) to invite the public to comment on the issues the DOL should consider before proposing a new overtime rule.
Employers are not required to comply with the 2016 overtime final rule. This ruling ensures that the rule will not take effect. Employers should monitor developments on a new overtime rule proposal.
DOL Rule on White Collar Exemptions
The Fair Labor Standards Act (FLSA) establishes minimum wage and overtime pay protections for many workers in the United States. However, the FLSA exempts certain workers, such as white collar employees, from these protections. The white collar exemptions apply to certain executive, administrative, professional, outside sales, computer and highly compensated employees.
To qualify for the executive, administrative or professional (EAP) exemption, an employee must meet a salary basis test, a salary level test and a duties test. The DOL’s 2016 overtime rule would have increased the required salary level from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). Highly compensated employees (HCEs) must also satisfy the salary basis and duties tests to be considered exempt, but a different salary level applies to them. The DOL rule would have increased the required salary level for highly compensated employees from $100,000 per year to $134,004 per year.
Challenges to the 2016 Overtime Rule
In September 2016, a coalition of 21 states and a number of business groups filed two separate lawsuits challenging the new rule. These two lawsuits were combined in October. On Nov. 16, 2016, the court held a hearing on whether to grant an emergency injunction blocking the implementation of the rule. The judge presiding over the case issued his written ruling granting the injunction on Nov. 22, 2016.
On Aug. 31, 2017, the same federal court struck down the 2016 overtime rule stating that the DOL exceeded its authority when imposing the $913 per week ($47,476 per year) and $134,004 per year salary level limits.
The Future of FLSA Overtime Regulations
On July 26, 2017, the DOL published an RFI regarding the overtime exemptions for executive, administrative, professional, outside sales and computer employees. The purpose of the RFI is to gather information from the public before formulating a proposal to amend the FLSA or its regulations.
The RFI does not place any responsibilities on employers. However, any individual or organization interested in responding to the RFI must submit their comments to the DOL by Sept. 25, 2017. The DOL is encouraging individuals and organizations to submit their comments electronically, using the instructions in the Federal eRulemaking Portal.
When submitting a comment, employers should remember that, once submitted, comments are considered public records and will be published without editing. This includes any personal information provided.
More Information
Please contact Scurich Insurance for more information regarding current overtime rules, compliance with the FLSA or the RFI on overtime regulations.
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Final Forms for 2017 ACA Reporting Released
On Sept. 28, 2017, the Internal Revenue Service (IRS) released final 2017 forms for reporting under Internal Revenue Code (Code) Sections 6055 and 6056.
- 2017 Forms 1094-C and 1095-C are used by applicable large employers (ALEs) to report under Section 6056, as well as for combined Section 6055 and 6056 reporting by ALEs who sponsor self-insured plans. Related draft instructions were released on Aug. 31, 2017, and have not been finalized at this time.
- 2017 Forms 1094-B and 1095-B are used by entities reporting under Section 6055, including self-insured plan sponsors that are not ALEs. Related draft instructions were released on Aug. 31, 2017, and have not been finalized at this time.
The 2017 forms are substantially similar to the 2016 versions, except that sections related to expired Section 4980H Transition Relief were removed.
ACTION STEPS
Employers should become familiar with the revisions to the forms, and prepare to file these final versions in early 2018.
Background
The Affordable Care Act (ACA) created reporting requirements under Code Sections 6055 and 6056. Under these rules, certain employers must provide information to the IRS about the health plan coverage they offer (or do not offer) or provide to their employees. Each reporting entity must annually file all of the following with the IRS:
- A separate statement (Form 1095-B or Form 1095-C) for each individual who is provided with minimum essential coverage (for providers reporting under Section 6055), or for each full-time employee (for ALEs reporting under Section 6056); and
- A transmittal form (Form 1094-B or Form 1094-C) for all of the returns filed for a given calendar year.
Reporting entities must also furnish related statements (Form 1095-B or 1095-C, or a substitute form) to individuals.
Forms must generally be filed with the IRS no later than Feb. 28 (March 31, if filed electronically) of the year following the calendar year to which the return relates. Individual statements must be furnished to individuals on or before Jan. 31 of the year immediately following the calendar year to which the statements relate.
2017 Forms and Instructions
The 2017 forms, as well as the 2017 draft instructions, are substantially similar to the 2016 versions. However, note the following changes:
- Section 4980H Transition Relief. Several forms of transition relief were available to some employers under Section 4980H for the 2015 plan year (including any portion of the 2015 plan year that fell in 2016). However, no Section 4980H transition relief is available for 2017. As a result, the 2017 draft instructions for Forms 1094-C and 1095-C were revised to remove references to Section 4980H transition relief. In addition, Form 1094-C has been revised to remove references to this transition relief. Specifically, the following two sections on Form 1094-C related to this transition relief have been designated as “Reserved” and should not be used: Part II, in the “Certifications of Eligibility” Section on Line 22, Box C; and Part III, in the “ALE Member Information – Monthly” table, column (e).
- Instructions for Recipient. Both individual statements (Forms 1095-B and 1095-C) include an “Instructions for Recipient” section. On both of the 2017 Forms 1095-B and 1095-C, the following paragraph was added: “Additional information. For additional information about the tax provisions of the Affordable Care Act (ACA), including the individual shared responsibility provisions, the premium tax credit, and the employer shared responsibility provisions, see www.irs.gov/Affordable-Care-Act/Individuals-and-Families or call the IRS Healthcare Hotline for ACA questions (1-800-919-0452).”
- Updated Penalty Amounts. Both sets of 2017 draft instructions include updated penalty amounts for failures to file returns and furnish statements in 2017. The adjusted penalty amount is $260 per violation, with an annual maximum of $3,218,500 (up from a maximum of $3,193,000, for 2016).
- Code Series 2 (Section 4980H Safe Harbor Codes and Other Relief). The 2017 draft instructions for Forms 1094-C and 1095-C clarify that there is no specific code to enter on line 16 to indicate that a full-time employee who was offered coverage either did not enroll or waived the coverage.
- Corrected Forms 1095-C. The 2017 draft instructions for Forms 1094-C and 1095-C include additional information for employers that have errors on Forms 1095-C. Specifically, the draft instructions indicate that Forms 1095-C filed with incorrect dollar amounts on line 15, Employee Required Contribution, may fall under a safe harbor for certain de minimis errors. The safe harbor generally applies if no single amount in error differs from the correct amount by more than $100. If the safe harbor applies, employers will not have to correct Form 1095-C to avoid penalties. However, if the recipient elects for the safe harbor not to apply, the employer may have to issue a corrected Form 1095-C to avoid penalties. For more information, see Notice 2017-9.
- Reporting Catastrophic Coverage for 2017. The 2017 draft instructions for Forms 1094-B and 1095-B clarify that reporting for catastrophic coverage enrolled in through the Exchange remains optional for 2017. It was expected that health insurance issuers and carriers would be required to report this coverage beginning in 2017. However, the instructions clarify that reporting of catastrophic coverage enrolled in through the Exchange will remain optional for coverage in 2017 (filing in 2018).
- Formatting Returns Filed with the IRS. Both sets of 2017 draft instructions clarify that all returns filed with the IRS must be printed in landscape format.
In addition, a prior draft version of Form 1095-C for 2017 clarified that the “Plan Start Month” box in Part II of Form 1095-C will remain optional for 2017. The draft instructions for Forms 1094-C and 1095-C indicate that this box may be mandatory for the 2018 Form 1095-C.
Although the forms have been finalized for 2017 reporting, keep in mind that the IRS may include additional clarifications in the final instructions, once those are released.
Additional Resources
The 2016 versions of these forms are also available on the IRS website:
These forms must have been filed with the IRS no later than Feb. 28, 2017 (March 31, 2017, if filing electronically). However, the IRS extended the due date for furnishing individual statements for 2016 an extra 30 days, from Jan. 31, 2017, to March 2, 2017. The IRS does not anticipate extending the filing or furnishing deadlines for 2017 reporting.
According to the IRS, information returns under Sections 6055 and 6056 may continue to be filed after the filing deadline (both on paper and electronically). Employers that missed the filing deadline should continue to make efforts to file their returns as soon as possible.
The IRS also previously released:
More Information
Please contact Scurich Insurance for more information on reporting under Code Sections 6055 and 6056.
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