Affordable Care Act Updates: Brought to us by HR360
Draft Instructions for Forms 1094-B, 1095-B, 1094-C and 1095-C
The IRS has released 2015 Draft Instructions for Forms 1094-B and 1095-B and 2015 Draft Instructions for Forms 1094-C and 1095-C to help employers prepare for the new information reporting provisions under the Affordable Care Act. Employers are required to report for the first time in early 2016 for calendar year 2015.
2015 Draft Forms Final versions of the 2014 forms were previously released for those employers that chose to voluntarily comply for the 2014 calendar year. The following draft forms are now available for 2015:
- Draft Form 1094-C (transmittal)
- Draft Form 1095-C
- Draft Form 1094-B (transmittal)
- Draft Form 1095-B
The Forms must be electronically filed if the employer is required to file at least 250 Forms 1095-B or 1095-C.
Who is Required to Report As a reminder, Forms 1094-B and 1095-B will be used by self-insuring employers that provide minimum essential health coverage (regardless of size) to report information on this coverage to the IRS and to covered individuals. Large employers (generally those with 50 or more full-time employees, including full-time equivalents) will use Forms 1094-C and 1095-C to report information to the IRS and to their employees about their compliance with the employer shared responsibility provisions (“pay or play”) and the health care coverage they have offered.
Note: Employers subject to both reporting provisions (generally self-insured employers with 50 or more full-time employees, including full-time equivalents) will satisfy their reporting obligations using Forms 1094-C and 1095-C. Form 1095-C includes separate sections for reporting under each provision.
For More Information Additional details on the information reporting requirements for providers of minimum essential coverage, including self-insured employers, are available in IRS Questions and Answers. More information about the information reporting requirements for large employers subject to “pay or play” is available in separate IRS Questions and Answers.
Certain Veterans Excluded When Determining Large Employer Status Under Pay or Play
Posted on August 13 2015 03:11 PM
New Law Applies Exemption for Months in 2014
Under a new law, certain veterans will not be taken into account for purposes of determining whether an employer is subject to the employer shared responsibility (“pay or play”) requirements under Health Care Reform.
Employers Subject to Pay or Play As a reminder, employers with 100 or more full-time employees (including full-time equivalents) are generally subject to the requirements in 2015, while those with 50 to 99 full-time employees (including full-time equivalents) do not need to comply until 2016 if they meet certain criteria.
New Exemption Specifically, the new law amends the “pay or play” rules to provide that an individual will not be taken into account in determining large employer status for any month in which he or she has medical coverage under TRICARE or the Veterans Administration. The exemption applies to months beginning after December 31, 2013.
Visit our Pay or Play section for more information on determining large employer status.
Cadillac Tax Special Updates
Effective for taxable years beginning after December 31, 2017, an excise tax will be imposed on high cost employer-sponsored health coverage. The tax is commonly referred to as the “Cadillac tax” and is governed by Internal Revenue Code (IRC) section 4980I.
The Cadillac tax is imposed if:
- An employee is covered under any “applicable employer-sponsored coverage” at any time during a taxable period, and
- There is any excess benefit with respect to the coverage.
The tax is equal to 40% of the excess benefit.
Special Updates: IRS Notices 2015-16 and 2015-52 describe potential approaches with regard to a number of issues under section 4980I, which could be incorporated in future proposed regulations, and invite comments on these potential approaches. The issues addressed in the notices primarily relate to:
- The definition of “applicable employer-sponsored coverage”;
- The determination of the cost of applicable employer-sponsored coverage;
- The application of the annual statutory dollar limit to the cost of applicable employer-sponsored coverage;
- The definition of taxpayers who may be liable for the tax;
- Employer aggregation rules;
- The allocation of the tax among applicable taxpayers; and
- Payment of the tax.
After considering comments on both pieces of guidance, the Treasury and IRS are expected to publish proposed regulations under section 4980I.
Applicable Employer-Sponsored Health Coverage
“Applicable employer-sponsored coverage” generally means, with respect to any employee (which includes any former employee, surviving spouse, or other primary insured individual), coverage under any group health plan made available to the employee by an employer which is excludable from the employee’s gross income.
Note: Coverage will be treated as “applicable employer-sponsored coverage” without regard to whether the employer or employee pays for the coverage.
Among others, the following types of coverage are not included in the definition of “applicable employer-sponsored coverage”:
- Coverage only for accident, or disability income insurance, or any combination thereof;
- Workers’ compensation or similar insurance;
- Automobile medical payment insurance;
- Long-term care coverage; or
- Other similar insurance coverage, specified in regulations, under which benefits for medical care are secondary or incidental to other insurance benefits.
The cost of plan benefits generally cannot be above the threshold of $10,200 for self-only coverage and $27,500 for family coverage, with exceptions for certain types of coverage.
Exceptions The threshold amount is increased by $1,650 for individual coverage and $3,450 for family coverage in the case of an individual who:
- Is a qualified retiree; or
- Participates in an employer-sponsored plan where the majority of employees covered by the plan are engaged in a high-risk profession or are employed to repair or install electrical or telecommunications lines.
Liability to Pay the Tax
The Cadillac tax is imposed proportionately on each coverage provider:
- If the employer-sponsored coverage consists of health coverage under a group health plan, the health insurance issuer is liable to pay the tax.
- If the employer-sponsored coverage consists of employer contributions to an Archer MSA or a health savings account (HSA), the employer is liable to pay the tax.
- In the case of any other applicable employer-sponsored coverage, the plan administrator is liable to pay the tax.
Responsibility to Calculate the Tax
Each employer generally must:
- Calculate the excess benefit for each taxable period and the applicable share of such excess benefit for each coverage provider, and
- Notify the Secretary of Treasury and each coverage provider of the amount so determined for the provider, at such time and in such manner as the Secretary may prescribe.
In the case of applicable employer-sponsored coverage made available to employees through a multi-employer plan, the plan sponsor must make the required calculations and provide the notice.
Note that employers or plan sponsors may be penalized if they undervalue the insurance cost subject to the Cadillac tax.