Blog Archives

Employer Impact of The SCOTUS Same-Sex Marriage Ruling

What Employers Should Know

The Supreme Court’s decision impacts the legality of same-sex marriages throughout the country. By ruling that state laws prohibiting same-sex marriage are unconstitutional, the Supreme Court has effectively legalized same-sex marriage in all 50 states. Same-sex couples will be allowed to marry in any state, and will be entitled to the all the rights, benefits and obligations given to opposite-sex spouses under both federal and state law.

Also, due to the Supreme Court’s ruling, employers will generally be required to treat employees in same-sex marriages the same as employees in opposite-sex marriages for many federal and state law purposes.

Many federal laws have already been interpreted to include both same-sex and opposite-sex marriages due to the Supreme Court’s decision on DOMA. The Supreme Court’s most recent ruling will expand these legal rights and protections to additional couples.

Also, many state law leave rights for legally married spouses should extend to employees with same-sex spouses. Same-sex married couples should also be subject to the same state tax rules as opposite-sex married couples. State insurance laws may require employers with insured health plans to offer equal health plan coverage to opposite-sex and same-sex couples.

The Supreme Court did not consider whether federal nondiscrimination laws should be expanded to protect workers from discrimination based on sexual orientation or gender identity. However, a number of states have laws that prohibit such workplace discrimination. Employers should keep any applicable laws in mind when providing any rights or benefits to employees.

Call us today for a full analysis. It’s up to you to make sure you and your business are compliant with the law, both Federally and within your particular State….and we can help!

Q1 2015 Benefits Bulletin: A Look Back, and Ahead

From CIBC of Illinois

IRS Invites Comments on Cadillac Tax Implementation

On Feb. 23, 2015, the Internal Revenue Service (IRS) issued Notice 2015-16 to describe potential approaches for a number of issues related to the Affordable Care Act’s (ACA) so-called Cadillac tax. The IRS is seeking comments as it begins developing guidance for the implementation of the Cadillac tax. Public comments may be submitted to the IRS until May 15, 2015.

Proposed or final regulations have not yet been issued on the ACA’s Cadillac tax provision. This notice is intended to invite comment as guidelines are assembled, and taxpayers should not rely on the information provided in Notice 2015-16.

Cadillac Tax Overview

The Cadillac tax will go into effect beginning in 2018. This provision imposes a 40 percent excise tax on high-cost group health coverage. The Cadillac tax is intended to encourage companies to choose lower-cost health plans for their employees.

The Cadillac tax provision is found in Internal Revenue Code Section 4980I. This provision taxes the amount of an employee’s “excess benefit.” The excess benefit is the amount by which the monthly cost of an employee’s employer-sponsored health coverage exceeds the annual limitation.

For 2018, the statutory dollar limits are:

  • $10,200 per employee for self-only coverage; and
  • $27,500 per employee for other-than-self-only coverage.

The tax amount for each employee’s coverage will be calculated by the employer and paid by the coverage provider.

The Cadillac tax applies to “applicable employer-sponsored coverage” (both insured and self-insured). Applicable employer-sponsored coverage is coverage under any group health plan made available to the employee by the employer, which is excludable from the employee’s gross income under Code Section 106.

Applicable coverage also includes health flexible spending accounts (FSAs), health savings accounts (HSAs), on-site medical clinics, retiree coverage, multiemployer plans and coverage only for a specified disease or illness and hospital indemnity or other fixed indemnity insurance (if paid on a pretax basis or if a Section 162(l) deduction is allowed).

 

DOL Issues Final Rule to Expand FMLA Protections for Same-sex Spouses

The Department of Labor (DOL) has issued a final rule that will expand rights under the Family and Medical Leave Act (FMLA) for same-sex spouses. Under the final rule, eligible employees in legal same-sex marriages will be able to take FMLA leave in order to care for their spouses or family members, regardless of where they live.

The DOL’s new guidance is effective March 27, 2015, and it replaces guidance regarding FMLA protections for same-sex spouses that was issued following the U.S. Supreme Court’s decision in United States v. Windsor.

The final rule changes the definition of “spouse” under the FMLA as follows:

Adopts a “place of celebration” rule (which is based on where the marriage was entered into), instead of the “state of residence” rule that applied under prior DOL guidance; and

  • Expressly includes same-sex marriages in addition to common law marriages, and encompasses same-sex marriages entered into abroad that could have been entered into in at least one state.

This change will impact FMLA leave in several ways. Specifically, the definitional change means that eligible employees, regardless of where they live, will be able to:

  • Take FMLA leave to care for their same-sex spouses with serious health conditions;
  • Take qualifying exigency leave due to their same-sex spouses’ covered military service; or
  • Take military caregiver leave for their same-sex spouses.

In connection with the final rule, the DOL also issued a set of frequently asked questions (FAQs) to help employers and employees understand the changes to the FMLA’s definition of “spouse.”

To comply with the final rule, employers should review and update their FMLA policies and procedures as necessary. Employers should also train employees who are involved in the leave management process on the expanded eligibility rules for same-sex spouses under the FMLA.

DOJ to Allow Claims Based on Gender Identity Discrimination

On Dec. 18, 2014, the U.S. Department of Justice (DOJ) announced a reversal of its position regarding whether discrimination based on sex incudes discrimination based on an individual’s gender identity and transgender status.

The DOJ has now taken the position that discrimination based on sex includes discrimination based on an individual’s gender identity and transgender status.

Although the DOJ’s authority to file discrimination lawsuits is limited to government employers, this announcement solidifies the federal government’s position on gender identity rights.

Background Title VII of the Civil Rights Act prohibits employers from discriminating on the basis of race, color, religion, sex or national origin when making employment decisions. In 2006, the DOJ took the position that discrimination based on sex excluded discrimination based on an individual’s gender identity or transgender status. The DOJ has now reversed this position.

Gender identity is an individual’s internal sense of being male or female. An individual’s internal identification may or may not correspond to the individual’s biological gender. Transgender individuals are people with a gender identity that is different from the sex assigned to them at birth.

Effect on Employers Employers can expect to see more individuals file claims based on gender identity discrimination and increased federal support for employee protections against discrimination based on gender identity and sexual orientation.

Employers should review their employment policies to ensure that they are compliant with federal, state and local anti-discrimination regulations.

New Guidance and Relief for Employer Payment of Individual Premiums

Under the ACA, employer payment plans do not comply with several provisions that took effect beginning in 2014. Violations of these rules can result in excise taxes of $100 per day for each employee.

An employer payment plan is an arrangement where an employer reimburses or pays premiums for an employee’s individual health insurance.

New Guidance on Employer Payments
The Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury have released several pieces of guidance clarifying the rules regarding these arrangements. The IRS issued Notice 2015-17 on Feb. 18, 2015, providing further clarification.

Specifically, this notice provides information on several related issues:

  • Reiterates that employer payment plans are group health plans that will fail to comply with the ACA’s market reforms applicable to group health plans;
  • Clarifies that increases in employee compensation do not constitute an employer payment plan, as long as the increases are not conditioned on the purchase of individual health coverage;
  • Provides transition relief from the excise tax for employer payment plans sponsored by small employers (those not subject to the ACA’s employer shared responsibility rules) and to S corporation health care arrangements for 2-percent shareholder-employees;
  • Addresses whether employers may reimburse employees for Medicare or TRICARE premiums for active employees under the ACA; and
  • States that employer payments for individual premiums can be excludable from an employee’s income under the tax code but will still violate the ACA’s market reforms.

Employers should review their benefit and compensation plans and policies to ensure they are not in violation of current guidance regarding employer payment plans.

The information contained in this newsletter is not intended as legal or medical advice. Please consult a professional for more information.

Affordable Care Act Update: Subsidy Certifications Explained

Certifications of Employee Eligibility for Subsidies

The Affordable Care Act (ACA) requires health insurance Exchanges to send a notice to employers regarding employees who purchase coverage through an Exchange and qualify for a health insurance subsidy. These notices are also called “Section 1411 Certifications” because the notice requirement is contained in Section 1411 of the ACA.

The Section 1411 Certification is part of the process established by the Department of Health and Human Services (HHS) for verifying that only eligible individuals receive health insurance subsidies. Both state-run and federally facilitated Exchanges are required to send these certifications to employers. For 2015, it is expected that HHS will issue the certifications in batches, beginning in spring 2015.

These certifications are not directly related to the ACA’s shared responsibility rules for applicable large employers (ALEs). Starting in 2016, the Internal Revenue Service (IRS) will contact ALEs to inform them of their potential liability for a shared responsibility penalty for 2015, and it will provide them with an opportunity to respond. Employers that receive certifications may appeal a subsidy determination to help ensure, as much as possible, that employees are not mistakenly receiving subsidies. Appealing subsidy determinations may also help limit an ALE’s potential liability for a shared responsibility penalty.

affected employers

The Exchanges are required to provide the certifications to all employers with employees who purchase coverage through an Exchange and qualify for a health insurance subsidy. This includes ALEs that are subject to the ACA’s shared responsibility rules and small employers that do not qualify as ALEs. Also, for efficiency reasons, Exchanges can either send the certifications on an employee-by-employee basis as subsidy determinations are made, or the Exchanges can send the certifications to employers for a group of employees.

health insurance subsidies

There are two federal health insurance subsidies available for coverage purchased through an Exchange—premium tax credits and cost-sharing reductions. Both of these subsidies vary in amount based on the taxpayer’s household income, and they both reduce the out-of-pocket costs of health insurance for the insured.

  • Premium tax credits are available for people with somewhat higher incomes (up to 400 percent of the federal poverty level), and they reduce out-of-pocket premium costs for the taxpayer.
  • Reduced cost-sharing is available for individuals who qualify to receive the premium tax credit and have lower incomes (up to 250 percent of the federal poverty level). Through cost-sharing reductions, these individuals have lower out-of-pocket costs at the point of service (for example, lower deductibles and copayments).

To be eligible for a health insurance subsidy, a taxpayer:

  • Must have a household income for the year between 100 percent and 400 percent of the federal poverty level for the taxpayer’s family size,
  • May not be claimed as a dependent of another taxpayer,
  • Must file a joint return if married,
  • Cannot be eligible for minimum essential coverage (Government or employer sponsored plan).

 

An employee who may enroll in an employer-sponsored plan, and individuals who may enroll in the plan because of a relationship with the employee, are generally considered eligible for minimum essential coverage if the plan is affordable and provides minimum value.

The requirements of affordability and minimum value do not apply if an employee actually enrolls in any employer-sponsored minimum essential coverage, including coverage provided through a cafeteria plan, a health FSA or an HRA, but only if the coverage does not consist solely of excepted benefits. Thus, if an employee enrolls in any employer-sponsored minimum essential coverage, the employee is ineligible for a subsidy.

section 1411 certification

The ACA directed HHS to establish a program for verifying whether an individual meets the eligibility standards for receiving an Exchange subsidy. As part of this verification process, an Exchange must notify the employer when it determines that an employee is eligible for subsidized coverage.

Final regulations issued by HHS on March 27, 2012, specify the content requirements for the Section 1411 Certifications.

Here is a key point:

Employees who are eligible for employer-sponsored coverage that is affordable and provides minimum value are not eligible for a subsidy. This is significant because the ACA’s shared responsibility penalty for ALEs is triggered when a full-time employee receives a subsidy for coverage under an Exchange. An employee who is not eligible for a subsidy may still be eligible to enroll in a health plan through an Exchange. However, this would not result in a shared responsibility penalty for the employer.

 

section 1411 certification

The ACA directed HHS to establish a program for verifying whether an individual meets the eligibility standards for receiving an Exchange subsidy. As part of this verification process, an Exchange must notify the employer when it determines that an employee is eligible for subsidized coverage.

Final regulations issued by HHS on March 27, 2012, specify the content requirements for the Section 1411 Certifications.

 

section 1411 certification

The ACA directed HHS to establish a program for verifying whether an individual meets the eligibility standards for receiving an Exchange subsidy. As part of this verification process, an Exchange must notify the employer when it determines that an employee is eligible for subsidized coverage.

Final regulations issued by HHS on March 27, 2012, specify the content requirements for the Section 1411 Certifications.

Section 1411 Certifications must: ·          Identify the employee;·          Provide that the employee has been determined to be eligible for advance payments of a health insurance subsidy;·          Indicate that, if the employer has 50 or more full-time employees, the employer may be liable for a penalty under Code Section 4980H; and

·          Describe the employer’s appeal rights.

appeal rights

When an employer receives a certification regarding an employee’s eligibility for an Exchange subsidy, the employer may appeal the determination to correct any information about the health coverage it offers to employees. The appeals process can help:

  • Minimize the employee’s potential liability to repay advance payments of the subsidy that he or she was not eligible to receive; and
  • Protect the employer from being incorrectly assessed with a tax penalty under the shared responsibility rules (if the employer is an ALE). If the appeal is successful and the employee does not receive an Exchange subsidy, the employee cannot trigger penalties for an ALE under the shared responsibility rules.

Final regulations issued by HHS on Aug. 30, 2013, established general parameters for the employer appeal process. A state-run Exchange may have its own appeals process or it may follow the federal appeals process established by HHS. In either case, the Exchange must:

  • Give employers at least 90 days from the date of the Exchange notice to request an appeal;
  • Allow employers to submit relevant information to support the appeal;
  • Not limit or interfere with an employer’s right to make an appeal request; and
  • Accept appeal requests made by telephone, by mail, via the Internet or in person (if the Exchange is capable of receiving in-person appeal requests) and provide assistance in making the appeal request if this assistance is needed.

The appeals entity must provide written notice of the appeal decision within 90 days of the date the appeal request is received, if administratively feasible.

 

Another key point:

HHS’ final regulations clarify that an appeals decision in favor of the employee’s eligibility for a subsidy does not foreclose any appeal rights the employer may have for a penalty assessment under Code Section 4980H. Thus, while ALEs that receive certifications may appeal a subsidy determination to help ensure, as much as possible, that employees are not mistakenly receiving subsidies, they are not required to appeal a subsidy determination to preserve their rights to appeal an IRS assessment of a penalty tax.

Also, employers may develop policies to allow an employee to enroll in employer-sponsored coverage outside an open enrollment period when the employee is determined to be ineligible for Exchange subsidies as a result of an employer appeal decision.

other employer considerations

To help avoid incorrect subsidy determinations, HHS encourages employers to educate their employees about the details of employer-sponsored health coverage. This includes information on whether their plans are affordable and provide minimum value. Employees enrolling in Exchange coverage will generally complete an Employer Coverage Tool that gathers information about the employers’ group health plans. HHS encourages employers to assist employees with their Exchange applications by providing information regarding the employer-sponsored coverage through the Employer Coverage Tool.

In addition, employers should remember that the ACA amended the Fair Labor Standards Act (FLSA) to include whistleblower protections for employees. Employees are protected from retaliation for reporting alleged violations of the ACA. Employees are also protected from retaliation for receiving a subsidy when enrolling in an Exchange plan. If an employer violates the ACA’s whistleblower protections, it may be required to reinstate the employee, as well as provide back pay (with interest), compensatory damages and attorney fees.

As always, contact us at 877-936-3580 for more information on this, or any other aspect of employee benefits and the Affordable Care Act.

 

ACA Update: New Guidance and Relief for Employer Payment of Individual Premiums

In the past, many employers have helped employees pay for individual health insurance policies instead of offering an employer-sponsored plan. In recent months, the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury (Departments) have released several pieces of guidance addressing these arrangements.

The Departments’ guidance specifically addresses “employer payment plans,” under which an employer reimburses or pays premiums for an employee’s individual health insurance policy.

According to this guidance, employer payment plans do not comply with several ACA provisions that took effect beginning in 2014. Violations of these rules can result in excise taxes of $100 per day for each employee.

IRS Notice 2015-17

On Feb. 18, 2015, the Internal Revenue Service (IRS) issued Notice 2015-17. This notice:

  • Reiterates that employer payment plans are group health plans that will fail to comply with the ACA’s market reforms applicable to group health plans;
  • Clarifies that increases in employee compensation do not constitute an employer payment plan, as long as the increases are not conditioned on the purchase of individual health coverage;
  • Provides transition relief from the excise tax for employer payment plans sponsored by small employers (those not subject to the ACA’s employer shared responsibility rules) and to S corporation healthcare arrangements for 2-percent shareholder-employees;
  • Addresses whether employers may reimburse employees for Medicare or TRICARE premiums for active employees under the ACA; and
  • States that employer payments for individual premiums can be excludable from an employee’s income under the tax code, but will still violate the ACA’s market reforms.

The DOL and HHS have reviewed the notice and agree with the guidance provided. The Departments noted that they expect to issue further clarifications regarding other aspects of employer payment plans and HRAs in the near future.

Increases in Employee Compensation

Notice 2015-17 clarifies that, if an employer increases an employee’s compensation, but does not condition the additional compensation on the purchase of health coverage (or otherwise endorse a particular policy, form or issuer of health insurance), it is not considered an employer payment plan.

According to the IRS, providing employees with information about the Exchange or the premium tax credit is not endorsement of a particular policy, form or issuer of health insurance. Because this type of arrangement generally will not constitute a group health plan, it is not subject to the ACA’s market reforms.

Excise Tax Delay for Small Employers

Small employers have often helped employees pay for individual coverage. As noted above, these employers would normally be subject to an excise tax of $100 per day for each employee.

Notice 2015-17 provides a delay in the excise tax penalty for employers that are not applicable large employers (ALEs) under the ACA’s employer shared responsibility rules. These employers may need additional time to obtain group health coverage or to adopt a suitable alternative.

Therefore, an excise tax will not be assessed for violations of the ACA’s market reforms by certain employer payment plans that pay (or reimburse employees) for individual health policy premiums or Medicare Part B or Part D premiums.

This transition relief is available on a temporary basis. Employers may be eligible for relief from the excise tax as late as June 30, 2015. Specifically:

  • For 2014, the relief applies to employers that are not ALEs in 2014.
  • For Jan. 1 to June 30, 2015, the relief applies to employers that are not ALEs in 2015.

After June 30, 2015, these employers may be liable for the excise tax.

This relief does not extend to stand-alone HRAs or other arrangements that reimburse employees for medical expenses other than insurance premiums.

Employers eligible for this relief are not required to file IRS Form 8928 (regarding failures to satisfy requirements for group health plans) as a result of having these arrangements during the period for which the employer is eligible for the relief.

Reimbursement of Medicare and TRICARE Premiums

Notice 2015-17 notes that an arrangement under which an employer reimburses (or pays directly) some or all of Medicare Part B or Part D premiums for employees constitutes an employer payment plan. Similarly, an arrangement under which an employer reimburses (or pays directly) some or all of medical expenses for employees covered by TRICARE constitutes an HRA. In both cases, if the arrangement covers two or more active employees, it is a group health plan subject to the ACA’s market reforms.

An employer payment plan or an HRA may not be integrated with Medicare coverage or TRICARE to satisfy the market reforms, because Medicare coverage and TRICARE are not group health plans for integration purposes.

However, an employer payment plan or HRA that pays for or reimburses Medicare Part B or Part D premiums, or medical expenses for employees covered by TRICARE, is integrated with another group health plan offered by the employer for purposes of the market reforms if:

  • The employer offers a group health plan (other than the employer payment plan or HRA) to the employee that does not consist solely of excepted benefits and offers coverage providing minimum value;
  • The employee participating in the employer payment plan or HRA is actually enrolled in Medicare Parts A and B or TRICARE;
  • The employer payment plan or HRA is available only to employees who are enrolled in Medicare Part A and Part B or Part D, or TRICARE; and
  • The employer payment plan or HRA is limited to reimbursement of Medicare Part B or Part D premiums, or cost-sharing, and excepted benefits, including Medigap premiums or TRICARE supplemental premiums.

Note that, to the extent that this type of arrangement is available to active employees, it may be subject to restrictions under other laws, such as the Medicare secondary payer provisions or laws that prohibit offering financial or other incentives for TRICARE-eligible employees to decline employer-provided group health plan coverage, similar to the Medicare secondary payer rules.

An employer payment plan that has fewer than two participants who are current employees (for example, a retiree-only plan) on the first day of the plan year is not subject to the market reforms, and, therefore, integration is not necessary to satisfy the market reforms.

Also, an employer may provide more than one type of healthcare arrangement for its employees (for example, a Medicare Part B employer payment plan and a TRICARE-related HRA), provided that each arrangement meets the applicable integration or other rules.

S Corporation Healthcare Arrangements for 2-percent Shareholder-employees

Under IRS Notice 2008-1, if an S corporation pays for (or reimburses) premiums for individual health insurance coverage covering a 2-percent shareholder, the payment or reimbursement is included in income, but the 2-percent shareholder-employee may deduct the amount of the premiums (provided that all other eligibility criteria for deductibility are satisfied). Notice 2015-17 refers to this as a 2-percent shareholder-employee healthcare arrangement.

The Departments stated that they may issue additional guidance on the application of the market reforms to a 2-percent shareholder-employee healthcare arrangement. However, until further guidance is issued (and at least through the end of 2015), the excise tax will not be assessed for any failure to satisfy the market reforms by a 2-percent shareholder-employee healthcare arrangement.

Furthermore, until additional guidance provides otherwise, an S corporation with a 2-percent shareholder-employee healthcare arrangement will not be required to file IRS Form 8928 (regarding failures to satisfy requirements for group health plans, including the market reforms) solely as a result of having a 2-percent shareholder-employee healthcare arrangement.

However, this guidance does not apply to reimbursements of individual health insurance coverage with respect to employees of an S corporation who are not 2-percent shareholders.

The IRS is also considering whether additional guidance is needed on the federal tax treatment of 2-percent shareholder-employee healthcare arrangements. However, until additional guidance provides otherwise, taxpayers may continue to rely on Notice 2008-1 with regard to the tax treatment of these arrangements for all federal income and employment tax purposes.

To the extent that a 2-percent shareholder is allowed both the deduction described above and a premium tax credit for coverage through an Exchange, Revenue Procedure 2014-41 provides guidance on calculating the deduction and the credit with respect to the 2-percent shareholder.

Notice 2015-17 also noted, however, that the market reforms do not apply to a group health plan that has fewer than two participants who are current employees on the first day of the plan year. Thus, an arrangement covering only a single employee (whether or not that employee is a 2-percent shareholder-employee) generally is not subject to the market reforms, whether or not the reimbursement arrangement otherwise constitutes a group health plan.

However, if an S corporation maintains more than one of these types of arrangements for different employees (whether or not 2-percent shareholder-employees), all are treated as a single arrangement covering more than one employee, so that this exception does not apply.

Employer Payment Plans under Code Sections 105 and 106

The notice also addresses Revenue Ruling 61-146 (Rev. Rul. 61-146), which has been cited by some as authority permitting employer payment plans under the tax code. Under Rev. Rul. 61-146, employer reimbursements of an employee’s individual insurance premiums are excluded from the employee’s gross income under Code Section 106. This exclusion also applies if the employer pays the premiums directly to the insurance company.

According to the IRS, this guidance regarding the tax exclusion continues to apply. This means only that the payments are excludable from the employee’s gross income under Section 106 (regardless of whether the employer includes the payments as wages on the Form W-2).

However, the IRS stated that Rev. Rul. 61-146 does not address the application of the ACA’s market reforms, and should not be read as containing any implication regarding the application of those market reforms.

An arrangement under which an employer provides reimbursements or payments that are dedicated to providing medical care (such as cash reimbursements for the purchase of an individual market policy) is, itself, a group health plan. Accordingly, the arrangement is subject to the ACA’s market reform rules applicable to group health plans, without regard to whether the employer treats the money as pre-tax or post-tax to the employee. These employer health care arrangements cannot be integrated with individual market policies to satisfy the market reforms and, therefore, do not comply with the ACA.

The notice supplements two Information Letters previously issued by the IRS Office of Chief Counsel. Letter 2014-0037 and Letter 2014-0039 addressed the ability of employers to reimburse employees’ medical expenses with pre-tax dollars under Code Section 105. These letters note that, although the ACA has not changed the tax treatment under Section 105 or 106, these arrangements violate the ACA’s prohibition on annual limits because they reimburse medical expenses up to a fixed amount.

Prior Employer Payment Plan Guidance

  • 24, 2013: Department FAQs addressed compliance of HRAs with the ACA’s market reforms.
  • 13, 2013: IRS Notice 2013-54 and DOL Technical Release 2013-03 clarified that HRAs, certain health FSAs and other employer payment plans are considered group health plans subject to the ACA’s market reforms, and they cannot be integrated with individual policies to satisfy those requirements. As a result, effective for 2014 plan years, these plans are essentially prohibited.
  • May 13, 2014: IRS FAQs addressed the consequences for employers that reimburse employees for individual health insurance premiums. These arrangements may trigger an excise tax of $100 per day for each applicable employee ($36,500 per year for each employee) under Code Section 4980D.
  • 6, 2014: Department FAQs clarified that employer payment plans do not comply with the ACA’s market reforms and may subject employers to penalties, whether provided on a pre- or after-tax basis.

Individual Health Insurance: Reporting Coverage and Paying Penalties

A key provision of the Affordable Care Act (ACA) is the individual mandate, which requires most individuals to purchase health insurance coverage for themselves and their family members or pay a penalty.

Starting in 2015, individuals will have to report on their federal tax return whether they had health insurance coverage for 2014 or were exempt from the individual mandate. Any penalties that an individual owes for not having health insurance coverage will generally be assessed and collected in the same manner as taxes.

How will coverage be reported under the individual mandate?

Starting in 2015, when you file a federal tax return for 2014, you will have to:

  • Report that you, your spouse (if filing jointly) and any individual you claim as a dependent had health care coverage throughout 2014; or
  • Claim a coverage exemption from the individual mandate for some or all of 2014 and attach Form 8965; or
  • Pay an individual mandate penalty (called a shared responsibility payment) for any month in 2014 that you, your spouse (if filing jointly) or any individual you claim as a dependent did not have coverage and did not qualify for a coverage exemption.

If you and your dependents all had minimum essential coverage for each month of the tax year, you will indicate this on your 2014 tax return by simply checking a box on Form 1040, 1040A or 1040EZ; no further action is required.

If you obtained a coverage exemption from the Marketplace or you qualify for an exemption that you can claim on your return, you will file Form 8965, and attach it to your tax return.

For any month you or your dependents did not have coverage or a coverage exemption, you will have to make a shared responsibility payment. The amount of the payment due will be reported on Form 1040, Line 61, in the “Other Taxes” section, and on the corresponding lines on Form 1040A and 1040EZ.

Who is exempt from the individual mandate?

You may be exempt from the individual mandate penalty if you:

  • Cannot afford coverage
  • Have income below the federal income tax filing threshold
  • Are not a citizen, are not considered a national or are not lawfully present in the United States
  • Experience a gap in coverage for less than a continuous three-month period
  • Qualify as a religious conscientious objector
  • Are a member of a health care sharing ministry
  • Are a member of certain American Indian tribes
  • Are given a hardship exemption by the Department of Health and Human Services
  • Are incarcerated

How much will the individual mandate penalty cost me?

The penalty for not obtaining acceptable health care coverage is being phased in over a three-year period. The amount of the penalty is either your “flat dollar amount” or your “percentage of income amount”—whichever is greater.

For 2014, the annual penalty is either:

  • One percent of your household income that is above the tax return filing threshold for your filing status; or
  • Your family’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a family maximum of $285.

Your payment amount is capped at the cost of the national average premium for a bronze level health plan, available through the Marketplace in 2014. For 2014, the annual national average premium for a bronze level health plan available through the Marketplace is $2,448 per individual ($204 per month), but $12,240 for a family with five or more members ($1,020 per month).

Calculating your payment requires you to know your household income and your tax return filing threshold.

Household income is the adjusted gross income from your tax return plus any excludible foreign earned income and tax-exempt interest you receive during the taxable year. Household income also includes the adjusted gross incomes of all of your dependents who are required to file tax returns.

Tax return filing threshold is the minimum amount of gross income an individual of your age and filing status (for example, single, married filing jointly, head of household) must make to be required to file a tax return.

ACA Update: Feds Prohibit All Employer Reimbursement of Individual Premiums

Due to the rising costs of providing group health insurance, some employers have considered helping employees pay for individual health coverage instead of offering an employer-sponsored group plan. However, these employer reimbursement arrangements do not comply with Affordable Care Act (ACA) requirements.

On Nov. 6, 2014, the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury issued FAQs clarifying that all individual premium reimbursement arrangements are prohibited. Despite the previously widespread understanding that only pre-tax reimbursement arrangements are prohibited, the clarification includes pre-tax and post-tax premium reimbursements and cash compensation for individual premiums.

An employer arrangement that provides cash reimbursement for an individual market policy is considered to be part of a plan, fund or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax for the employee. Therefore, the arrangement is group health plan coverage subject to the ACA’s market reform provisions.

In addition, the Nov. 6 FAQs clarify that an employer cannot offer a choice between enrollment in the standard group health plan or cash only to employees with a high claims risk. This practice constitutes unlawful discrimination based on one or more health factors, which violates federal nondiscrimination laws.

Violation of this guidance by offering prohibited individual premium reimbursement arrangements to employees may trigger penalties. Under Code Section 4980D, an employer could be fined an excise tax of $100 per day for each applicable employee ($36,500 per year per employee).

The information contained in this newsletter is not intended as legal advice. Please consult a professional for more detailed analysis and specific information.

Self-Insurance Update: PCORI Fee Amount Adjusted for 2014

The Affordable Care Act (ACA) imposes a fee on health insurance issuers and self-insured plan sponsors in order to fund comparative effectiveness research. These fees are widely known as Patient-Centered Outcomes Research Institute fees (PCORI fees).

On Sept. 18, 2014, the Internal Revenue Service (IRS) published Notice 2014-56, which provides the adjusted PCORI fee amount for plan years ending on or after Oct. 1, 2014, and before Oct. 1, 2015 (that is, 2014 for calendar year plans). For plan years ending on or after Oct. 1, 2014, and before Oct. 1, 2015, the PCORI fee amount is $2.08 multiplied by the average number of lives covered under the plan.

In the future, the IRS will publish the adjusted PCORI fee amount for plan years ending on or after Oct. 1, 2015, and before Oct. 1, 2019.

Overview of PCORI Fees

The PCORI fees apply for plan years ending on or after Oct. 1, 2012, but do not apply for plan years ending on or after Oct. 1, 2019. For calendar year plans, the fees will be effective for the 2012 through 2018 plan years.

Issuers and plan sponsors must pay PCORI fees annually on IRS Form 720 by July 31 of each year. The fee will generally cover plan years that end during the preceding calendar year.

PCORI Fee Amounts

The PCORI fees are calculated by multiplying an applicable rate for each tax year by the average number of lives covered under the plan. The applicable rate for each tax year is as follows:

  • $1 for plan years ending before Oct. 1, 2013 (that is, 2012 for calendar year plans); and
  • $2 for plan years ending on or after Oct. 1, 2013, and before Oct. 1, 2014.

For plan years ending on or after Oct. 1, 2014, the PCORI fee amount will increase based on increases in the projected per capita amount of National Health Expenditures.

Under Notice 2014-56, for plan years ending on or after Oct. 1, 2014, and before Oct. 1, 2015, the adjusted PCORI fee amount is $2.08 multiplied by the average number of lives covered under the plan. This amount was calculated based on the percentage increase in the projected per capita amount of the National Health Expenditures published by the U.S. Department of Health and Human Services on Sept. 3, 2014 (Table 3).

As always, call us today for a full analysis of your employee benefit structure and options!

Repaying Exchange Subsidy Overpayments: Some Obamacare Recipients Are In For A Rude Awakening at Tax Time

The Affordable Care Act (ACA) created health insurance subsidies in the form of premium tax credits and cost-sharing reductions in order to help eligible individuals and families purchase health insurance through an Exchange. The subsidies are designed to make coverage through an Exchange more affordable by reducing your out-of-pocket premium costs. However, because subsidies are based on projected income, you may have received a subsidy overpayment and are wondering what happens next.

How Do Overpayments Occur?

Subsidies are calculated on your tax return using your household income and family size for the taxable year. To make income and subsidy determinations, the Exchange insurance application asked you to provide specific information about your income. If your current income was not steady or if it was expected to change, you were asked to give a projected income on the application. If you did not provide any financial information, the Exchange used your federal income tax return from the previous year to calculate your projected income.

Advance payments of the premium tax credit are made directly to the insurance company on your behalf. At the end of the year, the advance payments are reconciled against the amount of your family’s actual premium tax credit, as calculated on your federal income tax return. If your actual income is more than your projected income, you likely have a subsidy overpayment.

How Are Overpayments Fixed?

At the end of each year, your subsidy amount will be recalculated using your household income as reported on your tax return, and any difference in the amounts must be corrected.

If your income has increased from the amount you reported to the Exchange and you received a larger subsidy than you were entitled to, you may have to repay part of your subsidy. This could result in either a smaller tax refund or a tax payment due. However, if, based on your household income, you are owed a greater premium tax credit than you received, you will receive the excess as an income tax refund.

If you do have to repay a portion of your subsidy, it is important to note that the ACA limits the amount of additional tax that may be imposed on taxpayers whose household incomes are less than 400 percent of the federal poverty level (FPL). The 2014 limits are as follows:

  • Less than 200 percent FPL: $300 individual, $600 family
  • 200-300 percent FPL: $750 individual, $1,500 family
  • 300-400 percent FPL: $1,250 individual, $2,500 family

For taxable years beginning in 2015, these limits may be adjusted to reflect changes in the consumer price index. If your household income is at or above 400 percent of the FPL, you will be required to repay the entire amount of any subsidy overpayment.

Open Enrollment Checklist From CIBC of Illinois, Inc.

To prepare for open enrollment, health plan sponsors should become familiar with the legal changes affecting the design of their plans for the 2015 plan year. These changes are primarily due to the Affordable Care Act (ACA). Employers should review their plan documents to confirm that they include these required changes.

In addition, any changes to a health plan’s benefits for the 2015 plan year should be communicated to plan participants. Health plan sponsors should also confirm that their open enrollment materials contain certain required participant notices, such as the summary of benefits and coverage (SBC).

There are also some participant notices that must be provided annually or upon initial enrollment. To minimize cost and streamline administration, employers should consider including these notices in their open enrollment materials.

 

Grandfathered Plan Status

A grandfathered plan is one that was 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. Contact CIBC of Illinois, Inc. if you have questions about changes you have made, or are considering making, to your plan.

  • If you have a grandfathered plan, determine whether it will maintain its grandfathered status for the 2015 plan year. Grandfathered plans are exempt from some of the ACA’s requirements. A grandfathered plan’s status will affect its compliance obligations from year to year.
  • If your plan will lose grandfathered status for 2015, confirm that the plan has all of the additional patient rights and benefits required by the ACA. This includes, for example, coverage of preventive care without cost-sharing requirements.

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). As enacted, the ACA included an overall annual limit (or an out-of-pocket maximum) for all health plans and an annual deductible limit for small insured health plans. On April 1, 2014, the ACA’s annual deductible limit was repealed. This repeal is effective as of the date that the ACA was enacted, back on March 23, 2010.

The out-of-pocket maximum, however, continues to apply to all non-grandfathered group health plans, including self-insured health plans and insured plans. Effective for plan years beginning on or after Jan. 1, 2015, a health plan’s out-of-pocket maximum for EHB may not exceed $6,600 for self-only coverage and $13,200 for family coverage.

  • Review your plan’s out-of-pocket maximum to make sure it complies with the ACA’s limits for the 2015 plan year ($6,600 for self-only coverage and $13,200 for family coverage).
  • If you have a health savings account (HSA)-compatible high deductible health plan (HDHP), keep in mind that your plan’s out-of-pocket maximum must be lower than the ACA’s limit. For 2015, the out-of-pocket maximum limit for HDHPs is $6,450 for self-only coverage and $12,900 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 2015.
  • Be aware that the ACA’s annual deductible limit no longer applies to small insured health plans.

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 flexible spending account (FSA) must be limited to $2,500. On Oct. 31, 2013, the Internal Revenue Service (IRS) announced that the health FSA limit remained unchanged at $2,500 for 2014. However, the $2,500 limit is expected to be adjusted for cost-of-living increases for later years. The IRS is expected to release the health FSA limit for 2015 later this year.

  • Work with your advisors to monitor IRS guidance on the health FSA limit for 2015.
  • Once the 2015 limit is announced by the IRS, confirm that your health FSA will not allow employees to make pre-tax contributions in excess of that amount for 2015. Also, communicate the 2015 health FSA limit to employees as part of the open enrollment process.

Transition Policy for Small Group Health Plans

Some non-grandfathered health plans in the small group market were allowed to renew for 2014 without adopting all of the ACA’s market reforms under a temporary transition policy adopted by the Obama Administration. The transition policy was originally a one-year reprieve from certain ACA market reforms; however, it was later extended for two more years, to policy years beginning on or before Oct. 1, 2016.

The transition relief is not available to all small group health plans. It only applies to small businesses with coverage that was in effect on Oct. 1, 2013. Also, because the insurance market is primarily regulated at the state level, state governors or insurance commissioners must allow for the transition relief. In addition, health insurance issuers are not required to follow the transition relief and renew plans.

Even if transition relief was available for a small group plan in 2014, it may not be available in 2015 and later years due to insurance market regulations or issuer decisions. If the transition relief no longer applies to your small group plan, confirm that your plan includes the following ACA market reforms for 2015:

  • Pre-existing Condition ExclusionsThe ACA prohibits health plans from imposing pre-existing condition exclusions (PCEs) on any enrollees. (PCEs for enrollees under 19 years of age were eliminated by the ACA for plan years beginning on or after Sept. 23, 2010).
  • Coverage for Clinical Trial ParticipantsNon-grandfathered health plans cannot terminate coverage because an individual chooses to participate in a clinical trial for cancer or other life-threatening diseases or deny coverage for routine care that would otherwise be provided just because an individual is enrolled in a clinical trial.
    • Comprehensive Benefits PackageInsured plans in the individual and small group market must cover each of the essential benefits categories listed under the ACA. Each state has a specific benchmark plan for determining the essential health benefits for insurance coverage in that state.

Employer Penalty Rules

Under the ACA’s employer penalty rules, applicable large employers (ALEs) that do not offer health coverage to their full-time employees (and dependent children) that is affordable and provides minimum value will be subject to penalties if any full-time employee receives a government subsidy for health coverage through an Exchange. The ACA sections that contain the employer penalty requirements are known as the “employer shared responsibility” provisions or “pay or play” rules. These rules were set to take effect on Jan. 1, 2014, but the IRS delayed the employer penalty provisions and related reporting requirements for one year, until Jan. 1, 2015.

On Feb. 10, 2014, the IRS released final regulations implementing the ACA’s employer shared responsibility rules. Among other provisions, the final regulations establish an additional one-year delay for medium-sized ALEs, include transition relief for non-calendar plans and clarify the methods for determining employees’ full-time status.

To prepare for the employer shared responsibility requirements, an employer should consider taking the following key steps:

  • Determine ALE status for 2015, including eligibility for the one-year delay for medium-sized ALEs;
  • For sponsors of non-calendar year plans, determine whether you qualify for the transition relief that allows you to delay complying with the pay or play rules until the start of your 2015 plan year;
  • Establish a system for identifying full-time employees (those working 30 or more hours per week);
  • Document plan eligibility rules; and
  • Test your health plan for affordability and minimum value.

HSA Limits for 2015

If you offer a high deductible health plan (HDHP) to your employees that is compatible with a health savings account (HSA), you should confirm that the HDHP’s minimum deductible and out-of-pocket maximum comply with the 2015 limits. Also, the 2015 increased HSA contribution limits should be communicated to participants. The following table contains the HDHP and HSA contribution limits for 2015.

HDHP Minimum Deductible Amount                                                                                                                             Individual                                                        $1,300

Family                                                              $2,600

 

            HDHP Maximum Out-of-Pocket Amount

Individual                                                         $6,450

Family                                                               $12,900

 

            HSA Maximum Contribution Amount

Individual                                                         $3,350

Family                                                               $6,650

           

            Catch-up Contributions (age 55 or older)   $1,000

 

  • Summary of Benefits and Coverage

The ACA requires health plans and health insurance issuers to provide a summary of benefits and coverage (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. The SBC also must be provided to participants and beneficiaries who enroll other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees).

Federal agencies have issued a template for SBCs, which should be used for 2015 plan years. The template includes information on whether the plan provides minimum essential coverage and meets minimum value requirements. The SBC template (and sample completed SBC) are available on the Department of Labor (DOL) website.

In connection with your plan’s 2015 open enrollment period, the SBC should be included with the plan’s application materials. If plan coverage automatically renews for current participants, the SBC must generally be provided no later than 30 days before the beginning of the new plan year.

For self-funded plans, the plan administrator is responsible for providing the SBC. For insured plans, 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. Thus, if you have an insured plan, you should work with your health insurance issuer to determine which entity will assume responsibility for providing the SBCs. Please contact your CIBC of Illinois, Inc. representative for assistance.

  • Grandfathered Plan Notice

If you have a grandfathered plan, make sure to include information about the plan’s grandfathered status in plan materials describing the coverage under the plan, such as summary plan descriptions (SPDs) and open enrollment materials. Model language is available from the DOL.

  • Notice of Patient Protections

Under the ACA, non-grandfathered group health plans and issuers that require designation of a participating primary care provider must permit each participant, beneficiary and enrollee to designate any available participating primary care provider (including a pediatrician for children). Also, plans and issuers that provide obstetrical/gynecological care and require a designation of a participating primary care provider may not require preauthorization or referral for obstetrical/gynecological care.

If a non-grandfathered plan requires participants to designate a participating primary care provider, the plan or issuer must provide a notice of these patient protections whenever the SPD or similar description of benefits is provided to a participant, such as open enrollment materials. If your plan is subject to this notice requirement, you should confirm that it is included in the plan’s open enrollment materials. Model language is available from the DOL.

 

Group health plan sponsors should consider including the following enrollment and annual notices with the plan’s open enrollment materials.

  • Initial COBRA Notice

Plan administrators must provide an initial COBRA notice to participants and certain dependents within 90 days after plan coverage begins. The initial COBRA notice may be incorporated into the plan’s SPD. A model initial COBRA Notice is available from the DOL.

  • Notice of HIPAA Special Enrollment Rights

At or prior to the time of enrollment, a group health plan must provide each eligible employee with a notice of his or her special enrollment rights under HIPAA.

  • Annual CHIPRA Notice

Group health plans covering residents in a state that provides a premium subsidy to low-income children and their families to help pay for employer-sponsored coverage must send an annual notice about the available assistance to all employees residing in that state. The DOL has provided a model notice.

  • WHCRA Notice

Plans and issuers must provide notice of participants’ rights under the Women’s Health and Cancer Rights Act (WHCRA) at the time of enrollment and on an annual basis. Model language for this disclosure is available on the DOL’s website in the compliance assistance guide.

  • Medicare Part D Notices

Group health plan sponsors must provide a notice of creditable or non-creditable prescription drug coverage to Medicare Part D eligible individuals who are covered by, or who apply for, prescription drug coverage under the health plan. This creditable coverage notice alerts the individuals as to whether or not their prescription drug coverage is at least as good as the Medicare Part D coverage. The notice generally must be provided at various times, including when an individual enrolls in the plan and each year before Oct. 15 (when the Medicare annual open enrollment period begins). Model notices are available at www.cms.gov/creditablecoverage.

  • Michelle’s Law Notice

Group health plans that condition dependent eligibility on a child’s full-time student status must provide a notice of the requirements of Michelle’s Law in any materials describing a requirement for certifying student status for plan coverage. Under Michelle’s Law, a plan cannot terminate a child’s coverage for loss of full-time student status if the change in status is due to a medically necessary leave of absence.

  • HIPAA Opt-out for Self-funded, Non-federal Governmental Plans

Sponsors of self-funded, non-federal governmental plans may opt out of certain federal mandates, such as the mental health parity requirements and the WHCRA coverage requirements. Under an opt-out election, the plan must provide a notice to enrollees regarding the election. The notice must be provided annually and at the time of enrollment. Model language for this notice is available for sponsors to use.

This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

 

Draft Instructions for Employer Reporting of Health Coverage Released

The Affordable Care Act (ACA) created new reporting requirements under Internal Revenue Code (Code) Sections 6055 and 6056. Under these new reporting rules, certain employers must provide information to the IRS about the health plan coverage they offer (or do not offer) to their employees.

On Aug. 28, 2014, the Internal Revenue Service (IRS) released draft instructions for the forms that employers will use to report under Code Sections 6055 and 6056.

  • Instructions for Forms 1094-B and 1095-B: These forms will be used by entities reporting under Section 6055 as health insurance issuers, sponsors of self-insured group health plans that are not reporting as applicable large employers (ALEs), sponsors of multiemployer plans and providers of government-sponsored coverage.
  • Instructions for Forms 1094-C and 1095-C: These forms will be used by ALEs that are reporting under Section 6056, as well as for combined reporting by ALEs who report under both Sections 6055 and 6056.

These instructions are draft versions only, and should not be relied upon for filing. The IRS may make changes to the instructions prior to releasing final versions.

Draft versions of Forms 1094-B, 1095-B, 1094-C and 1095-C were released in July 2014. The IRS expects both the forms and instructions to be finalized later this year.

Overview of Sections 6055 & 6056

The Code Sections 6055 and 6056 reporting requirements are intended to promote transparency with respect to health plan coverage and costs. They will also provide the government with information to administer other ACA mandates, such as the employer and individual mandates.

Code Section 6055 requires health insurance issuers, self-insured health plan sponsors, government agencies that administer government-sponsored health insurance programs and any other entity that provides minimum essential coverage (MEC) to report information on that coverage to the IRS and covered individuals.

Code Section 6056 requires ALEs subject to the employer shared responsibility rules to report information on the health coverage offered to full-time employees to the IRS and covered individuals.

Filing Requirements

Under both Sections 6055 and 6056, each reporting entity will be required to file all of the following with the IRS:

  • A separate information return for each individual who is provided MEC (for ALEs, this includes only full-time employees); and
  • A single transmittal form for all of the returns filed for a given calendar year.

Filing Due Dates

Under both Sections 6055 and 6056, the return and transmittal forms must be filed with the IRS on or before Feb. 28 (March 31, if filed electronically) of the year following the calendar year of coverage. However, if the regular due date falls on a Saturday, Sunday or legal holiday, entities should file by the next business day. For calendar year 2015, these forms must be filed by Feb. 29, 2016, (or March 31, 2016, if filing electronically).

These forms are not required to be filed for 2014. However, in preparation for the first required filing (in 2016 for 2015 coverage), reporting entities may voluntarily file in 2015 for 2014 in accordance with the draft forms and instructions. More information about voluntary filing is available on the IRS website.

Statements Furnished to Individuals

All entities reporting under Section 6055 or 6056 must furnish a copy of Form 1094-C or 1095-C, as applicable, to the person identified as the responsible individual named on the form. Statements must be furnished by mail, unless the recipient affirmatively consents to receive the statement electronically.

The statement must be furnished on or before Jan. 31 of the year following the calendar year of coverage. The first statements are due to individuals by Feb. 1, 2016.

 

 

Where To File

Any reporting entity that is required to file at least 250 returns under Section 6055 or 6056 must file electronically. The 250-or-more requirement applies separately to each type of return and separately to each type of corrected return.

Reporting entities that are filing on paper will send paper returns to the address provided in the instructions, based on where their principal business, office or agency (or legal residence, in the case of an individual) is located.

Instructions for Forms 1094-B and 1095-B

Under Section 6055, every person that provides MEC to an individual during a calendar year must file Forms 1094-B (a transmittal) and 1095-B (an information return). This includes:

  • Health insurance issuers or carriers;
  • Self-insured health plan sponsors;
  • Government agencies that administer government-sponsored health insurance programs; and
  • Any other entity that provides MEC.

However, ALEs subject to the employer shared responsibility rules that sponsor self-insured group health plans will report information about the coverage in Part III of Form 1095-C, instead of on Form 1095-B. In general, an employer with 50 or more full-time employees (including full-time equivalents) during the prior calendar year is considered an ALE.

Instructions for Forms 1094-C and 1095-C

All ALEs subject to the employer shared responsibility rules must file Form 1094-C (a transmittal) and Form 1095-C (an information return) for each full-time employee for any month.

  • Form 1094-C is used to report summary information for each employer to the IRS and to transmit Forms 1095-C to the IRS.
  • Form 1095-C is used to report information about each employee.

These forms help the IRS determine whether an ALE owes penalties under the employer shared responsibility rules, as well as whether an employee is eligible for premium tax credits.

How to Complete Forms

ALEs that sponsor a self-insured health plan must also complete Form 1095-C, Parts I and III, for any individual (including any full-time employee, non-full-time employee, family members and others) who enrolled in the self-insured health plan. If the employee is full-time for any month, the ALE must also complete Part II. If the employee is not full-time for all 12 months of the calendar year, the ALE must complete only Part II, line 14, by entering code 1G in the “All 12 Months” column.

For other types of coverage, the issuer or plan sponsor will provide the information about their health coverage to any enrolled employees. The employer should not complete Form 1095-C, Part III, for those employees.

An employer that sponsors self-insured health coverage but is not subject to the employer shared responsibility rules is not required to file Forms 1094-C and 1095-C. Instead, these employers report on Forms 1094-B and 1095-B for employees who enrolled in the employer-sponsored self-insured health coverage.

Authoritative Transmittal for ALEs Filing Multiple Forms 1094-C

A Form 1094-C must be attached to any Forms 1095-C filed by an ALE. An ALE may submit multiple Forms 1094-C, each accompanied by Forms 1095-C, for some of its employees, provided that Forms 1095-C are filed for each employee for whom the ALE is required to file.

ALEs must file a single Form 1094-C reporting aggregate employer-level data for all full-time employees, identifying the form, on line 19 of Part II, as the Authoritative Transmittal. One Authoritative Transmittal must be filed for each ALE, even if multiple Forms 1094-C are filed by and on behalf of the ALE. For example, if an employer has prepared a separate Form 1094-C for each of its two divisions to transmit Forms 1095-C for each division’s full-time employees, one of the Forms 1094-C filed must be designated as the Authoritative Transmittal and report aggregate employer-level data for all full-time employees (for both divisions).

One Form 1095-C for Each Employee of Each ALE

There must be only one Form 1095-C for each full-time employee of an ALE. For example, if an ALE separately reports for the full-time employees of its two divisions, the ALE must combine the information for any employee who worked at both divisions during the year so that there is only a single Form 1095-C for that employee which reports information for all 12 months of the calendar year.

In contrast, a full-time employee who works for more than one ALE that is a member of the same aggregated ALE group (that is, works for two separate ALE members) must receive a separate Form 1095-C from each ALE member.

More Information

Please contact CIBC of Illinois, Inc. for more information on reporting under Code Sections 6055 and 6056.

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