It’s time to get ready for the upcoming Affordable Care Act (ACA) reporting season. Although certain changes have been made to the ACA—such as the elimination of the individual mandate penalty—employers and plan sponsors must still report 2019 information under Sections 6055 and 6056 in early 2020.
Help your clients meet their compliance obligations by educating yourself on the following ACA reporting requirements. By sharing this information with your clients, you can prove your ACA compliance expertise and help them avoid costly penalties.
ACA Reporting Deadlines
Recently, the IRS extended the deadline for distributing 2019 Forms 1095-B and 1095-C to individuals, from Jan. 31, 2020, to March 2, 2020. This means that applicable large employers (ALEs) and self-insured plan sponsors have an extra 31 days to furnish these forms. Also, some self-insured plan sponsors may be able to avoid distributing these forms altogether, if they meet certain requirements.
However, all required forms must still be filed with the IRS, and the deadline was not extended for filing Forms 1094-B, 1095-B, 1094-C or 1095-C for 2019. These forms are due by Feb. 28, 2020, if filing on paper, or March 31, 2020, if filing electronically.
Section 6055 and 6056 Reporting Rules
Sections 6055 and 6056 were added to the Internal Revenue Code by the ACA as a means to enforce and administer certain new ACA requirements. Section 6055 reporting helps the IRS administer the ACA’s individual mandate requirement and determine individual eligibility for Exchange subsidies, while Section 6056 reporting helps the IRS enforce and administer the employer shared responsibility (pay or play) rules.
- Section 6055 applies to providers of minimum essential coverage, such as health insurance issuers and employers with self-insured health plans. Entities reporting under Section 6055 generally use Forms 1094-B and 1095-B to report information about the coverage they provided during the previous year.
- Section 6056 applies to applicable large employers (ALEs)—generally, those employers with 50 or more full-time employees, including full-time equivalents, in the previous year. ALEs use Forms 1094-C and 1095-C to report information relating to the health coverage that they offer (or do not offer) to their full-time employees. ALEs that sponsor self-funded plans will also use Forms 1094-C and 1095-C to report under both Sections 6055 and 6056.
Beginning in 2019, the ACA’s individual mandate penalty has been reduced to zero. As a result, the IRS considered whether and how the Section 6055 reporting requirements should change, if at all, for future years. Despite this change, Section 6055 reporting continues to be required for the 2019 calendar year. However, the IRS has provided some relief from penalties under Section 6055 in certain circumstances.
Preparing for the Deadlines
While there are no substantial changes to the IRS forms for 2019, it is still important for employers to become familiar with the required information and collect the necessary employee data from 2019. Accurate and timely reporting for the 2019 calendar year can help employers avoid hefty penalty assessments from the IRS.
For 2019 reporting, the penalty for failure to file or furnish correct information returns by the deadlines is $270 per return, with the total penalty of up to $3,339,000.
To prepare for reporting for 2019, employers should:
- Determine if their organization is an ALE, and will therefore be responsible for reporting under Section 6056. An employer was an ALE for 2019 if it employed an average of 50 or more full-time and full-time equivalent employees during 2018. Keep in mind that businesses that are related or commonly owned will need to be counted together to determine if they are considered an ALE.
- Determine the kind of health insurance coverage their organization offered to their employees, if any. Employers that sponsored a self-insured health plan at any point during 2019 will be responsible for reporting under Section 6055.
- Identify their full-time employees for each month and track enrollment and health coverage information in 2019 to help complete the IRS forms. Employers responsible for reporting under either Section 6055 or Section 6056 will need certain information about their workforce, offers of coverage, health plan and enrollment in order to complete the required IRS forms.
Monthly Information Required
Depending on whether an employer is reporting under Section 6055 or Section 6056, they’ll need to have certain information available for each month of 2019, including:
- Who is a full-time employee for each month (generally, employees who are employed, on average, at least 30 hours of service per week or 130 hours of service per calendar month).
- Whether they offered full-time employees (and dependent children) minimum essential coverage that provides minimum value and is affordable for each month.
- The employee’s share of the monthly premium for the lowest-cost plan offered to the employee, and whether the plan met any affordability safe harbor—either W-2, rate of pay or federal poverty line.
- Whether their employees (and any dependents) enrolled in any self-insured minimum essential coverage they offered, and the months in which those individuals were covered.
Some Penalty Relief is Available
Under certain circumstances, employers may be eligible for relief from penalties related to the Section 6055 and Section 6056 reporting.
The IRS has provided penalty relief for providing incorrect or incomplete information for reporting entities that can show that they have made good-faith efforts to comply with the Sections 6055 and 6056 reporting requirements for 2019 (both for furnishing to individuals and for filing with the IRS). However, penalty relief is not provided for late filing or furnishing, or in cases where reporting entities did not make a good-faith effort to comply with the requirements.
In addition, for 2019 reporting, the IRS has provided limited penalty relief for failures to furnish statements to individuals under Section 6055 only, if the reporting entity:
- Posts a notice on its website stating that individuals may receive a copy of their Form 1095-B upon request, along with certain other information; and
- Provides a Form 1095-B within 30 days of any request it receives.
Keep in mind that this particular penalty relief is available for Section 6055 reporting only. ALEs reporting under Section 6056 may be subject to penalties for any failures to furnish Form 1095-C to their full-time employees by the required deadline.
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