Large employers learned more details in new IRS guidance about how to both report about their coverage and fill out and file IRS forms designed to determine whether they are meeting the Affordable Care Act’s coverage requirements for employers.
Under the new guidance, if a large employer’s workforce is comprised entirely of part-time employees who were not full-time in any month of the year, it does not have to submit a Form 1095-C. The guidance also indicates how to report on coverage to employees during their months of hire and termination, and provides more details on reporting COBRA coverage for three categories of COBRA qualified beneficiaries.
Background
Most employers will be required to file and distribute information reporting forms under Code Sections 6055 and 6056. Employers must report whether: (1) an individual is covered by “minimum essential coverage”; and (2) an offer of MEC that has minimum value was made to a full-time employee.
Form 1095-C is what applicable large employers must use to report whether or not they comply with the ACA mandate requiring them to offer coverage to 95 percent or more of their full-time employees every month they were employed (after a modified 90-day waiting period).
The form requires them to report whether the offered coverage meets the ACA’s MEC standards for minimum value, whether the employer offered it to dependents and spouses, the name of every full-time employee, which months of the year they were employed and which months they were covered or had an offer of coverage.
Among the clarifications in the new IRS guidance were:
- ALEs do not have to submit a Form 1095-C for part-time employees who were not full-time in any month of the year. If no employee averaged at least 30 hours of service per week in any month, they are not required submit a Form 1095-C under Section 6056.
- ALEs will only report to their employees who are covered by the employer’s self-insured health plan. The question was raised in the context where the employer has both a self-insured and an insured health plan. Employees under the self-insured component will receive information about coverage in Part III of Form 1095-C. Employees under insured plans will receive information about coverage from the insurer, on a Form 1095-B.
- Employers should enter a code indicating no offer of coverage was made for employees in the month that they were hired unless the employee was covered on every single day of that calendar month. (The employee can be shielded from pay-or-pay penalties for that month, the guidance states.)
- Similarly, employers should report that no coverage was afforded the entire month during which an employee was terminated, unless the employee was covered every day that month and terminated on the last day on the month. The employer also would be shielded from ACA penalties for that month if the coverage would have carried through the whole month were it not for the termination.
Reporting on qualifying offers of coverage must attest: (1) minimum value; (2) monthly premiums cost not more than 9.5 percent of the mainland federal poverty limit divided by 12; and (3) offers were made to dependents and (if applicable) spouses.
The guidance includes Information on filing the forms if an ALE uses the 98-percent offer method, by which the employer is spared naming each employee on Form 1094-C, Part III, in return for attestation that coverage was offered to 98 percent of the workforce, as opposed to the required 95 percent.
Reporting COBRA Coverage
The forms and instructions had little guidance on how to report individuals with COBRA coverage. The FAQs also cover the topic of how to administer the IRS notifications to employees who incur a termination of employment or reduction in hours, or a former spouse who elects COBRA coverage following a divorce.
Related Guidance on Form 6056
Expanded guidance on employer reporting of health coverage offers (Section 6056) confirmed that that if you’re an ALE member controlled entity without full time employees you don’t have a Section 6056 filing obligation.
ALEs must report under Section 6056 about health coverage offered and whether an offer of coverage was made to all full-time employees, even for employees who did not accept the offer and are not covered under the plan.
In another clarification for large employers, the IRS said notifications to employees about coverage can be delivered by hand, in other words, in any manner that a W-2 form may be delivered.
Large employers were also told that requests for copies of 1095-C from terminated workers do not have to be honored within 30 days of that request — unlike W-2 forms, which have to be delivered within 30 days of the request.
More information from the IRS about employer reporting on compliance with their ACA coverage obligations is available here.
For more information on coverage notifications to the IRS and participants, see Section 530 of The New Health Care Reform Law: What Employers Need to Know.