As employers prepare to comply with the upcoming information-reporting requirements of the Affordable Care Act (ACA), which remain in place after the Supreme Court’s decision in King v. Burwell, Congress snuck higher penalties for failing to meet those requirements into a trade bill. House Resolution (HR) 1295, known as the Trade Preferences Extension Act of 2015, which was passed this summer, provides for significant increases in the previously set penalties for failing to file correct ACA information returns or furnish the correct payee statements to employees. 
Congress raises penalties
Originally, the basic penalty for failure to file or furnish was set at $100. The newly passed law increases the penalty to $250 per incorrect statement, with the cap increased from $1.5 million to $3 million. If an employer fails to file/furnish both an information return and a payee statement, the penalties are doubled to $500 per statement, with a cap of $6 million. The penalty increases serve to further remind employers of the importance of preparing now for this upcoming obligation by putting procedures in place and ensuring that you have the infrastructure to capture and provide the required information.
Is there any good news? There’s still a one-year “transition rule” providing that penalties will not be assessed for the first year of reporting if an employer or insurer can establish that it made a good-faith effort to comply but furnished incorrect or incomplete information. Thus, it seems that an employer that doesn’t file or furnish information won’t be able to establish a good-faith effort.
With all of that in mind, here’s a quick refresher on the reporting requirements.
Section 6056: ALE reporting
Section 6056, which addresses applicable large employer (ALE) reporting, helps the IRS identify which employers are subject to the employer mandate penalties and which individuals are eligible for a premium tax credit (subsidy). An ALE, or an employer with 50 or more full-time-equivalent employees (FTEs), must report the health insurance coverage it offers or provides to employees and their dependents. Covered employers must mail the information to employees by January 31, unless an employee affirmatively consents to receive it in electronic format.
An ALE will be required to file Form 1095-C, “Employer-Provided Health Insurance Offer and Coverage,” with the IRS for each employee by February 28 (or March 31 if the form is filed electronically). Form 1095-Cs are transmitted to the IRS with a 1094-C transmittal form, which will also report the total number of FTEs for each month during the calendar year. A form must be filed for each employee who was an FTE for any month of the calendar year and for each part-time employee who enrolled in the employer’s self-insured plan.
Form 1095-C includes basic information on employees and the employer’s certification as to whether it offered its FTEs and their dependents the opportunity to enroll in healthcare coverage, by calendar month, as well as the employee’s share of the lowest monthly premium for individual coverage providing minimum value offered to employees under an eligible employer-sponsored plan, by calendar month. The IRS has provided detailed instructions on the “indicator codes” to be used for the type of coverage offered and the employee’s share of the premium.
The forms are available at www.irs.gov/pub/irs-pdf/f1095c.pdf and www.irs.gov/pub/irs-pdf/f1094c.pdf. Draft instructions for completing the forms may be found at www.irs.gov/pub/irs-dft/i109495c-dft.pdf.
Section 6055: minimum essential coverage reporting
Under Section 6055, all health insurance issuers, self-insured employers, certain government agencies, and other entities that are not subject to the employer mandate must report minimum essential coverage provided to employees and dependents during a calendar year on Forms 1095-B (for reporting) and 1094-B (for transmittal to the IRS). This report helps the IRS identify individuals who are eligible for premium tax credits. Section 6055 reporting isn’t required for supplemental coverage such as health reimbursement accounts, on-site medical clinics, health savings accounts (HSAs), and wellness programs.
The plan sponsor (the entity that establishes or maintains the plan) is responsible for the reporting for self-insured group healthcare plans. The employer is the plan sponsor for self-insured group healthcare plans established or maintained by a single employer. Employees must be given their 1095-Bs by January 31. Form 1095-Bs are due to the IRS by February 28, 2016, for 2015 tax returns or by March 31, 2016, if they’re filed electronically. The forms are available at www.irs.gov/pub/irs-pdf/f1095b.pdf and www.irs.gov/pub/irs-pdf/f1094b.pdf.
Bottom line
You must begin preparing for the reporting requirements, if you haven’t already done so, to ensure you are ready to provide all the information required by the IRS. As we stated above, failing to provide the relevant information can be quite costly. We recommend that you implement procedures now for capturing all the information required on the ACA information returns, including documentation on employees to whom health insurance was offered (and their dependents), whether healthcare coverage was accepted or declined, the employee’s share of the premium, and whether COBRA continuation coverage was accepted or declined, if applicable.
Coordinate with your HR department, payroll department, payroll vendor, benefits administrators, benefits broker/consultants, and tax advisers to determine how each entity is managing—or will manage—all the information that must be reported.
Jamie Brabston is an attorney at Lehr Middlebrooks Vreeland & Thompson, P.C. in Birmingham, Alabama. She may be contacted at jbrabston@lehrmiddlebrooks.com.