ACA Reporting Costs Increase for Noncompliance

The Trade Promotion Authority bill signed into law the beginning of this month included provisions which increase the penalties related to employers’ Affordable Care Act (ACA) reporting (e.g., Forms 1094-C and 1095-C). The bill also reinstated the trade-related Health Coverage Tax Credit (the HCTC), which had expired on December 31, 2013.

The trade bill made increases in the penalties for IRS reporting failures. These increased penalties also apply to other information returns and filings, such as W-2s, and are effective for reporting required to be filed or furnished after 2015. So the increased penalties would apply to the first year’s filings under the ACA, which relate to 2015, but are due in early 2016.

The general penalty for failure to file a required information return with the IRS (which is subject to reduction, waiver or increase for various reasons) will increase from $100 per return to $250 per return.
The cap on the total amount of penalties for such failures during a calendar year will increase from $1,500,000 to $3,000,000.
If a failure relates to both an information return (e.g., a Form 1095-C required to be filed with the IRS) and a payee statement (e.g., that same Form 1095-C required to be furnished to the individual), these penalties are doubled.
If a failure is caused by intentional disregard, the new $250 penalty noted above is doubled to $500 for each failure, and no cap applies to limit the amount of penalties that can be applied with respect to that calendar year.

When looking at these increases, you should remember that these increases don’t affect the IRS’s enforcement policy for the first year of ACA filing. Specifically, the IRS won’t penalize employers that can show they make good faith efforts to comply with the ACA reporting requirements.

So, the “good faith efforts” standard is still in effect, but the penalties that will apply if that standard is not met are much more severe. If the employer attempts to complete the forms, but the information reported is incorrect or incomplete, that reporting failure would be considered a good faith effort and may be excused under the IRS enforcement policy. If, however, the employer does not file or provide a required form by the deadline, it seems that the good faith standard would not apply.

New IRS Guidance on Forms 1094 and 1095

The IRS has provided both new and updated Q&A guidance on the reporting requirements for applicable large employers under the federal tax code. As background, beginning in 2016, applicable large employers must file Forms 1094 and 1095 to provide information to the IRS and plan participants about health coverage provided in the prior year.

The forms are used by the IRS to enforce employer penalties according to the federal tax code, as well as individual mandate and tax credit eligibility rules. The latest guidance consists of an updated Q&A document covering basic reporting requirements and a new Q&A document addressing more specific issues that may arise while completing Forms 1094 and 1095.

Here are some highlights:

Clarifications on who must report. The guidance clarifies that an applicable large employer with no full-time employees for any month of the year is not obligated to report unless the employer sponsors a self-insured health plan in which any employee, spouse, or dependent is actually enrolled. In that case, it must still file Forms 1094-C and 1095-C even if it has no full-time employees. The guidance also confirms that an applicable large employer must file and provide Form 1095-C to all full-time employees regardless of whether they were offered coverage during the year.

Controlled groups. Examples show how reporting differs where an applicable large employer reports for separate divisions and where applicable large employers are part of a controlled group. In the former situation, employees working for multiple divisions must receive aggregated information on a single Form 1095-C. In the latter situation, employees will receive a separate Form 1095-C for full-time employment with each applicable large employer in the controlled group.

Qualifying offer method of reporting. The updated Q&As now address reporting under the qualifying offer method, which allows applicable large employers to furnish a simplified employee statement to employees receiving qualifying offers for all 12 months of the year. The Q&As emphasize that use of simplified statements is not available for employees who actually enroll in an applicable large employer’s self-insured health plan.

Note: No mention is made of the qualifying offer method transition relief available in 2015, which allows an applicable large employer to use a different simplified statement provided that it makes qualifying offers to at least 95% of its full-time employees.

Delivery to employees. The guidance confirms that a Form 1095-C may be delivered to employees in any manner permitted for delivery of Form W-2, including hand-delivery. However, unlike Form W-2, employers need not furnish a midyear Form 1095-C upon an employee’s request following termination of employment.

New hires and terminating employees. When reporting offers of coverage on Part II of Form 1095-C, applicable large employers may indicate that an offer of coverage was made for a month only if the offer would have provided coverage for every day of the month. Therefore, applicable large employers should report on Form 1095-C that no coverage was offered in the month an employee was hired (unless an offer of coverage extended to every day of that month). Similarly, if a terminating employee’s coverage ends before the end of the month of termination, the applicable large employer must report that no coverage was offered for the month. (In each case, the applicable large employer may be able to avoid liability for employer penalties under the federal code, even though coverage was not offered for the full month.) In contrast, when reporting coverage information under Part III of Form 1095-C, an employee should be reported as having coverage if the employee is enrolled on any day of the month.

Note: The disparate treatment of partial months of coverage highlights the multiple purposes of Form 1095-C. Under the federal tax code, applicable large employers generally get credit for offering coverage for a month only if the offer applies to the full month — but an individual avoids the individual mandate penalty for a month by having coverage on any day of the month.
Third-party reporting. The guidance verifies that applicable large employers may designate third parties to perform reporting on their behalf. The new Q&As confirm that a governmental applicable large employer may designate another governmental entity to accept reporting responsibility on its behalf; they also explain the allocation of responsibilities under various combinations of self-insured and fully insured coverage options.

Reporting offers of COBRA coverage. New Q&As illustrate reporting under various COBRA scenarios. The guidance explains how sponsors of self-insured plans should report enrollment information for non-employee COBRA beneficiaries, such as former spouses. Qualified beneficiaries electing COBRA independently from the employee must receive separate forms, while those who have COBRA due to an employee’s election should be included on the same form that is provided to the employee. (As previously noted in the instructions to the final forms, reporting may be made on either Form 1095-B or 1095-C for individuals who were not employees at any time during the year.)

Several examples illustrate how an applicable large employer should complete Form 1095-C for full-time employees who receive a COBRA offer due to termination of employment or a reduction of hours. In general, a COBRA offer made due to termination of employment is reported as an offer of coverage only if the former employee enrolls in COBRA coverage and the employee’s cost of coverage reflects the COBRA premium for the lowest-cost, self-only coverage providing minimum value. In contrast, a COBRA offer made to an active employee due to a reduction of hours would be reported as an offer of coverage on Form 1095-C even if the employee declines COBRA coverage.

Note: Unfortunately, the example used to illustrate this final point does not extend more than 60 days after the loss of eligibility, so it is unclear whether the applicable large employer would still report that coverage is offered after the employee’s COBRA election period has ended.

With mandatory reporting starting in early 2016 (for 2015 coverage), understanding the complexities of the reporting requirements is critical. While some of the Q&As contained in this IRS guidance were previously addressed in the instructions to Forms 1094 and 1095, others provide helpful clarifications and new information. Employers subject to the reporting requirements should give careful attention to this and future guidance as the reporting deadline draws nearer.

Group Benefits

Group Benefits
We work with employers to design attractive benefits to offer their employees at competitive prices.

Our size and overhead is far less than other agencies, which means more affordable options for employers. We have expertise in self-funded plan design and administration. We do not use any third-party general agents: all our contracts are direct with all of our carriers. We stand ready to serve you!

As an added benefit to you, we can create a custom intranet service to suit your company’s needs, ranging from an employee-benefits portal to a full human resources communications system, offering manual or electronic enrollment, tracking and administrative capabilities.

We offer:

Group Medical Plans
Self-funded Group Medical Plans
Fully-funded Group Medical Plans
Private Group Medical Exchanges
Dental Plans
Vision Plans
Group Life Insurance
Supplemental Life Insurance
Dependent Life Insurance
Group Short-term Disability Insurance
Group Long-term Disability Insurance
Voluntary Short-term Disability Insurance
Voluntary Long-term Disability Insurance
FSA Flexible Spending Accounts
HRA Health Reimbursement Accounts
Gap Health Insurance Plans
Cancer Insurance
Accident Insurance
Critical Illness

Small, medium and large group markets will each have different options and compliance levels under the new government health care regulations. IDSI is prepared to be your consultant and guide you throughout the complex maze of regulations and changes, so you can be confident that your company is in compliance.

With IDSI you can count on professional, friendly, no-pressure quoting. We provide assistance and explanations of coverage to both employers and their employees. For employees with a high share of dependent costs, we will help them compare group and individual plan options to help them save money. We are available for ongoing support to review questions from employees and employers about their coverage.

Our Group Benefits Providers include and are not limited to:
Blue Cross Blue Shield of NC
UnitedHealthcare
The Hartford
Transamerica
Dearborn National
Delta Dental
Assurant Health
AFLAC
Aetna/Coventry
Metlife
Principal
Nationwide
Guardian
Ameritas
Cigna
Integra Group Benefits

About Us

Insurance Design Solutions, Inc, was founded in 1996 and is centrally located in Greensboro, NC to best serve our statewide client base. With a combined experience of over 25 years in the industry, IDSI is operated by Jim and Bryan Valentine, a father and son team. IDSI is authorized to provide services for any company, large or small, in North Carolina seeking to offer insurance benefits to their employees. IDSI is also authorized to help with individual health insurance and Medicare insurance.

IDSI is a full-service agency, providing:

A no-pressure professional, relaxed quote options
Assist with the application process
Clarification and explanation of options
Handling of the paperwork: Underwriting, Rate comparisons and Enrollment
Open communication with you – so you know where you are in the enrollment process
Assistance with claim resolutions – we will serve as your advocate should you need to appeal or resolve claims issues
Competitive rates due to our low overhead
Direct contact and service with your agent – no getting lost in a phone tree or selecting the correct prompts

Our mission is to help you find the best current insurance options available. We will monitor how your options, or needs may change as the new insurance legislation is implemented. Our primary aim in this economy is cost-containment and compliance, while continuing to provide ample benefits. We take a proactive approach to health management and wellness programs for our clients and feel this can be an important part of cost containment.

New government regulations continue to change the health care industry. Employers need to team up with a brokerage that understands, and is actively engaged in the changing landscape of group and individual benefits. We are that brokerage, and want to be your partner in these challenging times! We are constantly monitoring the ongoing changes to the health care system on your behalf. We will share with you what we learn, and offer suggestions on how you can best take advantage of those changes. Please take a look at the “News/Compliance” section of our site for helpful updates.

Past and present clients range from restaurant chains, industry management companies, medical practices, professional services groups, country clubs, and individuals seeking their own individual health coverage. IDSI is a proud member of the North Carolina Automobile Dealers Association, and works closely with new and used vehicle franchises statewide.

Jim Valentine moved to NC from New York with his mother after the passing of his father at the age of 15 years old. Growing up one of five children, he started his career with Wachovia Bank working with the auto and banking industry. Jim transitioned into insurance in 1996 starting Insurance Design Solutions, Inc. after talking with business clients and finding out what their greatest need was in operating their corporations. The answer was clear; a trusted business relationship was needed most in the group benefits aspect of their respective businesses. Jim is licensed to negotiate proposals for life, health, disability, critical illness, and long term care products to meet the needs of his clients. Jim has been happily married for 44 years, and has two children and 3 grandchildren. Jim is a devoted husband and father. He carries these same beliefs to Insurance Design Solutions, Inc.

Bryan Valentine was born and raised in Greensboro, NC. Bryan started his carrier with Insurance Design Solutions, Inc. in 2003 after finishing college. After joining Insurance Design Solutions, Inc. in 2003 and learning the business of group insurance, Bryan received his Medicare Supplement/Long Term Care License in 2007. Bryan is uniquely qualified to sell group insurance products as well as individual insurance products. Bryan is federally licensed to sell individual health insurance plans “on” and “off” the new Federal Marketplace. Bryan also actively sells Medicare Advantage, and Medicare Supplement/Part D policies with a wide range of carriers. Bryan has been happily married for 4 years, and has one daughter. Bryan is a devoted husband and father. At Insurance Design Solutions, Inc. Bryan will work hard to find the insurance solution that best fits your specific needs.