Section 6056 also requires those employers to furnish related statements to employees so that the employees may use the statements to help determine eligibility for the ACA premium tax credit. A similar reporting requirement in Code section 6055 requires health insurance issuers and employers that sponsor self-insured plans to report and provide statements on minimum essential coverage offered under their plans.
On July 2, 2013, the Department of Treasury announced it was issuing transition relief to delay the implementation date of the Code section 6055 and 6056 information reporting provisions and the employer mandate requirements from 2014 until 2015. The IRS subsequently issued Notice 2013-45 formalizing the transition relief and delayed implementation date. On September 9, 2013, the Department of the Treasury and IRS published proposed regulations on the Code section 6055 (78 Fed. Reg. 54986) and section 6056 (78 Fed. Reg. 54996) reporting requirements. Final regulations for the ACA employer shared responsibility requirements were published in February (see “ACA Employer Responsibility Relief Calls for Planning”). The final regulations about reporting requirements should be out soon.
In a previous column, we answered some of the frequently asked questions we have received on the large employer, employer mandate reporting obligations under Code section 6056 (see “SECOND OPINIONS: ACA Employer Reporting Requirements – Part I”). In this column, we answer additional frequently asked questions on the employer mandate reporting requirements.
Are employers permitted to contract with a third party administrator to do the reporting on their behalf?
The proposed regulation under Code section 6056 generally states that an employer may contract with and use third parties to facilitate filing returns and furnishing employee statements, but the employer remains responsible for the reporting. The proposed regulation provides special rules for governmental units that want to delegate reporting. In the case of multiemployer plans, the preamble to the proposed regulation states that the IRS anticipates that section 6056 reporting with respect to full-time employees eligible to participate in a multiemployer plan will be permitted to be provided in a bifurcated manner where one section 6056 return pertains to the full-time employees eligible to participate in the multiemployer plan and another return pertains to the remaining full-time employees who are not eligible to participate in the multiemployer plan. The preamble also states generally that the administrator of the multiemployer plan would be permitted to report on behalf of an employer that contributes to a multiemployer plan, but the employer remains responsible for the reporting.
Does the proposed regulation provide simplified reporting methods, such as including the required information on a Form W-2?
The proposed regulation itself does not include simplified methods that would satisfy the section 6056 requirements. The preamble to the proposed regulation does, however, describe certain simplified reporting methods that the IRS and Treasury may consider providing as “optional alternatives” to the general reporting method in future guidance, and requested comments on these possible approaches. It is worth noting, however, that the simplified reporting methods previewed in the preamble would not be “one size fits all” and would only be available in certain circumstances for certain types of employees. Among other things, the preamble to the proposed regulation describes the following possible simplified methods:
Eliminating Section 6056 Employee Statements in Favor of Form W-2 Reporting for Certain Groups of Employees Offered Coverage. IRS is considering allowing certain employers to report offers of minimum value coverage on an employee’s Form W-2, using an existing box on Form W-2 to provide the monthly dollar amount of the required employee contribution for the lowest cost minimum value self-only coverage offered to the employee and using a letter code to describe the offer of coverage. This method could only be used for any employee employed by the employer for the entire calendar year when the offer, the individuals for whom the offer is made, and the employee contribution for the lowest-cost option for self-only coverage all remained the same for all twelve months of the calendar year.
No Need to Determine Full-Time Employees If Minimum Value Coverage Is Offered to All Potentially Full-Time Employees. IRS is considering whether employers that offer coverage to all or nearly all of their employees, and are able to accurately represent that the only employees not offered coverage are not full-time employees, may provide section 6056 reporting that does not identify the number of full-time employees and that does not specify whether a particular employee offered coverage is a full-time employee. The employer would have to certify that all of its employees to whom it did not offer coverage during the calendar year were not full-time employees (or were otherwise ineligible for coverage). If an employee who was offered coverage claimed a premium tax credit, the employer could be asked to confirm at a later date (after the filing of the return) whether that employee was a full-time employee during that calendar year.
Self-Insured Employers Offering Employees, Their Spouses, and Dependents Mandatory No-Cost Minimum Value Coverage. Some employers may provide mandatory minimum value coverage under a self-insured group health plan to an employee, an employee’s spouse, and an employee’s dependents with no employee contribution. None of those individuals would be eligible for a premium tax credit for any month during which the coverage was provided, and the employer would indicate on the return required under section 6055 for the employee all months for which that coverage was provided with respect to each individual in the employee’s family. The IRS is considering whether for those employees the employer could file and furnish only the return required under section 6055, a code on the Form W-2, the summary information provided in the section 6056 transmittal form, and no further information reporting under section 6056.
Voluntary Reporting Section 6056 Elements During or Prior to the Year of Coverage. Under another possible simplified method, employers could voluntarily report information about the coverage they offer their employees prior to the end of the coverage year. Employers have suggested that the IRS could transmit this data to the exchanges during the year to provide greater efficiency. Although it indicated some skepticism in the preamble, the IRS invited comments on whether there could be a way to design a voluntary partial early reporting arrangement that would reduce complexity and avoid confusion, be administrable for the IRS, and provide timely information to individuals so that they can meet their income tax filing obligation without undue burden or undue risk of inaccuracy
Reporting for Employees Potentially Ineligible for the Premium Tax Credit. Under this potential method, employers would only be required to provide limited reporting for employees potentially ineligible for a premium tax credit because they are highly paid. The employer would still need to report to the IRS the months during which the employee was a full-time employee (to the extent the employee was being included in the full-time employee count). The IRS requests comments on whether there is a level of W-2 wages at which a premium tax credit eligibility determination (which is based on things like family size and household income) might be made with sufficient confidence, and whether that level of wages is so high as of not to be of practical use to employers.
Combinations of Simplified Reporting Methods. The preamble notes that the various potential simplified methods would apply to particular groups of employees and that in many cases these groups would not overlap. As a result, IRS and Treasury anticipate that, to the extent any of the simplified methods are adopted in final regulations or other guidance (including forms and instructions), an employer would be permitted to use different simplified methods for different employees at the employer’s election.
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You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html
Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C. She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare. She represents employers designing health plans as well as insurers designing new products. Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.
Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.
PLEASE NOTE: This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.