Draft 2016 Employer-Provided Health Insurance Forms Contain Changes and Clarifications

Draft 2016 Employer-provided Health Insurance Forms Contain Changes and Clarifications

IRS has issued drafts of Form 1095-C (Employer-Provided Health Insurance Offer and Coverage), Form 1094-C (the transmittal for remitting Forms 1095-C) and the instructions for those forms. Among the changes to the instructions are changes that reflect the fact that the transition rules that apply to the 2016 forms differ from the transition rules that applied to the 2015 forms.

Code Sec. 6055(a) generally requires every health insurance issuer, sponsor of a self-insured health plan, government agency that administers government-sponsored health insurance programs, and other entity that provides “minimum essential coverage” (defined in Code Sec. 5000A(f)) to file annual returns reporting information for each individual for whom such coverage is provided.

Code Sec. 6056 requires annual information reporting by applicable large employers (ALEs) relating to the health insurance that the employer offers (or does not offer) to its full-time employees. In general, an ALE, as defined in Code Sec. 4980H, is an employer that employed an average of at least 50 “full-time employees” during the preceding calendar year. Code Sec. 6056 also requires those employers to furnish related statements to their employees.

ALEs use Forms 1094-C and 1095-C to report the information required under Code Sec. 6055 and Code Sec. 6056 about offers of health coverage and enrollment in health coverage for their employees. Form 1094-C must be used to report to IRS summary information for each employer and to transmit Forms 1095-C to IRS. Form 1095-C is used to report information about each employee.

In addition, Forms 1094-C and 1095-C are used in determining whether an employer owes a payment under the employer shared responsibility provisions under Code Sec. 4980H.

An employer may choose to file multiple Forms 1094-C, each accompanied by Forms 1095-C for only a portion of its employees. One “Authoritative Transmittal” must be filed for each employer, even if multiple Forms 1094-C are filed by and on behalf of that single employer. The Authoritative Transmittal (i.e., a Form 1094-C that the employer designates as such by checking the box on line 19) reports aggregate employer-level data for all full-time employees of the employer.

Form 1095-C is also used in determining the eligibility of employees for the Code Sec. 36B premium tax credit. Employers that offer employer-sponsored self-insured coverage also use Form 1095-C to report information to IRS and to employees about individuals who have minimum essential coverage under the employer plan and therefore are not liable for the individual shared responsibility payment for the months that they are covered under the plan. (2015 Instructions for Forms 1094-C and 1095-C)

Under the “qualifying offer method” and the “qualifying offer method transition relief for 2015,” employers who offer a plan that meets the minimum essential coverage requirement at a very low premium rate may report less information on Forms 1095-B and 1095-C. (Reg. § 301.6056-1(j))

2016 draft forms and instructions. Here are some of the key changes and clarifications on the draft 2016 forms and instructions:

...Changes to transition rules. Several forms of transition relief were available to employers for 2015 under Code Sec. 4980H and Code Sec. 6056, but only limited transition relief continues to apply in 2016. References to transition relief that applied only in calendar year 2015 have been removed. Descriptions of the remaining forms of transition relief have been amended to clarify for which months in 2016 the transition relief applies and how an ALE Member reports its eligibility for each type of relief.

An employer could be eligible for one of the two types of 2015 plan year transition relief under Code Sec. 4980H based on the employer's number of full-time employees (and full-time equivalent employees) One of these two types of 2015 transition relief under Code Sec. 4980H was for employers with 50 to 99 full-time employees, and the other type of relief was for employers with 100 or more full-time employees.

The draft instructions provide that, for the 2016 calendar year, the 50-99 Transition Relief and 100-or-more Transition Relief are applicable only if the ALE Member, or any member of an ALE Member's Aggregated ALE Group, if applicable, offers coverage under a health plan with a plan year beginning on a date other than January 1, and only with respect to calendar months in 2016 that fall within the plan year that began in the 2015 calendar year.

Note that the above-described 2016 transition relief is solely with respect to Code Sec. 4980H and does not affect the employee's potential eligibility for the premium tax credit. Accordingly, regardless of whether the ALE Member is eligible for relief under Code Sec. 4980H for an employee for one or more months, the Form 1095-C for that employee must accurately report the health coverage offered to that employee (if any) during that period, including, if applicable, the Employee Required Contribution.

For elimination of qualifying offer method transition relief, see “Changes to the forms themselves,” below.

...Authoritative transmittal clarification. An Aggregated ALE Group is all ALE Members under common control. Each ALE Member must file its own Forms 1094-C and 1095-C under its own separate employer identification number, even if the ALE Member is part of an Aggregated ALE Group. No Authoritative Transmittal should be filed for an Aggregated ALE Group.

...Changes to the forms themselves. The following are changes to the forms themselves.

Elimination of a type of relief. The Qualifying Offer Method Transition Relief provided certain employers with an alternative method of furnishing Form 1095-C to employees who did not receive a “Qualifying Offer” for all 12 calendar months. That relief is not applicable for 2016. As a result, the caption for draft Form 1094-C, line 22, box B is “Reserved”; the 2015 caption for that line read “Qualified Offer Method Transition Method.”
Definition of full-time employee. On Part III of Form 1094-C, “Section 4980H” was inserted before “Full-Time Employee Count for ALE Member” in Column (b) to remind filers that the Code Sec. 4980H definition of “full-time employee,” and not any other definition that an ALE Member may use for other purposes, applies for purposes of that column.
Form 1095-C, Part II, Employee Offer and Coverage. Line 14 of Form 1095-C, Part II is used to specify the type of coverage, if any, offered to an employee, the employee's spouse, and the employee's dependents. The type of coverage is shown via codes. 2015 Code 1I, Qualifying Offer Transition Relief 2015, has been dropped for 2016. New codes 1J and 1K address conditional offers of spousal coverage (also referred to as coverage offered conditionally).
The caption for line 15 has been changed from “Employer Share of Lowest Cost Monthly Premium...” to “Employee Required Contribution.” And, the caption for line 16 has been changed as well.
In both of the above cases, the change is not a substantive one; the instructions for the line are not substantively changed for 2016.
Line 16, Code 2I, “2015 non-calendar year transition relief applied to this employee,” has been dropped.
Part II has an unnumbered line for “Plan Start Month.” This line was optional for 2015, and the 2015 instructions stated, “... it is anticipated that this box will be mandatory for the 2016 Form 1095-C.” The 2016 instructions provide that this line is again optional for 2016, and they say that “it is anticipated that this box will be mandatory for the 2017 Form 1095-C.”

“Do not attach to your tax return.” On Form 1095-C, the language “Do not attach to your tax return. Keep for your records.” was inserted under the title of the form to inform the recipient that Form 1095-C should not be submitted with his income tax return.