IRS drafts instructions for ACA reporting requirements

They promised they would be coming and now they have. On Aug. 28, the Internal Revenue Service issued draft instructions for Forms 1094-C and 1095-C and Forms 1094-B and 1095-B, which I provided in my July 31 entry. 

These forms were provided in draft format and they are used to satisfy Affordable Care Act’s “information reporting requirements.” We also got draft instructions for Form 1095-A that relates to the statement about the Health Insurance Exchange Marketplace. The IRS has indicated that it will finalize the forms and instructions in 2014.  On top of that, they issued some FAQs that address the reporting requirements.

NOTE: Reporting for the 2015 year is due in 2016, so the instructions and guidance should help employers and plan sponsors put together a framework to following in 2015 so that they can properly report.

Also see: IRS releases draft instructions for ACA reporting forms

As a starting point, the FAQs provide that some short-term penalty relief will be available for incomplete or incorrect information returns that are filed (or employee statements provided to employees) in 2016 for coverage offered, or not offered, in 2015. Under this relief, the IRS will not impose penalties on employers that can demonstrate that they made good faith efforts to comply with the information reporting requirements. This relief applies to returns and statements filed and furnished in 2016 to report offers of coverage in 2015 for incorrect or incomplete information reported on the return or statement, but the relief is not available if you fail to file. You have to show a good faith effort to comply so you cannot simply not file anything an expect relief.

Also see: CEOs concerned about ACA incentive rules

With respect to the instructions themselves, to say that they are lengthy is an understatement.  Employers should read them in detail to understand their obligations. However, some key provisions that help in compliance include:

• Clarification that employers must file Forms 1095-C and 1094-C with the IRS, and provide a copy of Form 1095-C to employees.
• A statement that, as noted above, forms 1095-C and 1094-C information returns are not required for 2014. Actual filings are not required until 2016 for the 2015 calendar year but employers may voluntarily file these forms in 2015 for 2014.  If by chance an employer does choose to voluntarily files in 2015 for the 2014 year, penalties for the employer mandate payments will not be assessed for 2014.
• Establishment of specific dues dates for Forms 1095-C and 1094-C information returns.  They must be filed by February 28 (for paper filings), or March 31 (for electronic filings) of the year following the calendar year to which the return relates.
• Clarification that a Form 1094-C must be attached to any Forms 1095-C filed by an employer. Each employer must file one 1094-C that reports aggregate employer-level data for all the employer’s full-time employees, which is referred to as the “authoritative transmittal” (and denoted accordingly on Line 19 of the Form 1094-C). Only one authoritative transmittal may be filed for each employer.
• Employers also must provide a Form 1095-C to each full-time employee by Jan. 31 of the year after the year to which the form relates (so that would be Jan. 31, 2016 for the 2015 reporting year). Incidentally, employee statements must be furnished to individuals in paper format by mail, unless the individual affirmatively consents to receiving the statement electronically.

As with the forms, the instructions are in draft format and subject to change and finalization.  However, between the draft forms and the draft instructions, employers should now be able to ascertain generally what is required of them in reporting. Even though the mandatory reporting requirement does not completely kick in until after 2015, employers should spend some time reviewing these requirements with their plan professionals, preferably sooner rather than later, to get a sense of what data they will have to collect and how who has responsibility for making sure the information is accurate.
Keith R. McMurdy is partner with Fox Rothschild. He focuses primarily on labor and employment issues arising from the design, drafting and administration of employee benefits plans. McMurdy also contributes to the firm's Employee Benefits Legal Blog. He can be reached at kmcmurdy@foxrothschild.com or 212.878.7919.