Oct 12, 2016

Legislative Update: IRS Releases 2016 Updated Forms 1094 and 1095 ACA Reporting

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In 2015, new Internal Revenue Service (“IRS”) employer reporting requirements relating to the PPACA went into effect. The IRS recently released updated and modified Forms for the 2016 filings that are due in 2017. You may recall from last year, that there are two separate types of IRS PPACA required filings. The Forms 1094-B and 1095-B are designed to enforce the individual mandate. The Forms 1094-C and 1095-C are designed to enforce the employer mandate, which only applies to large employers –employers with 50 or more full-time equivalents. The Forms 1094-B and 1094-C are the Forms used to transmit individual employee coverage information contained in the 1095-B and 1095-C.

Small and large fully-insured employers --under 50 full-time equivalents-- do not have to worry about filing the 1094-B and 1095-B with the IRS because the insurance carrier is responsible to make those filings and to transmit the 1095-B to employees. Small employers are not subject to the employer mandate and therefore they do not file Forms 1094-C or 1095-C.

For the most part, the Forms did not change significantly. The deadlines for the Forms to be submitted to the IRS and delivered to employees, however, have been shortened from last year and the penalties have increased. Most of the few substantive changes that were made impacted the Forms 1094-C and 1095-C.

Dates to Remember.

Last year, the IRS gave employers and insurers extension by which to provide the Forms to employees and to file with the IRS. Those generous extensions have been shortened in 2016. Below is a side-by-side comparison of the new dates versus the 2015 deadlines.

Reporting Forms 2015 Deadline 2016 Deadline
Forms 1095-B and
1095-C due to Employees March 31, 2016 January 31, 2017
*Forms 1094-B, 1095-B, 1094-C and 1095-C, due to IRS if filed in paper format May 31, 2016 February 28, 2017
Forms 1094-B, 1095-B, 1094-C and 1095-C, due to IRS if filed electronically June 30, 2016 March 31, 2017

An employer is entitled to a one time automatic extension if the employer files a Form 8809 with the IRS on or before the deadline for filing. An extension to transmit the 1095-B and/or 1095-C to employees will only be granted if the employer writes a letter to the IRS requesting the extension. Extensions, if granted, will generally not exceed 30-days.


*Only employers with under 250 employees may file in paper form.

The Substantive Changes to the 1095-C Form.

The most important changes were made to the applicable codes on the Form 1095-C. Form 1095-C contains two series of codes: Code Series 1 and Code Series 2. The Code Series 1 indicator codes specify the type of coverage, if any, offered to an employee, the employee’s spouse, and the employee’s dependents. Code Series 2 indicator codes specify information that allows the IRS to determine whether the employer is subject to the employer mandate penalty.

Code 1I on Form 1095-C, line 14, and code 2I on Form 1095-C, line 16, are no longer applicable and have been reserved. Both Code 1I and 2I pertained to “Qualifying Offer Transition Relief.” That relief was only an option in 2015. This year two new codes were added 1J and 1K. Both address conditional offers of spousal coverage. A conditional offer is an offer of coverage that is subject to one or more reasonable, objective conditions. For example, an offer to cover an employee’s spouse only if the spouse is not eligible for coverage under Medicare or a group health plan sponsored by another employer.

Other minor points of clarification were made to the Forms, but none that are substantively significant. One clarifying point is that language stating “Do not attach to your tax return. Keep for your records” was inserted under the title of the 1095-B and 1095-C Forms.

Penalties

The following penalties may apply to an employer or insurer that fails to comply with the PPACA reporting requirements may be subject to penalties for failure to file correct returns and/or failure to furnish correct payee statements:

  • The penalty for failure to file a correct information return is $260 for each return for which the failure occurs, with the total penalty for a calendar year not to exceed $3,193,000.
  • The penalty for failure to provide a correct payee statement is $260 for each statement for which the failure occurs, with the total penalty for a calendar year not to exceed $3,193,000.
  • Special rules apply that increase the per-return and per-statement and total penalties with no maximum limitations if there is intentional disregard of the requirement to file the returns and furnish recipient statements.

The penalties may be waived if the failure was due to reasonable cause and not willful neglect. The IRS has issued regulations providing guidance on the type of issues that might constitute reasonable cause. Significantly, unlike last year, a good faith efforts standard to protect from filing information returns or payee statements with inaccurate or incorrect information will not be a permissible standard by which to avoid a penalty. Therefore, it will be much more critical that the 2016 filings be completed correctly.