IRS Issues Final ACA Information Reporting Forms; Additional Guidance to Follow

Practical Law Legal Update w-000-5984 (Approx. 6 pages)

IRS Issues Final ACA Information Reporting Forms; Additional Guidance to Follow

by Practical Law Employee Benefits & Executive Compensation

Truncated TINs on Section 6055 Statements

Code Section 6055 requires insurers to report coverage information under insured group health plans to the IRS. Reporting entities also must provide a written statement to individuals who are identified on a Section 6055 return. The IRS plans to issue regulations under Section 6055 to clarify that insurers reporting on insured plans may use an employer's truncated TIN on the statement provided to an individual.

Reporting for Health Reimbursement Arrangements and Supplemental Coverage

The IRS also intends to publish proposed regulations to address a rule regarding Section 6055 information reporting of supplemental coverage that was intended to prevent duplicative coverage, but that has proven confusing in practice. Under the existing rule, reporting is not required for MEC that supplements, or provides benefits in addition to, other MEC if either:

The primary and secondary coverage have the same plan sponsor.
The coverage supplements Medicare or other government-sponsored coverage.

The IRS plans to propose regulations that would replace this rule with the following two rules, both of which would apply month-by-month and individual-by-individual:

For individuals covered by multiple MEC plans or programs furnished by the same provider, reporting is required for only one of the MEC plans or programs.
Reporting generally would not be required for MEC for which an individual is eligible if the individual is covered by other MEC for which Section 6055 reporting is required.

To illustrate the first rule, assume that an employee is enrolled for a given month in an employer's self-insured group health plan and also has a self-insured health reimbursement arrangement (HRA) from the same employer (see Practice Note, Defined Contribution Health Plans: Health Reimbursement Arrangements (HRAs)). The employer in this example would be required to report only one type of coverage for the employee. If the employee were to drop the group health plan coverage (so that only the HRA coverage remained), the employer would be required to report the HRA coverage for the months after the employee dropped the non-HRA coverage.

Under the second rule, reporting would not be required for Medicare, Medicaid or TRICARE supplements for an individual enrolled in other coverage (for example, an employer-sponsored plan) for which reporting is required. Reporting also would not be required for an HRA that is available only to employees enrolled in the same employer's health plan for months that the employee also is enrolled in the health plan.

However, if the employee were enrolled in an employer's HRA and in a spouse's non-HRA group health plan (that is, a plan sponsored by a different employer), then:

The employer would need to report for the HRA.
The spouse's employer would be required to report for the group health plan.

Corresponding Changes to Reporting Forms

The newly-finalized reporting forms include changes consistent with Notice 2015-68. For example, the instructions for Form 1095-C now include a section indicating that employers with a self-insured health plan and an HRA must report for individuals enrolled in both types of MEC under only one of the arrangements.

Also, a large employer with an insured health plan and an HRA need not report (in Part III of Form 1095-C) the HRA coverage of an individual who is eligible for the HRA because the individual enrolled in the insured health plan. However, an employer with an HRA must report coverage under the HRA (in Part III) for any individual who is not enrolled in the employer's major medical plan (for example, if the individual has spousal coverage under the group health plan of the spouse's employer).

Information Reporting Penalty Relief for Reasonable Cause

Reporting entities are subject to penalties if they fail to comply with the filing and statement requirements for ACA information reporting, though the IRS has made available short-term penalty relief (see Practice Note, Information Reporting for Employers That Self-Insure and Insurers (Section 6055): Increased Penalties for Noncompliance; Good Faith Compliance). The relief applies to incorrect or incomplete information, including taxpayer identification numbers (TINs). Penalties also may be waived for failures due to reasonable cause, and existing regulations include procedures that a reporting entity can use to demonstrate that it acted responsibly in soliciting TINs for reporting purposes (26 C.F.R. § 301.6724-1(a)).

Under Notice 2015-68, and subject to future guidance, reporting entities will not be subject to penalties for failing to report a TIN if they satisfy the requirements of Section 301.6724-1(e), with the following changes:

The initial request for a TIN must be made at an individual’s first enrollment (or, for individuals already enrolled on September 17, 2015, the next open enrollment).
The second request for a TIN must be made at a reasonable time after the first request.
The third request must be made by December 31 of the year following the initial request.

It is not necessary to request a TIN from an individual whose coverage is terminated.

Reporting MEC under Catastrophic Health Plans

At present, neither the ACA exchanges nor health insurers are responsible for reporting MEC under a catastrophic health plan. Under the ACA, a catastrophic health plan is one that:

May only be offered in the individual market.
Covers essential health benefits (see Practice Note, Lifetime Limits, Annual Limits, and Essential Health Benefits Under the ACA).
Provides no benefits for a plan year until an individual has incurred a minimum level of cost-sharing expenses.

To make sure there is information reporting for catastrophic health plans, the IRS intends to propose regulations under Section 6055 that would require insurers to report catastrophic plans on Form 1095-B (Health Coverage) (see Practice Note, Information Reporting for Employers That Self-Insure and Insurers (Section 6055): Final Forms 1094-B and 1095-B, and Instructions). The proposed regulations would apply to:

Coverage in 2016.
Information returns and statements filed and furnished in 2017.

Insurers also may report on 2015 catastrophic coverage (that is, on returns and statements filed and provided in 2016). An insurer that reports on 2015 catastrophic coverage will not be subject to penalties for these returns.

IRS Issues Final ACA Information Reporting Forms; Additional Guidance to Follow | Practical Law