On Dec. 28, 2015, the US Treasury and IRS issued Notice 2016-4, which extends the deadlines and transition rules for 2015 employer and insurer information reporting requirements under the Affordable Care Act (ACA). Changes include the following:
- Furnishing statements to individuals – The original deadline for distributing Forms 1095-B and 1095-C to individuals offered minimum essential coverage (MEC) was originally set for Feb. 1, 2016. The new issuance deadline is March 31, 2016.
- Filing returns (transmittals) with the IRS – The original deadline for manually filing Forms 1094-B/C and 1095-B/C with the IRS was set for Feb. 29, 2016. The new manual filing deadline is May 31, 2016. The original deadline for electronically transmitting Forms 1094-B/C and 1095-B/C was originally set for March 31, 2016. The new electronic filing deadline is June 30, 2016.
- Impact to individuals – Notice 2016-4 also includes guidance for individuals who might not receive a Form 1095-B or Form 1095-C by the time they file their 2015 tax returns. For 2015 only, individuals can rely upon other information received from coverage providers and employers about their coverage for purposes of filing their returns and need not amend their returns once they receive the Form 1095-B or Form 1095-C should the two conflict. Once they submit their tax filing, individuals should save any forms they receive should they be needed to verify coverage at any point in the future.
It appears federal agencies recognized the degree of difficulty associated with the timely completion of the forms needed to establish a basis for compliance with the individual and employer shared responsibility mandates of the ACA. Therefore, they are providing additional time to prepare and submit the required forms through this guidance. The agencies apparently also recognized the need to continue to put this reporting and disclosure process in play in 2016, but are permitting more time for employers, insurance companies, unions, and other providers to accurately prepare and complete the forms.
Keep in mind, all employers that offer MEC have reporting obligations under the ACA, regardless the number of employees. Even if the employer contracted with an insurance company or another third-party provider, it still maintains overall responsibility for the preparation and filing of these forms. The IRS indicated in this notice it will assess penalties on employers that do not comply with the extended due dates.
This extension will come as welcome news to those who were scurrying late last year to comply, which is especially true for those who waited until the last minute to engage a third-party service provider and were turned away. However, for those employers who contracted in a timely manner with a third-party service provider, they will likely want that provider to honor the original deadlines, as doing so would position employees to have everything they (were supposed to) need to file their 2015 taxes. Here are several other practical considerations tied to reporting and the extension:
- Employee communications – If you contracted with a third party, you will want to obtain that service provider’s position on the extension so you know what to tell your employees. This is particularly important if you already have communicated the original deadline dates to employees. Many employers began educating employees about ACA reporting in 2015, with some leveraging fall annual enrollment periods as a prime opportunity to deliver targeted communications on this subject. If reporting dates were included in any such initiatives you sanctioned, it is important to take the opportunity now to redouble your efforts when it comes to pertinent dates and tax-filing impacts.
If you offer a fully insured plan and your portion of this reporting is on track, check with your insurer to obtain its position on the extension. The insurer, after all, has the form your employees will want to get their hands on most. Therefore, they’ll want to know if it will arrive later than yours.
Lastly, the extension guidance makes mention of “other information received” that employees can use to determine the offers and coverage they maintained in 2015. Common sources of this type of information include summaries of benefits and coverage, benefits enrollment materials, enrollment websites, member online portals provided by insurers, and COBRA documentation for those covered under COBRA for any portion of the year.
- Third-party assistance – If you sought assistance from a reporting service but were turned away late in 2015, it is worth seeing if that same service provider has changed its policy and resumed accepting new 2015 reporting business. While there are no guarantees, this proposition is especially worthwhile for applicable large employers (ALEs) who potentially will need to issue more than 250 1095-Cs, as the IRS electronic transmittal requirements represent a formidable challenge.
- Fully insured small employers – While the IRS has specified insurance carriers are to prepare the ACA information reports for fully insured plans, some insurance companies are indicating they will not prepare the reporting for employers with fewer than 50 full-time or full-time equivalent employees. As the employer, you are ultimately responsible for providing these reports to employees offered MEC. Confirm with your carrier who will prepare the necessary forms and be prepared to make other arrangements.
- Forms and filings: Buyer beware – ALEs that need to issue more than 250 Forms 1095-Cs should be cautious about solutions that include the form preparation component only. While such an arrangement sounds good because it affords compliance with the first reporting deadline, you will have a difficult time finding another service provider willing and able to take on the second deliverable: the IRS transmittal task. It is important to consider these services “bundled” (form generation AND IRS transmittal) when contracting with service providers.
- While you wait: Think SSN cleanup – The ACA puts additional requirements on ALEs to make periodic, good faith efforts to ensure Social Security numbers (SSNs) are accurate for all covered individuals. If you or your service provider intends to leverage the new deadlines, consider using the time in between to target employees for whom you may have missing or incorrect SSNs on file. These records can be updated before forms are issued to individuals and transmitted to the IRS.
- Don’t assume – The worst action an employer can take when it comes to ACA reporting is to assume someone else has it covered. This reporting is new, and the extension is telling with respect to its complexity. Consider your ability to comply at risk unless you have a plan for how it will be completed internally (and resources assigned to complete it) or you enter into a new or amended agreement with a service provider.
Critical now is for employers who needed more time to take advantage of the extended deadlines. Once this reporting cycle is complete, it will be important for all affected employers to evaluate their ACA reporting readiness strategies and partnerships.
For more information on this topic, or to learn how Baker Tilly tax specialists can help, contact our team.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.