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Category: Articles

As published in The Self-Insurer,
June 2014

In March of 2014 the Internal Revenue Service and Treasury issued final regulations providing guidance to those entities that are subject to the information reporting requirements of sections 6055 and 6056 of the Internal Revenue Code, as enacted by the Patient Protection and Affordable Care Act (PPACA).

This article will focus on section 6055 which requires health insurance issuers, certain employers, governments, and others that provide minimum essential coverage (MEC) to report annually to the IRS by filing the requisite returns and transmittal forms and to report annually to responsible individuals by providing the requisite statements.

By way of background, individuals who fall below 400% of the federal poverty level and do not have access to MEC that meets the minimum value and affordability thresholds may be entitled to a premium tax credit. The reporting requirements set forth in section 6055 are intended to facilitate the determination for the IRS, as well as individuals, on who might be eligible for a premium tax credit and who might be assessed a penalty pursuant to the individual mandate.

As a general rule, MEC includes any eligible employer sponsored plan, fully insured or self-funded, including COBRA and retiree coverage as well as coverage purchased in the individual market, a qualified health plan offered in the Marketplace, Medicare Part A, most Medicaid coverage, CHIP and TRICARE. MEC does not include, and reporting is therefore not required for, limited and/or excepted benefits such as a stand-alone vision or dental plan, accident or disability policies, workers’ compensation or limited Medicaid coverage, and likewise, section 6055 reporting is not required for coverage that merely supplements MEC such as HRAs, on-site medical clinics, or wellness programs.

 

Who is required to report?

Section 6055 requires insurers, plan sponsors and other entities providing MEC to an individual during a calendar year to comply with this reporting requirement. For self-funded plans, the plan sponsor is responsible for the reporting. In the case of a self-funded multiple employer welfare arrangement (MEWA), the plan sponsor is each participating employer with respect to its own employees. In the case of a self-funded multiemployer plan, the plan

sponsor is the association, committee, board, or similar group representative who maintains and administers the plan.

When and how must the information be reported?

Section 6055 reporting originally was to apply to coverage provided on or after January 1, 2014. However, the IRS provided transition relief for reporting for one year as set forth in Notice 2013-45. Under the final regulations, reporting is now required beginning in early 2016, for coverage that was provided in 2015, and annually thereafter. In the interim, the IRS is encouraging voluntary compliance and reporting prior to the effective date. The IRS is hopeful reporting entities will use this delayed effective date as a ‘real-world’ testing period resulting in a smoother transition come 2016.

A reporting entity must file a return (1095-B) for each individual to whom MEC was provided, along with a transmittal form (1094-B) on or before February 28 (March 31 if filed electronically) of the year following the calendar year in which the coverage was provided. Electronic filing is required for high-volume filers (250 or more returns under section 6055). For the first reporting year, since the 2016 deadline falls on a Sunday, the first returns and transmittal forms will be due by March 1, 2016 (unless filed electronically).

Statements must be furnished to the responsible individual on or before January 31st of the following year. For the first reporting year, since the 2016 deadline falls on a Sunday, the first statements will be due by February 1, 2016.

Statements must be mailed first class to the last known permanent address on file for the responsible individual, and although not required the final regulations indicate that plan sponsors may choose to provide the responsible individual with a copy of the return that was provided to the IRS to satisfy the statement requirement. The plan sponsor may furnish these required statements to the responsible individual within the same mailing as the W-2.

The final regulations also permit furnishing the statements to the responsible individual electronically so long as the proper consent has been received from the individual to receive electronic notices. A general consent to receive statements electronically will not be sufficient. Detailed requirements must be met in order to satisfy the electronic disclosure rules.

 

What information must be reported?

We are still waiting patiently for the required forms and instructions that are to be utilized in complying with section 6055 reporting requirements. At a bare minimum, the returns will require the following:

  • Name, address, and taxpayer identification number (TIN) of the primary insured (the “responsible individual”);
  • Name, address, TIN (or date of birth) of each additional individual (spouses and dependents) obtaining coverage under the policy;
  • Dates during which the individual was covered during the calendar year; and
  • Name, address, and employer identification (EIN) of the employer maintaining the plan.

Statements that must be provided to the responsible individuals must generally contain the same information as set forth in the returns as well as contact information of the individual filing the return.

 

Penalties for non-compliance?

Failure to comply with these reporting requirements could result in penalties ranging from $100 per return up to $1.5 million in a calendar year. In an effort to provide short-term relief from penalties, the IRS will not impose penalties where it can be shown that a good faith attempt to comply has been made but only for incorrect and/or incomplete information. No relief will be provided where a reporting entity does not make a good faith effort to comply or for failure to file timely returns or furnish the requisite statements, and penalties could exceed $1.5 million for a reporting entity that intentionally disregards the requirement.
Next Steps?

January 2016 will be here before we know it and between now and then many systems may need to be designed or refined to capture the relevant data elements that will enable reporting entities to streamline the 6055 reporting requirements. Reporting entities and/or their TPA partners will need to look at current processes and assess the operational impact complying with these requirements will have.

Will TPAs be educating their clients on the requirements? Will this be a service that TPAs offer to their clients?

The initial hurdle, whether it is the TPA or the plan sponsor, is going to be gathering the TINs that are required. The final regulations require entities to make ‘reasonable efforts to obtain TINs” and it is anticipated in the regulations that reporting entities that don’t currently possess the required TINs will make an initial annual solicitation and a second solicitation if required in an attempt to satisfy the reasonableness test.

Complete TINs are going to be required on the returns, or dates of birth if reasonable attempts are unsuccessful in obtaining dependent TINs. Yet, there are challenges in providing complete TINs in the statements that are being provided to the responsible individuals. The final regulations clarify that reporting entities are permitted to use truncated TINs on the statements that are being provided to the responsible individuals.

The issues surrounding TINs is just one hurdle that needs to be considered over the next several months to assist in making the reporting requirement under sections 6055 and 6056 a streamlined process for those involved. Next month’s article will focus on section 6056 reporting requirements and the additional challenges that it may pose.

This article is intended for general informational purposes only. It is not intended as professional counsel and should not be used as such. This article is a high-level overview of regulations applicable to certain health plans. Please seek appropriate legal and/or professional counsel to obtain specific advice with respect to the subject matter contained herein.

This article is intended for general informational purposes only. It is not intended as professional counsel and should not be used as such. This article is a high-level overview of regulations applicable to certain health plans. Please seek appropriate legal and/or professional counsel to obtain specific advice with respect to the subject matter contained herein.