Pillsbury Winthrop Shaw Pittman

Healthcare reform update: employers must begin reporting details of health coverage to IRS

By Mark C Jones and Matthew C Ryan

The Patient Protection and Affordable Care Act (ACA) imposes significant new reporting requirements on employers providing self-insured group health coverage to their employees and employers subject to the shared responsibility (or ‘Pay or Play’) rules. Recently finalised regulations explain these requirements and provide certain employers with opportunities to reduce their reporting burden. The ACA reporting regime will become effective on 1 January 2015, relying in part on data collected in 2014.

The Internal Revenue Service (IRS) is tasked with enforcing two new classes of ACA penalties. The first applies to adults who are subject to the ACA’s individual mandate but fail to secure ‘minimum essential’ health coverage for themselves. The second class of penalties applies to employers that are subject to Pay or Play and either choose not to offer health coverage to full-time employees or offer employee health coverage that fails to meet ACA affordability or ‘minimum value’ standards. An employer is subject to Pay or Play if it employs 50 or more full-time employees (or equivalents), either individually or when grouped with certain affiliates (its ‘controlled group’). The Pay or Pay penalty applies only if a full-time employee obtains a premium subsidy for coverage from a public health insurance marketplace (or ‘exchange’).

To enforce these new penalties and identify employees who may qualify for a premium subsidy, the IRS will rely on new Forms 1095-B and 1095-C. Section 6055 of the Internal Revenue Code requires employers with self-insured health plans to report the individuals covered by their plans on Form 1095-B. This information will be used primarily for enforcement of the individual mandate. Section 6056 requires employers subject to Pay or Play to describe the health coverage they offer to employees on Form 1095-C. This information will be used primarily for enforcement of Pay or Play…

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