Subsequent to this article being published, the IRS changed the due date of the returns. Please refer to our article posted on January 5, 2016.
As you are aware, beginning in January 2016, certain employers are required to report information related to their employee’s health coverage in 2015. Applicable large employers (ALEs) are those who employed at least 100 full-time employees in 2015 (and after 2015, at least 50 full-time employees), may be subject to the employer mandate that was enacted as part of the Affordable Care Act (ACA). The ACA defines “full-time” employees as averaging 30 or more hours per week.
Beginning in January 2016, reporting of health coverage provided to employees is required for the tax year 2015 for all those required to provide coverage in 2015. ALEs will use Forms 1094-C and 1095-C to report the information about offers of health coverage and enrollment in health coverage for their employees. Specifically, an ALE will use Form 1094-C to report summary information for each employee and to transmit Forms 1095-C to IRS. A separate Form 1095-C is used to report information about each employee. In addition, Forms 1094-C and 1095-C are used in determining whether an employer owes payments under the employer shared responsibility provisions (sometimes referred to as the “employer mandate”). Under the employer mandate, an employer can be subject to a penalty if it does not offer affordable minimum essential coverage that provides minimum value to substantially all of its full-time employees (and their dependents). Form 1095-C is also used in determining eligibility of employees for premium tax credits. Completion of these forms requires monthly tracking of offerings and coverage on an employee by employee basis. The 2015 forms are due to employees by January 31, 2016.
You could potentially be subject to the excise tax if any of your full time employees are certified, as described below, as having received “health care assistance,” and you either: (1) do not offer health care coverage for all of your full-time employees; or (2) offer “minimum essential” coverage under your group health care plan that either is not “affordable” or does not provide “minimum value” to your employees.
If you do not offer health care coverage to your full-time employees, the excise tax will be $166.67 for any month, i.e., 1/12 of $2,000 for 2015, times the number of your full-time employees during any month, reduced by an 80 person threshold for 2015, and any calendar months of 2016 that fall within your 2015 plan year. After that transitional period, the threshold is reduced to 30.
If you do offer health care coverage to your employees, but it is not affordable, or does not provide minimum value, the excise tax will be $250 for any month, i.e., 1/12 of $3,000 for 2015, times the number of your full-time employees for any month who receive health coverage assistance, reduced by the number of those employees in a “limited non-assessment period,” and the number of your employees who were offered the opportunity to enroll in “minimum essential coverage” under your group health plan that meet the requirements of employer mandate. In addition, the amount of any excise tax that you may owe as a consequence of this aspect of the excise tax cannot exceed the amount of the excise tax owed if you failed to offer health care coverage at all, as described above.
In the event you have an employee who received health care assistance outside your company, IRS is required to notify you to ensure you will have the opportunity to respond before the issuance of any notice and demand for payment of the excise tax.
The contact from IRS for a given year will not occur until after your employees’ individual tax return is due for that year, and after the due date for you to file information returns identifying your full-time employees and describing the health coverage that you offered, if any.
The above is a very simplified explanation of the employer mandate and the applicable excise taxes, which can be severe. You should be aware that these reporting requirements may be more complex if the employer is a member of an aggregated ALE group or if the coverage is provided through a multiemployer plan.
If you have questions or would like to discuss how these requirements may impact your business, please contact your account manager or me at your earliest convenience.