By Alison Stemler

Frost Brown Todd

Employers will need to provide annual healthcare-related reports to employees and the IRS beginning in early 2016, but you need to begin tracking the information that must be reported (employee status and health insurance coverage offers) beginning January 1, 2015. The new reporting obligations for health plan coverage will allow the government to administer the “play-or-pay” penalties that will be assessed against employers that don’t offer compliant coverage to full-time employees.

The reporting obligations will be difficult for most employers to implement. Penalties for noncompliance are high, so you need to begin work now to plan how your company will track and file the required information.

Play-or-pay reporting

Play-or-pay penalties apply to employers with 100 or more full-time-equivalent employees (FTEs) in 2015 and 50 or more FTEs in 2016 and beyond. Play-or-pay penalties are assessed on those employers if they don’t offer compliant healthcare coverage to 70 percent of full-time employees in 2015 and 95 percent of full-time employees thereafter.

Applicable large employers (ALEs) must report healthcare coverage offered to employees for each month of 2015 in an annual information return due in early 2016. ALEs are employers with 50 or more FTEs, determined by counting all employees of a controlled group of commonly owned employers. Even though the penalties apply only if the ALE has 100 or more employees for 2015, ALEs with 50 or more FTEs are required to report for 2015.

Individual mandate reporting

Employers that provide self-funded group healthcare coverage also have reporting obligations, which will allow the government to administer the “individual mandate,” the tax on individuals who do not maintain healthcare coverage.

Self-funded employers, including both ALEs and small employers that aren’t ALEs, must report each individual covered for each month of the calendar year. For fully insured coverage, the insurance carrier must report individual month-by-month coverage. The individual mandate reporting is due early in 2016 for each month of 2015.

Which form?

ALEs have one set of forms for reporting both the play-or-pay and the individual mandate information: Forms 1094C and 1095C. Insurers and self-insured small employers that are not ALEs will use Forms 1094B and 1095B to report the individual mandate information.

Employers must report information about employee and individual coverage provided on the IRS forms to employees as well as COBRA and retiree participants. Forms 1095B and 1095C can be used to provide the information, or you can provide it in a different format.

Who reports?

While ALE status is determined on a controlled group basis, each ALE must file separate reports. Employers will need to provide insurance carriers and third-party administrators (TPAs) that process claims for self-funded coverage (if they will assist the employer with reporting) accurate data on the employer for whom each covered employee works. If an employee works for more than one ALE in a controlled group, the employer for whom the employee works the highest number of hours does the reporting for him.

For play-or-pay reporting, each ALE must file a Form 1094C, reporting the number of its full-time employees (those who average 30 hours) and total employees for each calendar month, whether the ALE is in a controlled group, a listing of the name and employer identification number (EIN) of each entity in the controlled group, and any special transition rules being used for play-or-pay penalties.

ALEs must also file a 1095C for each employee who was a full-time employee during any calendar month of the year. The 1095C includes the employee’s name, address, and Social Security number (SSN); month-by-month reporting of whether coverage was offered to the employee, spouse, and dependents; the lowest premium for employee-only coverage; and identification of the safe harbor used to determine affordability.

If it provides self-funded coverage, the ALE must also report on the 1095C the name and SSN of each individual who is covered for each calendar month. If an employer is not an ALE but is self-funded, it will report the name and SSN of each covered individual on the 1095B, and the 1094B will be used to transmit the 1095Bs to the IRS.

Due date for filing

The due date of the forms matches the due dates for W-2s, and you may provide the required employee statements along with W-2s. Statements to employees are due January 31, and reports to the IRS are due each February 28, although the date is extended until March 31 if the forms are filed electronically. If you file 250 or more returns, the returns must be filed electronically. Reports to employees can be made electronically only if an employee has specifically consented to receiving the report electronically.

Penalties

Failure-to-file penalties can total $200 per individual employee for whom information must be reported, up to a maximum of $3 million per year. Penalties will not be assessed for employers that make a good-faith effort to file correct returns for 2015.

Action items

Your HR, payroll, and IT staff will need to work together to be sure the necessary information is being tracked and can be produced for reporting. Your insurance carrier, TPA, or payroll provider may be able to offer assistance, but that should be determined now so you can be sure the needed data is captured.

Excerpted from the Kentucky Employment Law Letter. For more information about this topic, please contact Alison Stemler at astemler@fbtlaw.com.