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1094-C: Reporting Requirements: A Step-by-Step Guide

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[Last Updated 2/11/2016]

Employers subject to the Affordable Care Act (ACA) must begin collecting certain employee data to meet Section 6056 reporting requirement. Specifically, the ACA requires that employers subject to the law (Applicable Large Employers (ALEs) with 50 or more full-time employees or their equivalent) file Forms 1094-C and 1095-C. A draft version of these Forms was released on October 15, 2014. A final version is expected later this year. All employers subject to the ACA will have to file these two forms starting on 2016 for tax year 2015—this applies even to those employers who are delaying compliance due to the transition relief available to smaller ALEs. These forms are a vital part of the ACA because this is how regulators will know whether employers are complying with the ACA. These forms will also be used to substantiate whether employees maintained minimal essential coverage as required by the individual mandate. Covered employers must complete a Form 1095-C for each employee who was considered a full-time employee for any month of the calendar year. Covered employers have to also complete at least one authoritative1094-C for each Applicable Large Employer Member. Form 1095-C is due to the employee by January 31. Form 1094-C and a copy of 1095-C is due to the IRS by February 28 if filing by paper or March 31 if filing electronically. A $100 penalty will be assessed for each return that is not timely or correctly filed.

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1094-C: Reporting Requirements: A Step-by-Step Guide

  1. 1. The Affordable Care ActReporting Requirements: A Step-by-Step Guide to Form 1094-C 1
  2. 2. These slides were last updated on February 11, 2016. 2
  3. 3. First things first, this is not a basic guide. 3
  4. 4. This guide assumes you know how the Employer Mandate basically works under the Affordable Care Act. 4
  5. 5. Which brings me to a very important point. The reporting requirements are their own separate, free-standing requirement under the Affordable Care Act. 5
  6. 6. I’ve helped hundreds of employers since the Affordable Care Act was signed on March 23, 2010. 6
  7. 7. I’ve written scholarly articles for peer-reviewed legal journals on the Affordable Care Act. 7
  8. 8. I’ve written three editions of a comprehensive guide on the Affordable Care Act for employers called The Employer Mandate Handbook. The third edition was released in September 2015. 8
  9. 9. When I wrote my articles and books, I tried to cite as many legal authorities as possible so people could verify my claims. So unlike most books, when I make seemingly outrageous (or even non-outrageous) claims, I have endnotes so you can see that I am not a liar, liar with my pants on fire. 9
  10. 10. I have spent years working on this stuff every day. 10
  11. 11. I have been quoted in the Houston Chronicle, Forbes, and the New York Times. 11
  12. 12. But even after all of that, I don’t know everything, and you should run (very fast) from anyone that claims they do. 12
  13. 13. I do know that if you were an Applicable Large Employer or an Applicable Large Employer Member during 2014, you have a legal duty to file the reports discussed on these slides with the IRS in 2016. 13
  14. 14. The reporting requirements were optional in 2015 (for the 2014 tax year); they are not optional in 2016 (for the 2015 tax year). 14
  15. 15. Your duty to report in 2016 exists even if you are not currently offering insurance (during 2015) because (1) you like to live dangerously, or (2) your lawyer, accountant, or other confidant said you did not have to under the law. 15
  16. 16. Again, it does not matter if you had fewer than 99 full-time employees or their equivalent during 2014. 16
  17. 17. And it does not matter if you have a non-calendar year plan that has not yet come up for renewal in 2015. 17
  18. 18. Whether you are an Applicable Large Employer or Applicable Large Employer Member, as of January 1, 2015, remains the only barrier standing between you and the legal duty to comply with the ACA’s reporting requirements. 18
  19. 19. If you don’t know the answer to the last slide, 19
  20. 20. Stop. Investigate. Then Come Back. 20
  21. 21. Welcome back. 21
  22. 22. The Due Date of the Form 1094-C (and 1095-C) has changed since December 2015--both the delivery date to the recipient and the delivery date to the IRS have been extended. See Notice 2016 – 4 (the orange text is a direct link to the IRS) 22
  23. 23. The Penalties for good-faith compliance will apparently be waived by the IRS if you can prove good faith compliance. The IRS seldom gives people “As for Effort,” but this is one of those rare times. As long as you can prove that you tried your best, the IRS is claiming it will leave you alone. So if you can’t crack this riddle that you and only I understand, just relax and try to comply in good faith. See Notice 2015-87 (the orange text is a direct link to the IRS). 23
  24. 24. Why do I have to report in the first place? The IRS will use the information reported on Form 1094-C to determine the sum, if any, that a particular employer will pay in penalties under the Employer Mandate. 24
  25. 25. Where can I find this Form? You can find it on the IRS website, by clicking here. 25
  26. 26. Understandably, some people will not click links online sent by people they don’t know. 26
  27. 27. I like your paranoia. Paranoia is good when dealing with IRS forms. 27
  28. 28. Embrace it. 28
  29. 29. Please ensure you have picked up, and are completing, the correct Form 1094-C through whatever means you are comfortable employing. 29
  30. 30. I know that sounds a bit silly, but I have audited employer forms where the employer had the completely wrong form. 30
  31. 31. You do not want to be that employer. 31
  32. 32. In fact, the IRS has released several versions of Form 1094-C just during the time I have had these slides online. If you do not visit the IRS website every time you complete these forms, you are probably doing it wrong. Resist the urge to print 100 of these and shove them in a drawer. 32
  33. 33. Ensure you have the right IRS form by checking the top-left corner. It should look like this: 33
  34. 34. The correct Form 1094-C is also titled like this: 34
  35. 35. Notice the word transmittal in the name of the Form. 35
  36. 36. Form 1094-C is a coversheet that must accompany every Form 1095-C a reporting employer sends to the IRS. 36
  37. 37. If you find yourself sending a Form 1094-C, without attaching Forms 1095-C, to the IRS, you are doing it wrong. 37
  38. 38. Also, ensure you have the right form for the right year. In 2016, your form should have a 2015 on the top-right corner of the form you are completing. 38
  39. 39. There is no Form 1094-C with 2016 in the top-right corner, stop looking for it. 39
  40. 40. We checked the Form’s number. We checked the Form’s name. We checked the Form’s year. 40
  41. 41. Again, it might sound silly, but many employers complete the wrong form. It is important that you verify everything on the last slide every time you complete IRS forms. 41
  42. 42. Every Applicable Large Employer Member that employs at least one full-time employee must file at least one Form 1094-C. 42
  43. 43. What the heck is an Applicable Large Employer or an Applicable Large Employer Member (ALEM)? 43
  44. 44. If you don’t know what that is, you are not ready to complete Form 1094-C. The IRS provides a definition that is everything you would expect an IRS definition to be on the 9th page of the instructions. 44
  45. 45. Let’s assume Acme, Delta, Beta, and Echo are all employers. Together, the four legal entities employ more than 50 full-time employees or their equivalent during 2015. The four collective companies are an Applicable Large Employer. 45
  46. 46. The group of companies is called an Applicable Large Employer (everything inside the circle). The Form 1094-C refers to the same concept as the “Aggregated ALE Group.” 46
  47. 47. The individual companies inside the circle are called Applicable Large Employer Members (ALE Members or ALEMs). 47
  48. 48. Every ALEM in the group (inside the circle) is responsible for filing its own Form 1094-C if it employs at least one full-time employee. 48
  49. 49. If you have 100 legal entities within an ALE, you need at least 100 Forms 1094-C completed every tax year (so long as each ALEM employs at least one full-time employee). 49
  50. 50. If you only have one legal entity that employs a full-time employee, you only need to complete at least one Form 1094-C every applicable tax year. 50
  51. 51. Do you know if you are part of an ALE? Do you know all the ALEMs that are in that ALE? If you do not, 51
  52. 52. Stop. Investigate. Come Back. 52
  53. 53. Welcome Back. 53
  54. 54. Part I just asks for information regarding the particular ALEM on whose behalf the particular Form 1094-C is being filed and really, Part I is the coversheet part of the Form (more on this later). 54
  55. 55. 55
  56. 56. Once you know your ALEM/ALE status, Part I is relatively straightforward (except for Line 19). The tricky part is knowing the status to ensure you enter the right data in each line. 56
  57. 57. Nevertheless, let’s take it one line at a time. 57
  58. 58. Line 1 asks for the name of the ALEM for which the Form 1094-C is being completed. 58
  59. 59. Line 2 requires that the ALEM enter its FEIN / EIN number (don’t forget the dash). 59
  60. 60. If I do not have an EIN number, I can just input my Social Security Number in there, right? 60
  61. 61. Wrong. Without an EIN number you cannot complete a Form 1094-C. If you do not have one, you must get one to complete a Form 1094-C. 61
  62. 62. Lines 3 through 6 ask for the ALEM’s address: 62
  63. 63. Even the address is tricky on Form 1094-C. You want to keep track of two issues when you are completing the address portion. 63
  64. 64. First. If you are completing a Form 1094-C for an ALEM you have to decide whether to put one of three addresses (assuming they are different): (1) the location’s address, (2) the ALEM’s corporate address, or (3) the ALE’s corporate address. 64
  65. 65. Second. You must ensure that the address (whichever one you choose) matches the address on the corresponding Forms 1095-C. You do not want to have one address on Form 1094-C and a different address on the Form 1095-C. 65
  66. 66. Lines 7 and 8 require the ALEM designate a person to contact and a telephone number. It is very important that this person be someone that the employer trusts to talk to the IRS. 66
  67. 67. Moving on to Line 9: What the heck is a DGE? 67
  68. 68. Good news—if you don’t know what a DGE is, you are probably not a DGE. 68
  69. 69. To make it easier on government employers, government employers can designate a sister-agency or –department as the go-to entity for all Form 1094-C compliance requirements. 69
  70. 70. That designated government entity must then complete Lines 9 through 16 to make it clear to the IRS that an intermediary was used. 70
  71. 71. If you are not a government employer you can ignore everything highlighted in blue in the image below and just skip from Line 8 through Line 17: 71
  72. 72. I have received several calls about Line 17. Regulators don’t like reinventing the wheel (or Form) every time they want to ask an additional piece of information. To fix that, they often reserve sections on Forms to where they can add questions without changing the entire form. 72
  73. 73. Recall the at the start of these slides, I said that Form 1094-C acts as a coversheet for Form 1095-C. Line 18 makes that evident by expressly asking how many Form 1095-Cs are being filed along with a particular Form 1094-C. This is basically the part of any fax coversheet where it says “How many attached pages?” 73
  74. 74. Ideally, you want to file one Form 1094-C per ALEM with all of that particular ALEM’s Form 1095-Cs attached. 74
  75. 75. The last question (Line 19) in Part I concerns the two roles Form 1094-C plays in ACA compliance. 75
  76. 76. The first role Form 1094-C plays regards the Form’s status as an authoritative transmittal of vital information the IRS needs to administer and enforce ACA compliance for employers (these items are requested on Lines 20 through 65) . 76
  77. 77. The second role Form 1094-C plays regards the Form’s administrative use as nothing more than a cover sheet (Lines 1 through 19) for the attached Forms 1095-C. 77
  78. 78. Every time you sit down to fill out a Form 1094-C you have to ask yourself a fundamental question: 78
  79. 79. Are all of my Form 1095-Cs attached to this Form 1094-C? 79
  80. 80. If the answer is Yes, then this will be your authoritative transmittal and you have to go beyond Line 19 (and Part I). 80
  81. 81. If the answer is No, then you will have to file at least one Form 1094-C that goes beyond Line 19 and one that does not. 81
  82. 82. Either the first one, the second one, or the 99th one can be the authoritative one, but you only need to file one authoritative transmittal (before the applicable deadline). 82
  83. 83. The rest of your Forms 1094-C (whether there is one or a hundred) are all very fancy coversheets that do not have to be filled out beyond Line 19. 83
  84. 84. If you have more than one Form 1094-C for any one ALEM in any given year that goes beyond Line 19, you are doing it wrong. 84
  85. 85. If you know this is not your authoritative Form 1094-C you can stop at Line 19, sign, and file it. 85
  86. 86. When would I be purposefully filing a non-authoritative Form 1094-C? 86
  87. 87. For example, let’s say you collect all your Form 1095-Cs and file them in February with the IRS (and send along an authoritative Form 1094-C). A month later, you realize that you forgot to attach one Form 1095-C to your original batch. You have to send that lone Form 1095-C with its own Form 1094-C. That second Form 1094-C is not an authoritative version and you know it when you are completing it. 87
  88. 88. Otherwise, if you know you are only filing one Form 1094-C (because all of your 1095-Cs are attached) OR If you know that the form you are working on will be the authoritative transmittal even though you will be filing other Forms 1094-C. 88
  89. 89. Soldier on to Line 20. 89
  90. 90. Line 20 exists so that the IRS can check how many total Forms 1095-C your ALEM has filed. Remember, you only go beyond Line 19 on the authoritative Forms 1094-C. 90
  91. 91. Ideally, again, you will only file one Form 1094-C per ALEM every year. If you do so, Lines 18 and 20 should be the same number. 91
  92. 92. Also remember that Line 20 and beyond only get completed on authoritative Form 1094-C forms. 92
  93. 93. If the Form 1094-C you are completing is not the authoritative one, Line 20 should be left blank. 93
  94. 94. If you did your research, as I suggested in the opening slides, Line 21 should be fairly easy to answer at this point. 94
  95. 95. Otherwise, Stop. Investigate. Then Come Back. 95
  96. 96. Welcome Back. 96
  97. 97. If you are certain that your particular ALEM is not part of a larger ALE, then you can skip Section (d) of Part III and Part IV altogether. Don’t worry, I’ll highlight these sections as we move through the rest of the Form. 97
  98. 98. Having completed Line 21, we now arrive at what causes people the most headaches in all of 1094-dom, Line 22. The line reads as follows: 98
  99. 99. Make no mistake about it: Line 22 is the toughest section in all of Form 1094-C. 99
  100. 100. Basically, Line 22 offers employers the opportunity to certify that they are eligible for four different kinds of relief. 100
  101. 101. And that’s why there are four certifications on Line 22: A, B, C, and D. 101
  102. 102. Lines 22A and 22B are related, while 22C and 22D are completely different forms of relief from each other and Lines 22A and 22B. 102
  103. 103. Those four kinds of relief, have four different requirements, and four different “rewards” that depend on the applicable certification. 103
  104. 104. Not all employers will qualify for at least one certification of eligibility. 104
  105. 105. Indeed, many employers may not qualify for any of them. 105
  106. 106. Conversely, notice the “select all that apply” on Line 22. 106
  107. 107. Some ALEMs may qualify for multiple forms of relief and you should check to ensure you don’t leave some relief on the table. 107
  108. 108. Again, the first step to understanding how Line 22A, 22B, 22C, and 22D work is to appreciate that Lines 22A and 22B are closely related to one another and only slightly different. 108
  109. 109. In order to understand the subtle difference between Certifications A and B, you must appreciate what “qualifying” for either Certification does to an ALE’s reporting requirements. 109
  110. 110. The default reporting requirements require ALEs to provide every full-time employee with a copy of a Form 1095-C detailing the ALE’s offer of coverage and other individualized specifics regarding that particular full-time employee’s benefits (this is called general method reporting). 110
  111. 111. That is a lot of work for employers with thousands of employees (or even smaller employers that do not have the infrastructure, payroll, or HR resources to tackle such a monumental task). 111
  112. 112. And for some employers, all that work is for nothing. Specifically, remember that the entire point of Form 1094-C and Form 1095-C (from an employer’s perspective) is to provide reports so that the IRS can determine if the reporting employer is liable for employer mandate penalties. 112
  113. 113. If a general method reporting employer offers great healthcare to all full-time employees, at a legally affordable price, and goes beyond the minimum requirements of the ACA, all of its work compiling custom Forms 1095-C will be for nothing because the IRS is unlikely to fine that employer under the circumstances. 113
  114. 114. So when you combine the massive amounts of work involved in general method reporting with the likelihood that in some circumstances those reports will never lead to employer mandate penalties, simplified reporting method was born. 114
  115. 115. Certification A (Line 22A) and Certification B (Line 22B) are simplified methods of reporting where the employer can skip giving the full-time employee a copy of Form 1095-C by January 31 and instead can give certain full-time employees a generic, pro- forma statement. Important: simplified method reporting is optional. If you understand general method reporting and are comfortable doing so, then you should just ignore simplified method because it’s completely optional and somewhat complicated for the uninitiated person scrambling to comply with compliance for the first time in 2016. 115
  116. 116. Unless, of course, you are a self-insured employer—then it’s not even on the table. Self-insured employers cannot use the “alternative method of furnishing Form 1095-C” (which is the entire point of Line 22A and 22B). Others may disagree, but I think that renders Certification A and Certification B largely useless to self-insured employers and most self-insured employer should just skip Line 22A and Line 22B. 116
  117. 117. Again, there are two types of Form 1095-C reporting: general method of reporting and simplified reporting. If you barely know what the heck you are doing in 2016, you need to focus on general method of reporting. Otherwise, it’s like trying to do calculus but not knowing algebra. 117
  118. 118. So to carry the analogy: Algebra Calculus E=MC2 1B 1A 1I 1C (Line 22A) (Line 22B) 1D 1E (Step 1) (Step 2) (Step 3) 1F (General) (Simplified) (Simplified) 1G 1H If you do not know when 1B, 1C, 1D, 1E, 1F, 1G, or 1H apply (on Form 1095-C) go ahead and table trying to figure out 22A and 22B because using 22A and 22B require even more knowledge and you do not have to use either relief, they are optional for the ACA astrophysicists out there. You can stop on the far left and be fully compliant. 118
  119. 119. Note: ALEs that meet the requirements of Certification A or B still have to give the IRS a Form 1095-C for any such full-time employee, but instead of having to have Forms 1095-C ready by January 31 (standard rule) of the applicable year for those full- time employees, qualifying employers can wait until March 31st (standard rule) to provide them to the IRS. For many employers, those three months are extremely valuable, especially the first year. But, remember that in 2016, we got some extra months (see slide 22 of this deck for details). 119
  120. 120. Moving On 120
  121. 121. Employers that want to give all of their full-time employees generic substitute statements (instead of Form 1095-C) informing the employee that he or she is not eligible for a tax subsidy must fully comply with the next slide. 121
  122. 122. Certification A: Qualifying Offer Method Means the ALEM: Offered a QHP to all full-time employees; Offered at least MEC or More to a spouse and dependents; Full-time employees that received such offers did not pay more than 93.18 dollars a month for the employee-only coverage; and That was true for all months in the calendar year where that employee was a full-time employee. 122
  123. 123. Employers that can give some of their full-time employees (but not all because some employees did not satisfy Slide 119) generic substitute statements informing the employee that he or she is not eligible for a tax subsidy, instead of a Form 1095-C, must fully comply with the next slide. 123
  124. 124. Certification A: Qualifying Offer Method Means the ALEM: Offered a QHP to some full-time employees; Offered at least MEC or More to a spouse and dependents; Full-time employees that received such offers did not pay more than 93.18 dollars a month for the employee-only coverage; and That was true for all months in the calendar year where that employee was a full-time employee. 124
  125. 125. Full-time employees captured by slides 122 and 124 are the employees that the employer completed “1A” for on Form 1095-C. A 1A full-time employee gets a substitute statement instead of Form 1095-C under Line 22A so long as that 1A applies to all the months where the full-time employee was a full-time employee. 125
  126. 126. But, I only offered a skinny, MEC, rust, barebones, something- other-than QHP plan to my full-time employees?! 126
  127. 127. Or, I didn’t offer anything to my full-time employee’s dependents. 127
  128. 128. Or, even though I offered something, my full-time employees had to pay more than 93.18 dollars a month. 128
  129. 129. Or, I did all those things on the slide, I just didn’t do it for all months where the employee was a full-time employee because [insert irrelevant excuse here]. 129
  130. 130. Well then . . . No Qualifying Offer Method for You! 130
  131. 131. Qualifying Offer Method (Line 22A on Form 1094-C) is unlikely to apply in industries where full-time employees have not traditionally had health insurance or where the employer does not pick up an extremely generous amount of the health insurance tab. 131
  132. 132. In short, Qualifying Offer Method is hard, very hard, to satisfy. So hard, in fact, that it led to the creation of Line 22B (but more on that later). 132
  133. 133. If you are not self-insured, and comply with Certification A requirements (slide 122), you can get away with a substitute statement that says something like the next slide for all full-time employees instead of a Form 1095-C. 133
  134. 134. John Q. Taxpayer Widgets Company, LTD 123 Internal Revenue Love Houston, Texas 123654 Ph. (281) 555 – 3986 Dear [22A-Eligible Full-Time Employee]: Widgets Co. records indicate that you received a qualifying offer, along with your spouse and dependents, if any, for all months in which you qualified as a full-time employee. According to our records, you are therefore not eligible for a premium tax credit on the individual marketplace. However, you are directed to see IRS Pub. 974, Premium Tax Credit (PTC) for more information on your eligibility for a premium tax credit. For information about the offer of coverage you received or inquiries regarding what Widgets reported to the IRS on Form 1095-C, please contact, via telephone, the person listed above. All the best, Widgets Company, LTD Federal Employer Identification No. 36--12536548 134
  135. 135. If you are not self-insured, and comply with Certification A requirements (slide 122) for some full-time employees, you can get away with an substitute statement that says something like the next slide for those particular full-time employees. 135
  136. 136. John Q. Taxpayer Widgets Company, LTD 123 Internal Revenue Love Houston, Texas 123654 Ph. (281) 555 – 3986 Dear [Full-Time Employee]: Widgets Co. records indicate that you received a qualifying offer, along with your spouse and dependents, if any, for all months in which you qualified as a full-time employee. According to our records, you therefore are not eligible for a premium tax credit on the individual marketplace. However, you are directed to see IRS Pub. 974, Premium Tax Credit (PTC) for more information on your eligibility for a premium tax credit. For information about the offer of coverage you received or inquiries regarding what Widgets reported to the IRS on Form 1095-C, please contact, via telephone, the person listed above. All the best, Widgets Company, LTD Federal Employer Identification No. 36--12536548 136
  137. 137. Go back to Slide 122. If you cannot say that you satisfied that slide for every full-time employee, for every month such full-time employees were full-time employees, or you operated on a self- insured basis, you will not be able to give substitute statements to all full-time employees. If that is what you are after, skip to Line 22B and Certification B. 137
  138. 138. Line 22A will be the standard rule for all full-time employees that have a 1A offer for all 12 calendar months in the year being reported. Line 22B exists to give employers one last chance at sending full- time employees a substitute statement instead of Form 1095-C and is far more temporary than Line 22A (some speculate it will not be available in 2017 for the 2016 tax year). 138
  139. 139. Certification B: Qualifying Offer Method Transition Relief The easiest way to understand the difference between Certification B and Certification A is to show you the 1 series codes for a 12-month period on a Form 1095-C and how they affect whether a particular employer uses Certification A or B. 139
  140. 140. Recall from Slides 122 and 124 that in order to qualify for 22A status a particular full-time employee has to satisfy the requirements of Slide 122 or 124 for all months where the employee was a full-time employee (so someone that worked for you every month in 2015, would have to have 12 1As). 140
  141. 141. So that begs the question: What happens when you have a 1A- eligible full-time employee for only some instead of all months in the calendar year where that particular full-time employee was a full-time employee? 141
  142. 142. Under the standard Line 22A rules, such a full-time employee is automatically entitled to a Form 1095-C (and the employer is not eligible for 22A relief as regards that particular full-time employee). 142
  143. 143. This is where Line 22B becomes very relevant to some employers. 143
  144. 144. For example, in the full-time employee example below, this full- time employee (who worked for you from January through December of 2015) would have to receive a Form 1095-C because of the non-offer in January (and thus would be ineligible for Line 22A relief). 144 January February March April May June July August September October November December 1H 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A
  145. 145. In 2016 (for the 2015 tax year) there is a middle ground between 1A qualification, and say, 1H non-qualification, and that is 1i. 145
  146. 146. The best way to think about how 1i works is as a middle-ground between 1A and 1H. 146
  147. 147. But not all employers can take advantage of this middle ground. In fact, for every particular month in which you want to transform a 1H into a 1I (like January below), the employer must have offered 95% of full-time employees a QHP. Note that the 95% excludes full-time employees in limited non- assessment periods (e.g., waiting periods). 147 January February March April May June July August September October November December 1H 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A
  148. 148. So assume that the employer below had 100 full-time employees during January. Of those 100, 9 were in waiting periods. Line 22B requires 95% of 91 not 95% of 100 to qualify for Line 22B transitional relief (in others words, to transform the 1H into a 1I during January in the example below). 148 January February March April May June July August September October November December 1H 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A
  149. 149. Once an employer qualifies to transform a 1H into a 1I (see below), this particular full-time employee is now eligible for Line 22B’s substitute statement. 149 January February March April May June July August September October November December 1H 1I 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A 1A
  150. 150. Under Line 22B, just like 22A, you also get to send a letter (instead of the 1095-C), but you have to tweak it a bit because you didn’t offer a qualifying offer for all the months the employee was a full-time employee (that’s why you had to rely on Line 22B in the first place). See the next slide for the modification. 150
  151. 151. John Q. Taxpayer Widgets Company, LTD 123 Internal Revenue Love Houston, Texas 123654 Ph. (281) 555 – 3986 Dear [22-B Full-Time Employee]: Widgets Co. records indicate that you received a qualifying offer, along with your spouse and dependents, if any, for some months in which you qualified as a full-time employee. According to our records, you might be eligible for a premium tax credit on the individual marketplace for the months that you did not receive such a qualifying offer. However, you are directed to see IRS Pub. 974, Premium Tax Credit (PTC) for more information on your eligibility for a premium tax credit. For information about the offer of coverage you received or inquiries regarding what Widgets reported to the IRS on Form 1095-C, please contact, via telephone, the person listed above. All the best, Widgets Company, LTD Federal Employer Identification No. 36--12536548 151
  152. 152. Please also appreciate that although you may qualify to send an employee the letter described in the last slide (instead of the Form 1095-C), the IRS still wants its Form 1095-C by March 31st (under the standard rules, but I explained available extensions at the start of this deck) of every year for employers that qualify for Certification A or Certification B. All Certifications A and B do for an employer is minimize the custom forms they give full- time employees—the IRS still gets its Forms. 152
  153. 153. Thankfully, Certification C and D are much simpler. 153
  154. 154. Certification C: Section 4980H Transition Relief ALEs with fewer than 100 full-time employees or their equivalent (ALEs with 50-99), or ALEs with more than 99 full-time employees or their equivalent (ALEs with 100+) can get an 80-employee discount instead of a 30-employee discount during 2015 when the IRS calculates appropriate penalties for failing to offer any medical benefits to full-time employees. 154
  155. 155. Before February 12, 2014, everyone thought the employer mandate (having to offer insurance or pay a penalty) would go in effect on January 1, 2015. 155
  156. 156. On February 12, 2014, the IRS announced that ALEs with fewer than 100 full-time employees would be given another year before having to offer insurance or pay a penalty if certain conditions were met by those employers. 156
  157. 157. One of those conditions is certifying under oath that you have read what is required and swear, under penalty of perjury, that you are eligible. 157
  158. 158. That is the point of Certification of Eligibility C—affirming that you are eligible under oath and penalty of law. 158
  159. 159. If you are unsure about whether you are eligible you should find out sooner rather than later because, forget the reporting requirements, you could be accruing penalties for failing to offer insurance. If you are unsure . . . . 159
  160. 160. Stop. Investigate. Then Come Back. 160
  161. 161. Welcome Back. 161
  162. 162. The second part of Certification of Eligibility C is for ALEs that had more than 99 full-time employees or their equivalent during 2014. 162
  163. 163. These are often referred to as the “larger ALEs” in ACA sewing circles. 163
  164. 164. Larger ALEs did not get until 2016 to comply with the requirement to offer full-time employees medical benefits or risk paying a penalty; these folks had to be ready to go in January 2015 under the default rules. 164
  165. 165. Sidebar: if a larger ALE did not offer anything to full-time employees, under the standard rules, the particular affected ALEM would have to share, proportionately to its full-time employee count, in an ALE-wide 30-full-time employee discount when the IRS calculated penalties. 165
  166. 166. To help these folks out, just like smaller folks got a one-year reprieve, the IRS increased the amount of the full-time employee discount from 30 to 80 for 2015. The second portion of Certification of Eligibility C is for larger ALEs to take advantage of this transition relief. 166
  167. 167. Certification D: 98% Offer Method The last Certification of Eligibility, Letter D, requires an eligible ALEM to have offered a QHP to 98% of its full-time employees and their dependents. The bolded “its” should make it clear that the 98% rule applies on an ALEM-BY-ALEM basis. Additionally, the full-time employee’s offer of self-only coverage was legally affordable under the Affordable Care Act (no more than 9.5 percent of the employee-only income). 167
  168. 168. The “reward” is that the employer who takes advantage of Certification D does not have to complete “Full-Time Employee Count” in Part III, column (b), of the authoritative Form 1094-C. 168
  169. 169. Don’t worry, when we get there, I’ll remind the Certification D folks of the Lines they can skip. 169
  170. 170. Before we move on, don’t forget to sign the Form 1094-C right underneath Line 22. 170
  171. 171. We finally arrive at Part III! 171
  172. 172. Part III requires ALEMs to report, typically on a month-by-month basis, several variables for the particular ALEM. 172
  173. 173. The first thing ALEMs have to report on Part III is whether the particular ALEM offered at least a MEC plan to at least 70% of full- time employees. If you offered a skinny plan, bare bones plan, rust plan, etc., you get to say “yes” here for every month that you did so. 173
  174. 174. Likewise if you offered more robust insurance, like a QHP, you also get to say “yes” here for every such month. 174
  175. 175. Several people have asked me whether they should complete Part III by row or by column. I find it easier to do columns. You should do one column at a time starting with Column (a) which again, looks like this: 175
  176. 176. Working your way down Column (a), the first question is whether you offered Minimum Essential Coverage All 12 Calendar Months. 176
  177. 177. If you did, you can just denote that by checking “Yes” under All 12 Months. 177
  178. 178. Likewise, if you didn’t offer minimum essential coverage for all 12 months, to at least 70 percent of your full-time employees, you can just denote that by checking “No” under All 12 Months. 178
  179. 179. Most employers, especially those who just entered the benefits world, will have a mixture of “Yes” and “No.” The 1094-C form allows employers to report that by allowing spaces to report on a month-by-month basis as shown below: 179
  180. 180. After you report whether you offered at least minimum essential coverage or not, the IRS wants to know how many full- time employees the reporting ALEM had on a month-to-month basis. 180
  181. 181. The specific boxes (Section b) below confuse people for a few reasons. First, the number you put in each box, each month, must be calculated every month. 181
  182. 182. No, look-back measurement periods and all of that do not count here. Here, every month you have to calculate how many full-time employees you have and whether they are in limited non- assessment periods. 182
  183. 183. Wait a second. I don’t know how to calculate full-time employees and I have no idea what a limited non-assessment period is. 183
  184. 184. Stop. Investigate. Then Come Back. 184
  185. 185. Welcome Back. 185
  186. 186. The number of full-time employees for a particular ALE member is exclusive of full-time employees in limited non- assessment periods. In the 2014 version of the Form, the all-12- months option was greyed out (see here to the right). In the 2015 form, accepting that some employers have the same amount of full-time employees all 12 months, the IRS will now allow an all-12-month option. 186
  187. 187. Section (c) of Part III is relatively straightforward. You must report how many human beings work for the ALEM in Section (c). 187
  188. 188. The only tricky part with (c) is the point at which you take the “snap shot” to report how many human beings work for the ALEM during any given month. On February 9, 2015, we got an answer. Ensure you use the same method every month during the year. 1) The first day of each month; 2) The last day of each month; 3) The first day of the first payroll period that starts during each month; or 4) The last day of the first payroll period that starts during each month (the last day of such a payroll can’t be in another month). 5) The 12th day of the month. 188
  189. 189. Section (d) is only for ALE/ALEMs that are part of a larger group of aggregated companies. 189
  190. 190. Look at your Form, did you answer “No” to Line 21? If you did answer “No” you don’t have to complete Section (d) of Part III. If you answered “Yes” to Line 21, you have to complete Section (d) of Part IV. 190
  191. 191. If the particular ALEM completing the 1094-C Form was a member of a larger ALE group all 12 months, just check the all-12-months box. Otherwise, entities that were acquired during the course of the year will have to do a month-by-month report so that the IRS can know the exact month where the ALEM joined the ALE. 191
  192. 192. Section (e): This section goes hand-in-hand with Line 22(c). Recall that I told you that Certification of Eligibility C has two parts. The IRS wants to know what part you are using. So in section (e) (shown to the right, here), you either put (a) or (b) depending on whether you are under 100 full-time employees or their equivalent (“a”), or whether you are over, and want to take advantage of the 80-employee discount rule (b). 192
  193. 193. If you answered “No” to Line 21, you are done. Congrats! 193
  194. 194. If you answered “Yes” to Line 21, you have one more part to go, Part IV. 194
  195. 195. 195
  196. 196. Part IV is relatively straight-forward once you know what an ALE is, what an ALEM is, and how they are different. If you have gotten this far, this should be a breeze. 196
  197. 197. You want to list the 30 biggest ALEMs that are sister-ALEMs to the particular ALEM for which you are filling out this authoritative Form 1094-C. 197
  198. 198. By biggest, I mean, which sister-ALEMs had the largest monthly average of Full-Time employees. 198
  199. 199. What if my company has more than 30 ALEMs? 199
  200. 200. You only have to report the 30 biggest ones. 200
  201. 201. Mario, I am freaking out right now because I do not know what is going on with these reports! 201
  202. 202. It is going to be okay. 202
  203. 203. Just keep reviewing the slides, shoot me an email, and remember that this year the IRS will waive penalties for screwing up the reports if you make a good-faith effort to comply. 203
  204. 204. When people make seemingly outrageous claims (like I just did in the last slide), you should always ask for citations. Here is the one that backs up what I just claimed in the last slide (page 61). And this is of course is in addition to the other document I linked to in the opening slides. 204
  205. 205. Still. Freaking. Out. 205
  206. 206. I have another set of slides that go with a webinar. Some of these slides are on that deck, but that deck has many slides / visuals that are easier to explain orally than via text. Consider sitting through my webinar. It’s 100 bucks for 2.5 hours of 1094-C line-by-line conversation that you can binge watch over and over until your heart is content. And although it’s mainly a 1094-C webinar, I crossed into 1095-C-land several times to answer some timeless riddles like: 206
  207. 207. What is the difference between 1E / 1A? Do I have to leave Line 16 blank if I put 1A in Line 14? What is the difference between 1A and 1i? And many more riddles that presently escape me. 207
  208. 208. You can sign up for that webinar here. Note, that it’s prerecorded, so you can watch whenever it fits your schedule. 208
  209. 209. Boom. The End. 209
  210. 210. Note: I tried my best to ensure that these slides are as accurate and informative as possible. If I made a mistake, please send corrections to my email address which appears on the last slide. 210
  211. 211. Extra credit for those folks that send corrections with supporting authority. 211
  212. 212. Thanks for sitting through this slide deck. 212
  213. 213. These slides have received thousands of views. I have also received many emails from folks thanking me for putting them up online (you’re welcome!). These slides are supplementary materials to the third edition of my book, The Employer Mandate Handbook. If you benefited from these slides, please consider purchasing the book (or signing up for a webinar) that led to their creation while helping me pay off these massive student loans in the process. 213
  214. 214. Comments and GENERAL questions should be sent to me via email at the following email address: theACAguy@gmail.com Please do not send me angry emails complaining about the ACA itself. I can’t much do anything about that one. Also, please note that sending me an email does not create an attorney-client relationship nor is anything you send me privileged. I reserve the right to quote your questions and my answers on my website, slides, etc. These slides are also copyrighted. © 2015-2016. All Rights Reserved (please don’t steal my stuff). 214
  215. 215. Finally, I do not email these slides out to anyone. I provide these for free, and I want to keep it that way. I once went to a paid-for seminar where someone had “borrowed” my slides and was charging people for the privilege. Not cool and that’s why we can’t have nice things. I also update these slides as people send in questions so you are better off just coming back here. Please do not email asking for copies of the slides to be sent to you. If you want to get on my mailing list (I give discounts for my various wares) email me at theACAguy@gmail.com and I will email you when the slides are updated or I release a new webinar. 215
  216. 216. ABOUT MARIO. Mario K. Castillo is the General Counsel of the Lone Star College System in Houston, Texas and Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization. Prior to joining the System, he was a labor, employment, and benefits partner at the law firm of Monty & Ramirez LLP in Houston, Texas, where he helped employers avoid or minimize liability and defended them when litigation was necessary. Mario also completed a four-year term as briefing attorney to the Honorable Felix Recio of the Southern District of Texas prior to joining Monty & Ramirez. Mario received a Juris Doctorate from the Maurer School of Law at Indiana University— Bloomington. Prior to attending law school, Mario received a Bachelor of Arts in Government from the University of Texas in Austin. DISCLAIMER. This presentation is for informational purposes only and provides general information concerning the Affordable Care Act to help you identify when you may need additional advice. It is not an exhaustive treatment of the statutes, case law or regulations that are involved with the subject. Please recognize that the law is developing rapidly in this area and you will want to obtain current legal advice on your specific situation before taking action. 216

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