ACA Compliance Playbook - Collaborate '15 Presentation

ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERS™
Proprietary and conﬁdential
ACA Compliance Playbook:
The Two New Pay-or-Play Rules You
Must Follow to Avoid Up to $1.5
Million in Fines

Agenda
•  Background
•  Who is subject to a Section 6055 and/or 6056 reporting
obligation?
•  IRS Forms:
–  1094-B and 1095-B
–  1094-C and 1095-C
•  When the forms must be filed with the IRS and sent to
employees, and administrative details for reporting in
2016
•  Action steps
© 2015 GALLAGHER BENEFIT SERVICES, INC. 2

Background
•  PPACA created two significant IRS reporting obligations
that will commence in early 2016:
–  Internal Revenue Code Section 6055 requires insurers and
sponsors of self-insured plans to prepare annual reports
regarding “minimum essential coverage” (“MEC”)
–  Internal Revenue Code Section 6056 requires “applicable
large employer” members (“ALE” members) to prepare
annual reports regarding the coverage offered to their
employees

Who is Required to
Report?

Section 6055 (“MEC”)
•  Employers (of all sizes) who sponsor self-insured health
plans that provide minimum essential coverage to any
individual during the calendar year are required to report
under Section 6055.
–  What if we sponsor a fully-insured plan? Your health
insurance carrier will be responsible for Section 6055
reporting for that plan.

What is MEC?
•  Eligible employer-sponsored plans
–  Both fully-insured and self-insured, regardless of employer
size
–  This does not include excepted benefits
–  This does include even “low cost” plans or plans that do
not provide minimum value
–  Reporting not required for coverage that supplements MEC
•  Government-sponsored programs
•  Insured plans offered in the individual market or group
market

Section 6056 (“ALE”)
•  Applicable large employer members (both fully-insured
and self-insured) must report information to the IRS about
the health coverage, if any, that they offered to full-time
employees
•  Such ALE members must also report information about
whether the coverage was affordable and whether
coverage was offered to dependents
•  Finally, this reporting is the mechanism in place for an
employer to claim an exemption or delay in penalty
exposure due to various forms of transitional relief

Who is an ALE member?
•  Applicable large employers are those with 50 or more
full-time (FT) and full-time equivalent (FTE) employees
•  Status as applicable large employer is based on the entire
controlled group, but each ALE member reports
separately for its employees
•  NOTE: All ALE members remain subject to 6056
reporting for the 2015 calendar year, even if transitional
relief delays their penalty exposure until later

ESR Penalties: A Refresher
•  Penalty for failing to offer coverage – 4980H(a)
–  An employer must offer “minimum essential coverage” to
95% (70% for 2015) of its full-time employees and their
dependent children up to age 26 or risk a penalty equal to
(i) $2,080 (indexed), multiplied by (ii) the number of full-
time employees minus 30 (80 for 2015)
–  There is no requirement that the coverage be affordable or
provide “minimum value” to avoid this penalty.
–  But…

ESR Penalties: A Refresher
•  Penalty for failing to offer coverage which is both
affordable and provides minimum value – Section
4980H(b)
–  If the employer fails to offer coverage that is both
affordable and provides minimum value to a full-time
employee, it can risk a penalty equal to $3,120 (indexed)
per year for that employee
–  Penalty can only be triggered if a full-time employee goes
to the marketplace and receives premium tax assistance

IRS Forms

Forms 1095-B and 1094-B
•  Used by plan sponsors of self-insured employer coverage
if the employer is not an applicable large employer
member
–  In other words, this form is used by small, self-insured
employers
–  A Form 1095-B is provided to each “responsible
individual”
–  The Form 1094-B is the transmittal form
•  Also used by insurance carriers for fully-insured coverage

1095-B: Parts I, II, and III

1095-B: Part IV

Forms 1095-C and 1094-C
•  Used by applicable large employer members, regardless
of whether they are fully-insured or self-insured.
–  Employers that are fully-insured may leave part of the
Form 1095-C blank (the portion dealing with covered
individuals)
•  Keep in mind the rules for who is an ALE member
–  Even if transitional relief delays potential penalties, the
reporting obligation will apply for 2015

1095-C: Parts I and II

1095-C: Part III

1094-C: Part I

Who Reports What?
(Revisited)
Employer and Plan
Type
Type of Reporting Who Reports IRS Transmittal IRS Return
Employee
Statement
Large
employer*
with
fully

insured
group
health
plan

6055

Health
insurance

issuer

or
carrier

1094-‐B
1095-‐B
1095-‐B

6056
Employer
1094-‐C
1095-‐C,
Parts
I
and
II

1095-‐C,
Parts
I

and
II

(or
alternaFve)

Large
employer*
with
self-‐
insured
group
health
plan

covering
employees
only

Combined

6055
and
6056

Employer
1094-‐C
1095-‐C
1095-‐C

Large
employer*
with
self-‐
insured
group
health
plan

covering
employees
and

non-‐employees
(e.g.,

directors,
reFrees,
or

COBRA
qualiﬁed

beneﬁciaries)

Employees:

Combined
6055
and

6056

Employer
1094-‐C
1095-‐C
1095-‐C

Non-‐employees

employed
for
1
or

more
months:

Combined
6055
and

6056

Employer
1094-‐C
1095-‐C
1095-‐C

Non-‐employees
for

all
12
months:
6055

Employer

1094-‐B
or

1094-‐C**

1095-‐B
or

1095-‐C,
Part
III**

1095-‐B
or

1095-‐C,
Part
III**

*
A
large
employer
is
an
employer
with
50
or
more
full-‐Fme
and
full-‐Fme
equivalent
employees.
**
If
using
Form
1094-‐B
as
the
transmiQal
form,
use
Form
1095-‐B
for
the
IRS
return
and
employee
statement.
If
using
Form
1094-‐C
for

transmiQal,
use
Form
1095-‐C
for
the
IRS
return
and
employee
statement.

Who Reports What?
(Revisited)
Employer and
Plan Type
Type of
Reporting
Who Reports
IRS
Transmittal
IRS Return
Employee
Statement
MulFemployer
plans
6055
Plan
sponsor
1094-‐B
1095-‐B
1095-‐B

Small
employer
with

fully
insured
group

health
plan

6055

Health

insurance
issuer

or
carrier

1094-‐B
1095-‐B
1095-‐B

Small
employer
with

self-‐insured
group

health
plan

6055
Employer
1094-‐B
1095-‐B
1095-‐B

Details and Deadlines

Method of IRS Reporting
•  Mailing the forms to the IRS is permitted for employers
with fewer than 250 Forms 1095-B or 1095-C in a
calendar year.
•  Can I submit the reports electronically?
–  IRS encourages all employers to file their forms
electronically.
–  Employers that file at least 250 Forms 1095-B or 1095-C in
a calendar year are required to file electronically. Other
employers may file electronically; but are not required to
do so.

Statements to Employees
•  How should I send out the statements?
–  Mail
–  Electronically (if employee has consented to electronic)
–  Posting to a website (an employer must separately notify
the employee)
–  Employee can also request a paper copy
•  Can we send out the employee statements with the Forms
W-2?
–  Yes. Employers may include an employee’s statement with
his or her Form W-2 mailing.

Separate Return and
Statement Deadlines
Report/Disclosure Due date
Form 1095-B to employees 1/31 of each year (2/1/16)
Forms 1095-B and 1094-B to IRS 2/28 (or 3/31 if filed electronically*)
Form 1095-C to employees 1/31 of each year (2/1/16)
Forms 1095-C and 1094-C to IRS 2/28 (or 3/31 if filed electronically*)
* Must file electronically if provide 250 or more “returns”

Penalties
•  Failure to timely file complete and accurate returns to the IRS, or
failure to timely furnish a correct statement to responsible
individuals:
–  $100 per return with a maximum of $1,500,000 for a calendar year.
–  Penalties may be reduced if corrective action is taken within 30 days
and may even be waived if the failure to file timely or accurately is due
to reasonable cause and not due to willful neglect.
•  Penalty relief for reports filed in 2016 as long as “good faith” efforts
to comply are made
•  Important Note: the C series forms themselves will trigger penalties
under employer shared responsibility rules, if you failed to offer
coverage to a sufficient number of your full-time employees, or if
the coverage you did offer was not affordable or did not provide
minimum value

Action Steps
•  Collect data during 2015
regarding:
–  Who is covered by MEC
–  Who are full-time
employees
–  Who was offered coverage
–  Was coverage affordable
•  Consider vendor options
for data aggregation and
reporting

Action Steps
•  Request Social Security
numbers for covered
dependents
•  Button-up compliance
with employer shared
responsibility rules
•  Determine other
controlled group and
affiliated service group
members

Resources: ajghealthcarereform.com

Thank you!

The
intent
of
this
presenta8on
is
to
provide
you
with

general
informa8on
regarding
the
status
of,
and/or

poten8al
concerns
related
to,
your
current

employee
benefits
issue.

It
does
not
necessarily

fully
address
all
your
specific
issues.

It
should
not
be

construed
as,
nor
is
it
intended
to
provide,
legal
or

tax
advice.

Ques8ons
regarding
specific
issues

should
be
addressed
by
the
your
organiza8on's

general
counsel,
tax
advisor,
or
an
aHorney
who

specializes
in
this
prac8ce
area.

ACA Compliance Playbook - Collaborate '15 Presentation

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