After months of preparation and multiple iterations of (sometimes conflicting) IRS guidance, health coverage providers and applicable large employers are nearing the end of the 2015 reporting season under the Affordable Care Act (ACA). By way of background, the ACA added new Sections 6055 and 6056 to the Internal Revenue Code (the “Code”). Code Section 6055 requires that health coverage providers file with the IRS, and distribute to covered individuals, forms showing the months in which the individuals were covered by “minimum essential coverage.” Code Section 6056 requires that applicable large employers (generally, those with 50 or more full-time employees and equivalents) file with the IRS, and distribute to employees, forms containing detailed information regarding offers of, and enrollment in, health coverage. These reporting requirements are, in most cases, satisfied using Forms 1094-B and 1095-B and/or Forms 1094-C and 1095-C, as applicable.
Although the original deadlines for distributing and filing the ACA reporting forms tracked the deadlines for Forms W-2 and W-3, the IRS extended the 2015 deadlines to provide health coverage providers and applicable large employers more time to prepare for the burdensome requirements under Code Sections 6055 and 6056. The applicable forms must now be distributed to employees and covered individuals by March 31, 2016 and must be filed with the IRS by May 31, 2016 (if filing paper copies) or June 30, 2016 (if filing electronically). As coverage providers and employers put the finishing touches on the 2015 forms, they should consider the following:
- A “good faith compliance” standard will be applied to forms prepared in connection with the 2015 filing season. This means that the IRS will not penalize a coverage provider or employer for incorrectly completing a form as long as the form was completed based on a good faith interpretation of the ACA reporting regulations and instructions. However, in order for this good faith compliance standard to apply, the forms must be distributed and filed by the March 31, 2016 deadline. The IRS made clear in Notice 2016-04 that the March 31, 2016 deadline was firm and that no requests for extensions beyond that date would be granted. Therefore, it is better to be incorrect (albeit in good faith) than late.
- The IRS website contains a number of useful resources regarding ACA reporting, including updated versions of the forms and instructions, regulations and frequently asked questions. The IRS continuously revises this information, so it is best to periodically check for updates.
- The penalties associated with late filings under Code Sections 6055 and 6056 were recently increased based on inflation (See Rev. Proc. 2016-11). These increases are in addition to the increased penalties required under the Trade Preferences Extension Act of 2015 (as described here). The chart below summarizes the newest increases (note that lower penalties apply to entities with gross receipts of $5,000,000 or less).
|Reason for Penalty||Standard Penalty||Maximum Penalty|
|Forms filed or provided late, but within 30 days||$50 per report||$529,500
|Forms filed or provided late, but by August 1||$100 per report||$1,589,000
|Forms filed or provided late, but after August 1, or not filed at all||$250 per report||$3,178,500
Even though the 2015 ACA reporting season is coming to an end, health coverage providers and applicable large employers must continue to track offers of coverage and enrollment in preparation for 2016 ACA reporting. The IRS has noted that the 2016 forms and instructions will reflect substantial changes due to the end of 2015 transition relief and anticipated regulations related to affordability and conditional offers of coverage.