Health Care Reform: Employer Reporting and Other Upcoming Key Dates
The following is a list of certain key dates for employers that provide group health benefits to their employees. Many of the requirements were created by the Patient Protection and Affordable Care Act (the ACA) and are new or relatively new. This includes the employer shared responsibility reporting obligations under Internal Revenue Code (Code) Sections 6055 and 6056.
The list below is based upon dates for plans that are operated on a calendar-year basis. Certain dates listed will be different for non-calendar-year plans.
October 2015
Finalize plan eligibility assessment for heighted ACA compliance hurdle
Employers with 50 or more full-time employees should determine whether they need to make any plan eligibility changes due to the phaseout of 2015 transition rules under the ACA’s employer shared responsibility provisions. Employers with 100 or more full-time employees became subject to penalties under the ACA’s “play or pay” mandate beginning in 2015. Under a limited transition rule, penalties under Code Section 4980H were postponed until 2016 for most employers with between 50 and 99 full-time employees. Employer size under the ACA is determined on a controlled group basis in which employees of organizations under common ownership, control or management are aggregated in determining if the total number of employees meets the legal threshold.
Significantly, the percentage of full-time employees (and their dependents) that an applicable large employer must offer coverage to in 2016 in order to avoid being subject to the so-called “no-coverage” penalty is increasing from 70 to 95 percent. Failure to meet this standard subjects an employer to a penalty under Code Section 4980H of $2,000 per full-time employee per year (with the dollar amount adjusted annually for inflation after 2014). Further, there is no partial credit for offering coverage to some full-time employees if the 95 percent threshold is not met. Thus, an employer with 500 full-time employees that offers coverage to 94 percent of its full-time employees would be subject to an annual penalty of nearly $1 million, the same penalty that would be assessed if it did not offer any health insurance coverage to its employee. For more information, see our bulletins “Health Care Reform: Upcoming Key Dates for Employer-Sponsored Health Plans” (September 23, 2014) and “IRS Final Rule on ACA Play or Pay Mandate Allows Employers to Finalize Compliance Plans” (February 19, 2014).
Update plan documents to reflect any eligibility changes
Incorporate any changes in the definition of eligible employees into plan documents, summary plan descriptions, open enrollment materials, employee handbooks and other documents describing which employees are eligible to participate.
In light of the phaseout of the relaxed standards under the 2015 transition rules, employers subject to the ACA’s employer mandate should examine their eligibility rules and practices to ensure that, if the employer is offering health insurance coverage in 2016, it is doing so for at least 95 percent of its “full-time employees” as defined by the regulations under Code Section 4980H. For more information about the ACA’s definition of “full-time” employees, see our bulletins “IRS Final Rule on ACA Play or Pay Mandate Allows Employers to Finalize Compliance Plans” (February 19, 2014) and “Health Care Reform: Employer Shared Responsibility Requirements Require Action” (February 4, 2013).
Prepare for new information reporting obligations
Employers subject to the ACA’s information reporting requirements should be preparing to issue their first statements to employees and file information returns with the IRS in early 2016 for 2015 calendar year under Code Sections 6055 and 6056. All applicable large employers—those that employed (on a controlled-group basis) an average of at least 50 full-time employees (including full-time equivalents) in 2015—are required to report to employees and the IRS detailed information about health insurance coverage it offered to its full-time employees for each month in 2015. This will be reported using IRS Forms 1094-C and 1095-C.
In addition, all health insurers and all employers that sponsor self-funded health plans, regardless of the employer’s size, are required to furnish statements to covered employees and the IRS about the coverage provided each month in 2015. This is done using IRS Form 1095-B or 1095-C.
The employee statements must be furnished by February 1, 2016 (one day later than the standard January 31 deadline because January 31, 2016 is a Sunday). The deadline for filing returns with the IRS is March 31, 2016, if filed electronically. Generally, an entity required to file more than 250 information returns using the same form, such as Form 1095-C, must file electronically, although an electronic filing waiver process is available. Earlier this year, the IRS announced the availability of an automatic 30-day extension for filing information returns. To obtain an extension, the employer must file a completed Form 8809 with the IRS by the due date of the returns.
For more information about reporting requirements under Code Sections 6055 and 6056, see our bulletin “Health Care Reform: ACA Information Reporting Requirements for Employers” (September 23, 2014).
Distribute Medicare Part D notice
If an employer offers health insurance coverage, it must furnish a Medicare Part D notice by October 15 to all covered persons who are eligible for Medicare. The notice informs the individual whether or not the prescription drug coverage provided by the employer’s plan is creditable for Medicare Part D purposes. This is an annual obligation that predates the enactment of the ACA.
File 5500 annual report
October 15 is the deadline for 2014 IRS Form 5500 submissions by administrators of calendar year plans that filed a timely request for an extension of time using IRS Form 5558.
November 2015
Transitional Reinsurance Program filing due
Monday, November 16, 2015, is the deadline to electronically submit through pay.gov the 2015 enrollment count and documentation and schedule reinsurance payments for the ACA Transitional Reinsurance Program. This annual fee for 2015 may be paid as a single installment by January 15, 2016, or in two installments, one on January 15 and one on November 15, 2016. The rate for 2015 is $44 per year per covered life ($3.67 per month). Insurers are responsible for paying the fee for insured plans. For self-insured plans, the employer is responsible for paying the fee, although arrangements may be made for the plan’s third-party administrator to pay the fee on the plan’s behalf.
Include required notices with open enrollment materials
Include in open enrollment materials a summary of benefits and coverage (SBC) for each health benefits option. If the plan or a plan option is grandfathered, the open enrollment materials should also include a notice of the plan’s continued grandfathered status. Consider also including with open enrollment materials other notices required to be furnished annually, including notices required under the Women’s Health and Cancer Rights Act (WHCRA) and the Children’s Health Insurance Program Reauthorization Act (CHIPRA).
Ensure a record of each offer of coverage is maintained
For purposes of demonstrating compliance with the ACA’s employer shared responsibility provisions, applicable large employers should ensure that a written record is maintained of all offers of coverage as part of the annual enrollment process, as well as in connection with mid year hires and changes to benefits eligible status. Potential penalties under the ACA’s employer shared responsibility provisions are based upon whether an employer “offered its full-time employees (and their dependents) the opportunity to enroll” in minimum essential coverage. On audit or in connection with an employer’s protest of an excise tax assessment, an employer will need proof that an offer of coverage was made.
December 2015
Distribute summary annual report
December 15 is the deadline for furnishing to participants the 2014 summary annual report (SAR) for administrators of calendar year plans filing their Form 5500 annual reports under the extended deadline of October 15.
Process for handling Section 1411 exchange notices of employee eligibility
Under ACA Section 1411, federal and state exchanges (also referred to as marketplaces) are responsible for providing written notice to an employer when one of its employees is determined to be eligible for subsidized exchange coverage. 45 C.F.R. § 155.310(h). The notice informs the employer of the determination, that the employer may be subject to an excise tax penalty under Code Section 4980H and that the employer has the right to appeal the determination. These exchange determinations will be based, in part, on the employee’s representation that the employer did not offer the employee the opportunity to enroll in health insurance coverage or that the coverage offered did not meet the ACA’s affordability and/or minimum value standards.
These Section 1411 exchange notices should have begun being issued in 2014. However, technical and other challenges facing healthcare.gov and the various state exchanges have resulted in delays in the implementation of this aspect of the law. At this time, it is still uncertain when healthcare.gov will begin issuing such notices or have in place a process for handling employer appeals.
In the meantime, employers should have in place a process for identifying such notices and forwarding them to the responsible person within the organization for handling. Each notice will need to be reviewed, and a decision will need to be made about whether the employer should appeal the determination in an effort to correct erroneous information and thereby avoid the incorrect assessment of penalties under Code Section 4980H.
January 2016
Pay Transitional Reinsurance Program fee
Payment of ACA Transitional Reinsurance Program fees are due January 15, 2016. For additional information, see the November 2015 entry above on this subject.
Furnish required employee statements—Form 1095-C
Employers subject to the new information reporting requirements described above must furnish coverage information statements to employees using IRS Forms 1095-C by February 1, 2016. See the October 2015 entry above on this subject for more information.
Include coverage information on Form W-2
The Forms W-2 issued to employees must include the aggregate cost of applicable employer-sponsored health insurance coverage. This requirement was first effective for the 2012 Forms W 2 issued in January 2013. An exception remains in effect for smaller employers that issued less than 250 Forms W-2 for the preceding year.
February to March 2016
File IRS informational returns
Employers subject to the new information reporting requirements described above must file required information returns with the IRS by March 1, 2016 (one day later than the standard February 28 deadline because February 28, 2016, is a Sunday) or by March 31, 2016, if filing electronically. These filings require use of IRS Forms 1094-C and 1095-C. For additional information, see the October 2015 entry above on this subject.
July 2016
PCORI fee due
July 31 is the annual deadline for payment of the Patient-Centered Outcomes Research Institute (PCORI) fee of $2.08 ($2.00 adjusted for inflation) per covered life for the preceding plan year. For more information, see our bulletin “Health Care Reform Requires Action Despite Delay of Employer Mandate” (September 2013).
* * *
The legal landscape for employer-provided health benefits has become significantly more complex in recent years. This bulletin provides just a brief overview of selected upcoming key dates.
If you have any questions about the foregoing or any other health plan or ERISA compliance issues, please contact Thomas G. Hancuch, at +1 (312) 609-7824 or any other Vedder Price attorney with whom you have worked.
Vedder Thinking | Articles Health Care Reform: Employer Reporting and Other Upcoming Key Dates
Newsletter/Bulletin
October 2015
The following is a list of certain key dates for employers that provide group health benefits to their employees. Many of the requirements were created by the Patient Protection and Affordable Care Act (the ACA) and are new or relatively new. This includes the employer shared responsibility reporting obligations under Internal Revenue Code (Code) Sections 6055 and 6056.
The list below is based upon dates for plans that are operated on a calendar-year basis. Certain dates listed will be different for non-calendar-year plans.
October 2015
Finalize plan eligibility assessment for heighted ACA compliance hurdle
Employers with 50 or more full-time employees should determine whether they need to make any plan eligibility changes due to the phaseout of 2015 transition rules under the ACA’s employer shared responsibility provisions. Employers with 100 or more full-time employees became subject to penalties under the ACA’s “play or pay” mandate beginning in 2015. Under a limited transition rule, penalties under Code Section 4980H were postponed until 2016 for most employers with between 50 and 99 full-time employees. Employer size under the ACA is determined on a controlled group basis in which employees of organizations under common ownership, control or management are aggregated in determining if the total number of employees meets the legal threshold.
Significantly, the percentage of full-time employees (and their dependents) that an applicable large employer must offer coverage to in 2016 in order to avoid being subject to the so-called “no-coverage” penalty is increasing from 70 to 95 percent. Failure to meet this standard subjects an employer to a penalty under Code Section 4980H of $2,000 per full-time employee per year (with the dollar amount adjusted annually for inflation after 2014). Further, there is no partial credit for offering coverage to some full-time employees if the 95 percent threshold is not met. Thus, an employer with 500 full-time employees that offers coverage to 94 percent of its full-time employees would be subject to an annual penalty of nearly $1 million, the same penalty that would be assessed if it did not offer any health insurance coverage to its employee. For more information, see our bulletins “Health Care Reform: Upcoming Key Dates for Employer-Sponsored Health Plans” (September 23, 2014) and “IRS Final Rule on ACA Play or Pay Mandate Allows Employers to Finalize Compliance Plans” (February 19, 2014).
Update plan documents to reflect any eligibility changes
Incorporate any changes in the definition of eligible employees into plan documents, summary plan descriptions, open enrollment materials, employee handbooks and other documents describing which employees are eligible to participate.
In light of the phaseout of the relaxed standards under the 2015 transition rules, employers subject to the ACA’s employer mandate should examine their eligibility rules and practices to ensure that, if the employer is offering health insurance coverage in 2016, it is doing so for at least 95 percent of its “full-time employees” as defined by the regulations under Code Section 4980H. For more information about the ACA’s definition of “full-time” employees, see our bulletins “IRS Final Rule on ACA Play or Pay Mandate Allows Employers to Finalize Compliance Plans” (February 19, 2014) and “Health Care Reform: Employer Shared Responsibility Requirements Require Action” (February 4, 2013).
Prepare for new information reporting obligations
Employers subject to the ACA’s information reporting requirements should be preparing to issue their first statements to employees and file information returns with the IRS in early 2016 for 2015 calendar year under Code Sections 6055 and 6056. All applicable large employers—those that employed (on a controlled-group basis) an average of at least 50 full-time employees (including full-time equivalents) in 2015—are required to report to employees and the IRS detailed information about health insurance coverage it offered to its full-time employees for each month in 2015. This will be reported using IRS Forms 1094-C and 1095-C.
In addition, all health insurers and all employers that sponsor self-funded health plans, regardless of the employer’s size, are required to furnish statements to covered employees and the IRS about the coverage provided each month in 2015. This is done using IRS Form 1095-B or 1095-C.
The employee statements must be furnished by February 1, 2016 (one day later than the standard January 31 deadline because January 31, 2016 is a Sunday). The deadline for filing returns with the IRS is March 31, 2016, if filed electronically. Generally, an entity required to file more than 250 information returns using the same form, such as Form 1095-C, must file electronically, although an electronic filing waiver process is available. Earlier this year, the IRS announced the availability of an automatic 30-day extension for filing information returns. To obtain an extension, the employer must file a completed Form 8809 with the IRS by the due date of the returns.
For more information about reporting requirements under Code Sections 6055 and 6056, see our bulletin “Health Care Reform: ACA Information Reporting Requirements for Employers” (September 23, 2014).
Distribute Medicare Part D notice
If an employer offers health insurance coverage, it must furnish a Medicare Part D notice by October 15 to all covered persons who are eligible for Medicare. The notice informs the individual whether or not the prescription drug coverage provided by the employer’s plan is creditable for Medicare Part D purposes. This is an annual obligation that predates the enactment of the ACA.
File 5500 annual report
October 15 is the deadline for 2014 IRS Form 5500 submissions by administrators of calendar year plans that filed a timely request for an extension of time using IRS Form 5558.
November 2015
Transitional Reinsurance Program filing due
Monday, November 16, 2015, is the deadline to electronically submit through pay.gov the 2015 enrollment count and documentation and schedule reinsurance payments for the ACA Transitional Reinsurance Program. This annual fee for 2015 may be paid as a single installment by January 15, 2016, or in two installments, one on January 15 and one on November 15, 2016. The rate for 2015 is $44 per year per covered life ($3.67 per month). Insurers are responsible for paying the fee for insured plans. For self-insured plans, the employer is responsible for paying the fee, although arrangements may be made for the plan’s third-party administrator to pay the fee on the plan’s behalf.
Include required notices with open enrollment materials
Include in open enrollment materials a summary of benefits and coverage (SBC) for each health benefits option. If the plan or a plan option is grandfathered, the open enrollment materials should also include a notice of the plan’s continued grandfathered status. Consider also including with open enrollment materials other notices required to be furnished annually, including notices required under the Women’s Health and Cancer Rights Act (WHCRA) and the Children’s Health Insurance Program Reauthorization Act (CHIPRA).
Ensure a record of each offer of coverage is maintained
For purposes of demonstrating compliance with the ACA’s employer shared responsibility provisions, applicable large employers should ensure that a written record is maintained of all offers of coverage as part of the annual enrollment process, as well as in connection with mid year hires and changes to benefits eligible status. Potential penalties under the ACA’s employer shared responsibility provisions are based upon whether an employer “offered its full-time employees (and their dependents) the opportunity to enroll” in minimum essential coverage. On audit or in connection with an employer’s protest of an excise tax assessment, an employer will need proof that an offer of coverage was made.
December 2015
Distribute summary annual report
December 15 is the deadline for furnishing to participants the 2014 summary annual report (SAR) for administrators of calendar year plans filing their Form 5500 annual reports under the extended deadline of October 15.
Process for handling Section 1411 exchange notices of employee eligibility
Under ACA Section 1411, federal and state exchanges (also referred to as marketplaces) are responsible for providing written notice to an employer when one of its employees is determined to be eligible for subsidized exchange coverage. 45 C.F.R. § 155.310(h). The notice informs the employer of the determination, that the employer may be subject to an excise tax penalty under Code Section 4980H and that the employer has the right to appeal the determination. These exchange determinations will be based, in part, on the employee’s representation that the employer did not offer the employee the opportunity to enroll in health insurance coverage or that the coverage offered did not meet the ACA’s affordability and/or minimum value standards.
These Section 1411 exchange notices should have begun being issued in 2014. However, technical and other challenges facing healthcare.gov and the various state exchanges have resulted in delays in the implementation of this aspect of the law. At this time, it is still uncertain when healthcare.gov will begin issuing such notices or have in place a process for handling employer appeals.
In the meantime, employers should have in place a process for identifying such notices and forwarding them to the responsible person within the organization for handling. Each notice will need to be reviewed, and a decision will need to be made about whether the employer should appeal the determination in an effort to correct erroneous information and thereby avoid the incorrect assessment of penalties under Code Section 4980H.
January 2016
Pay Transitional Reinsurance Program fee
Payment of ACA Transitional Reinsurance Program fees are due January 15, 2016. For additional information, see the November 2015 entry above on this subject.
Furnish required employee statements—Form 1095-C
Employers subject to the new information reporting requirements described above must furnish coverage information statements to employees using IRS Forms 1095-C by February 1, 2016. See the October 2015 entry above on this subject for more information.
Include coverage information on Form W-2
The Forms W-2 issued to employees must include the aggregate cost of applicable employer-sponsored health insurance coverage. This requirement was first effective for the 2012 Forms W 2 issued in January 2013. An exception remains in effect for smaller employers that issued less than 250 Forms W-2 for the preceding year.
February to March 2016
File IRS informational returns
Employers subject to the new information reporting requirements described above must file required information returns with the IRS by March 1, 2016 (one day later than the standard February 28 deadline because February 28, 2016, is a Sunday) or by March 31, 2016, if filing electronically. These filings require use of IRS Forms 1094-C and 1095-C. For additional information, see the October 2015 entry above on this subject.
July 2016
PCORI fee due
July 31 is the annual deadline for payment of the Patient-Centered Outcomes Research Institute (PCORI) fee of $2.08 ($2.00 adjusted for inflation) per covered life for the preceding plan year. For more information, see our bulletin “Health Care Reform Requires Action Despite Delay of Employer Mandate” (September 2013).
* * *
The legal landscape for employer-provided health benefits has become significantly more complex in recent years. This bulletin provides just a brief overview of selected upcoming key dates.
If you have any questions about the foregoing or any other health plan or ERISA compliance issues, please contact Thomas G. Hancuch, at +1 (312) 609-7824 or any other Vedder Price attorney with whom you have worked.
