The IRS has released 2016 final forms and instructions for information reporting under the Affordable Care Act (ACA). All entities that provide minimum essential coverage (MEC), such as employers and insurers, must submit the reports to support enforcement of the individual mandate. Applicable large employer members (ALEMs) must submit the reports to support enforcement of the employer mandate.
The 2016 forms and instructions are substantially similar to the 2015 versions, with some clarifications (including the removal of transition rules that no longer apply) and the addition of new Series 1 indicator codes to reflect conditional offers of spousal coverage. Good faith compliance relief does not appear in the instructions for the 2016 reporting year, and there may be penalties for failing to comply with the 2016 requirements.
The filings for 2016 are due to employees by January 31, 2017, and to the IRS by March 31, 2017. These deadlines apply to all group health plans.
Changes from the 2015 forms/instructions
The IRS released drafts of the 2016 forms and instructions earlier this year,1 which included the following changes that were also adopted in the final forms and instructions.
Revisions to Forms 1094-C and 1095-C
- On Form 1094-C, line 22, box B is designated “reserved” because the Qualifying Offer Method Transition Relief is not applicable for 2016. In Part III, column (b), “Section 4980H” was inserted before “Full-Time Employee Count for ALE Member” to remind filers to apply the section 4980H definition of “full-time employee” to this column.
- On Form 1095-C, the IRS inserted “Do not attach to your tax return. Keep for your records.”
- On Form 1095-C, the heading in Line 15 was revised to read “Employee Required Contribution (see instructions).”
Changes to Form 1095-C Series 1 and 2 indicator codes
- Indicator codes 1I for line 14 and 2I for line 16 are no longer applicable and have been “reserved.”
- New Series 1 indicator codes 1J and 1K, which address conditional offers of spousal coverage, have been added to line 14.
- A conditional offer of coverage is subject to one or more reasonable, objective conditions, such as offering coverage to an employee’s spouse only if the spouse is not eligible for Medicare or another group health plan.
- Filers may use new Series 1 indicator codes 1J or 1K to report a conditional offer to a spouse as an offer of coverage, regardless of whether the spouse meets the condition. A conditional offer of coverage generally would affect a spouse’s eligibility for the premium tax credit only if the spouse met the condition.
- The draft instructions explain that, to help employees (and spouses) who receive a conditional offer determine their eligibility for the premium tax credit, ALEMs should be prepared to provide a list of all conditions for the coverage upon request.
The IRS removed forms of transition relief that are no longer available and identified the months to which the remaining transition relief applies (for non-calendar-year group health plans).
Changes to the instructions
- Examples to explain the “Authoritative transmittal” for ALEMs who file multiple Forms 1094-C
- An example of what is meant by “Only One Form 1095-C for Each Employee of ALE Member”
- A description of electronic filing requirements for original and corrected forms
- Clarification of coding for COBRA continuation coverage and post-employment (non-COBRA) coverage reporting on Line 14 of Form 1095-C
- Replacement of “Premium Amount” with “Employee Required Contribution” (and adding a definition for that term)
- Clarification that the contact for the ALEM on line 8 of Form 1094-C is the person the IRS would contact with questions, while the contact on line 10 of Form 1095-C is the person recipients would contact (these may not be the same person)
- Confirmation that the “Plan Start Month” continues to be optional on Form 1095-C for 2016
- Clarification that the multiemployer plan interim guidance continues to apply for 2016
- Description of adjusted penalty amounts and removal of the reference to penalty relief
Additional changes in the final draft forms and instructions
While the final Forms 1094-C and 1095-C for 2016 are identical to the draft versions, the associated final instructions include some clarifications. The following are some of the clarifications that apply to Form 1095-C:
- Code 1G applies for the entire year or not at all. So if it applies, the filer should enter it on line 14 in the “All 12 months” column and may leave the monthly boxes blank.
- If Code 1G is entered in line 14, Code 2C should not be entered in line 16.
- The affordability safe harbor codes should not be entered in line 16 for any month that the ALEM did not offer MEC to at least 95% of its full-time employees and dependents.
- Filers should not use the “VOID” box.
The instructions also refer filers to additional guidance and proposed regulatory changes for Internal Revenue Code section 6055.2 They note that substitute statements (instead of official IRS forms) to recipients may be in portrait format, but substitute returns filed with the IRS must be printed in landscape format.
Employers that sponsor self-insured group health plans should familiarize themselves with the final 2016 Forms 1094-C and 1095-C and accompanying instructions so they can complete (either directly or through a third-party administrator [TPA]) the forms, distribute them to employees, and file them with the IRS in an accurate and timely manner.
Plan sponsors should ensure that their reporting systems are updated to include the final forms and that their TPAs are prepared to gather the required information and complete the filings using the final 2016 forms and instructions.