After previously releasing draft versions of the forms in July, the Internal Revenue Service (IRS) released the final versions of the 2016 ACA reporting forms in early October – less than four months out from the first of the two reporting deadlines. Fortunately, the final forms do not differ significantly from the forms used for 2015 reporting. There are, however, some key differences for employers to keep in mind.
The Affordable Care Act (ACA) requires Applicable Large Employers (ALEs) to report to the IRS on offers of medical coverage made to full-time employees. The ACA also requires employers of all sizes that sponsor self-funded health plans to report to the IRS on all individuals covered under the self-funded plan during the calendar year.
2015 was the first year for which ACA reporting was mandated. While the core reporting requirements remain the same, employers should be aware of some changes in 2016.
What’s New for 2016?
- Deadlines: Employers received a welcome delay of the 2015 reporting deadlines. This year, however, employers should not expect a similar reprieve. The original deadlines will apply. Employee statements are due by January 31, 2017, and submissions to the IRS must be made by February 28, 2017, or March 31, 2017 if filing electronically.
- Penalties: For 2016, the IRS will no longer offer a “good faith effort” exemption from filing penalties to employers who made a genuine effort to comply with the requirements. Instead, employers will face a penalty of $260 per delinquent or incorrect form, with an annual maximum of $3.2 million.
- Transition relief: Many forms of transition relief are no longer available to ALEs in 2016. Last year, mid-size employers with 50-99 full-time employees were not required to comply with the employer mandate, and ALEs were required to offer coverage to only 70% of their full-time employee population. This year, all ALEs are subject to the employer mandate provisions, and the threshold offer of coverage is up from 70% to 95%.
- Offer of coverage codes: In addition to last year’s list of codes for reporting coverage on Line 14 of Form 1095-C, two new codes are available. Codes 1J and 1K can be used to report conditional offers of medical coverage to a spouse. A conditional offer of coverage is one that requires the spouse to satisfy a specific condition in order to be eligible for coverage. For example, a requirement that the spouse not have access to other employer-provided coverage is considered a conditional offer.
- Reporting COBRA: The IRS provides clarification in the 2016 instructions on how employers should report an offer of COBRA coverage on Form 1095-C. An offer of COBRA coverage to a former employee (and dependents) should not be reported as an offer of coverage (i.e., no offer of coverage). Conversely, an offer of COBRA coverage made to an active employee should be reported as an offer of coverage regardless of whether the active employee elects COBRA.
With the final 2016 forms and instructions now available, employers should not delay preparations to meet the upcoming January 31 deadline. Advance planning is critical, particularly for employers required to file electronically with the IRS (those filing 250 or more forms). Review the final forms here, or read more about the changes in 2016.