Reporting Extensions for Employers May Effect Employees

Happy New Year!  Those in the benefits world are likely continuing to toast the New Year with the release of IRS Notice 2016-4 . This notice grants extension of time for filing new reports to the IRS and providing forms to employees.

Employee benefits professionals have been preparing large employers and self-insured plans for reporting by providing or introducing software programs that would collect the data regarding coverage status.

2015 Deadline Extensions

Specifically, the notice extends the due date:

  • For furnishing to individuals the 2015 Forms 1095-B and 1095-C, from February 1, 2016, to March 31, 2016
  • For filing with the IRS the 2015 Forms 1094-B, 1095-B, 1094-C, and 1095-C, from February 29, 2016, to May 31, 2016 (if not filing electronically) and from March 31, 2016, to June 30, 2016 (if filing electronically).

While this is good news for employers and their benefits staff, this could prove problematic for some individuals.  Individuals may receive 1095-B, Health Coverage and/or Form 1095-C, Employer-Provided Health Insurance Offer and Coverage less than two weeks before the tax filing deadline of April 15.

Initially these forms were due at the same time as W-2’s so it worked well for those that want to file taxes early.  The IRS provided guidance that said individuals “need not amend their returns once they receive the Form 1095-B or Form 1095-C or any corrections. Individuals need not send this information to the Service when filing their returns but should keep it with their tax records.”

Note that this extension applies to insurers as well.  So those who are insured directly under either a small group or individual plan may not receive the form 1095-B until March 31.

However, my concern is that there are individuals that do not understand what it means to have “affordable employer sponsored coverage” or an offer of such coverage.  Specifically, the rules defines “affordable coverage” as follows:

  • meets the minimum value standard and
  • the employee’s share of cost for employee only coverage is less than 9.5% of the employee’s W-2 income with the employer

The Covered California enrollment website was modified for this year’s open enrollment to ask quite a few more questions of an employee to help them determine if they have “affordable coverage”.  Hopefully this will help folks avoid a problem for 2016.

However this was not the case for enrollments for the 2015 calendar year.  I suspect many individuals who enrolled on the Exchange at Covered California, did not understand the rules and enrolled for themselves and/or family and obtained a subsidy. Prior to this reporting requirement, there didn’t seem to be a method to catch this, short of a full audit.

With the advent of this reporting the IRS computers will be able to cross reference the employer report showing offers of “affordable minimum value coverage” by social security number to the individual’s tax return.

Since the employer report to the employee will now likely come after many individuals have filed their tax returns, it may end up costing the individuals not only the repayment of subsidy, but the cost of an amended tax return.  So once again, I want to remind individuals that your idea of affordable and the IRS definition are quite different.

One further important note for employers with 50 or more employees: the extensions for the ACA information reporting requirements apply for calendar year 2015 only and have no effect on the requirements for other years or on the effective dates or application of the ACA “pay or play” provisions. Employers or other coverage providers that do not comply with these extended due dates will be subject to penalties.

Margaret R. Beck

Margaret Beck CLU, ChFC, CEBS started her insurance practice in Redding in 1978. She is the founder of Affiliated Benefit Services where businesses and individuals are assisted in choosing proper products, compliance with complex benefit laws and claims issues once coverage is placed.