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From Health Reform WK-EDGE, March 11, 2019

IRS updates FAQs on ACA information reporting by employers

By Tulay Turan, J.D.

Those that failed to properly report in recent years but made good faith efforts to comply with requirements can seek relief from penalties.

The IRS has updated its Questions and Answers on Reporting of Offers of Health Insurance Coverage by Employers (Section 6056) website. The revised FAQs tweak the guidance regarding how applicable large employer (ALE) members comply with the reporting requirements and also address transition relief for calendar years 2015, 2016 and 2017.

Background. Certain employers are required to report to the IRS information about whether they offered health coverage to their employees and if so, information about the coverage offered. This information also must be provided to employees. The FAQs address these reporting requirements.

Who must report. The IRS explains that employers subject to the employer shared responsibility provisions, called applicable large employers or ALEs, are required to report under Code Sec. 6056. An ALE is an employer that employed an average of at least 50 full-time employees (including full-time equivalent employees) on business days during the preceding calendar year. An ALE may be a single employer or may consist of a group of related employers (such as parent and subsidiary entities or other related/affiliated entities), called an Aggregated ALE Group. An aggregated ALE group refers to a group of employers treated as a single employer under Code Secs. 414(b), (c), (m) or (o). Any employer that is an ALE or a member of an aggregated ALE group is called an ALE member. An ALE member is a member of the aggregated ALE group for a month if it is treated as a single employer with the other members of the group on any day of the calendar month. The reporting requirements under Code Sec. 6056 apply to each ALE member separately.

Aggregated ALE group. The revised guidance provides that each ALE member must file Forms 1094-C and 1095-C with the IRS and furnish Form 1095-C to its full-time employees, using its own EIN. This is the case even if a particular ALE member does not employ enough employees to meet the 50-full-time-employee threshold.

Government entities, churches, and a convention or association of churches should determine whether a person or group of persons is an ALE and whether a particular entity is an ALE member in the same way they made those determinations for purposes of the employer shared responsibility provisions under Code Sec. 4980H.

Transition relief. The IRS also explains that relief is available from penalties for incomplete or incorrect returns filed or statements furnished to employees for coverage offered (or not offered) in calendar years 2015, 2016 and 2017.

In general, ALE members were subject to new information reporting requirements starting in 2016 for offers of coverage in 2015. For these new information reporting requirements, the penalty under Code Sec. 6721 may apply to an ALE member that fails to file timely information returns, fails to include all the required information, or includes incorrect information on the return. Similarly, the penalty under Code Sec. 6722 may apply to an ALE member that fails to timely furnish the statement, fails to include all the required information, or includes incorrect information on the statement.

In implementing new information reporting requirements, short-term relief from reporting penalties frequently is provided. This relief generally allows additional time to develop appropriate procedures for collection of data and compliance with the new reporting requirements. Accordingly, for reporting in 2016 for offers of coverage in 2015 and for reporting in 2017 for offers of coverage in 2016 (see Notice 2016-70) and for reporting in 2018 for offers of coverage in 2017 (see Notice 2018-06), the IRS will not impose penalties under Code Secs. 6721 and 6722 on ALE members that can show that they have made good faith efforts to comply with the information reporting requirements.

Specifically, relief is provided from penalties under Code Secs. 6721 and 6722 for returns and statements filed and furnished in 2016 to report offers of coverage in 2015 and in 2017 to report offers of coverage in 2016, and in 2018 to report offers of coverage in 2017 for incorrect or incomplete information reported on the return or statement. No relief is provided in the case of ALE members that cannot show a good faith effort to comply with the information reporting requirements or that fail to timely file an information return or furnish a statement.

In addition, consistent with existing general information reporting rules, the waiver of penalty and special rules under Code Sec. 6724 and the applicable regulations, including abatement of information return penalties for reasonable cause, may apply to certain failures under Code Secs. 6721 or 6722 both for information returns filed and statements furnished to individuals. In particular, penalty relief may apply if the IRS determines that the standards for reasonable cause under Code Sec. 6724 have been met.

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