New and Notable: 2016 Draft Instructions for ACA Forms
Recently, the Internal Revenue Service released the much-anticipated draft instructions for Affordable Care Act Forms 1094-C and 1095-C.While changes to ACA forms and filing requirements can be difficult to follow, we’re here to help. Our team of ACA experts has reviewed these documents to deliver a brief overview of what’s new and notable.
Here’s what we think you should know:
COBRA and Multiemployer Plan Reporting Subject to Change
The methods for reporting offers of coverage under COBRA and multiemployer (union) plans have not changed for 2016 reporting. The draft instructions specifically note that the instructions for multiemployer reporting are interim guidance and are therefore subject to change for 2017 and future years, hinting that employers may eventually be required to report precise offers of coverage for multiemployer plans.
New Indicator Codes: Conditional Offers of Spousal Coverage
New Form 1095-C, line 14 indicator codes 1J and 1K have been added for 2016 reporting. These codes address conditional offers of spousal coverage. Per the instructions, “a conditional offer is an offer of coverage that is subject to one or more reasonable, objective conditions (for example, an offer to cover an employee’s spouse only if the spouse is not eligible for coverage under Medicare or a group health plan sponsored by another employer).” If the conditions attached to an offer are met so that the spouse was actually eligible for and offered coverage, it may impact the spouse’s eligibility for a premium tax credit (subsidy). For purposes of reporting on Forms 1095-C, if coverage for the spouse was offered conditionally, codes 1J and 1K should be used in place of codes 1D and 1E, respectively.
Several forms of transition relief were available to employers in reporting year 2015, the first mandatory reporting year. Per the draft instructions, only some of these forms of transition relief continue to apply in 2016, “and they apply only for certain ALE Members and only for certain calendar months in 2016.” Specifically, for employers with non-calendar plan years, 2015 transition relief may still apply for the months of the 2015 plans that fall in 2016.
Example: If an employer has a 12-month plan year that runs from the beginning of March 2015 to the end of February 2016, then 2015 plan year transition relief may apply for January and February 2016.
Types of Transition Relief That May Still Apply:
2015 Plan Year Section 4980H Transition Relief Based on Number of Full-Time Employees (Form 1094-C, Line 22, Box C, and Form 1094-C, Lines 23-35, Column (e))
- ALEs with Fewer Than 100 Full-Time Employees, Including Full-Time Equivalent Employees (50-99 Transition Relief): For ALEs with less than 100 full-time employees, no assessable payment under section 4980H(a) or (b) will apply for any calendar month in 2016 that falls within the 2015 plan year.
- ALEs with 100 or More Full-Time Employees, Including Full-Time Equivalent Employees (100 or More Transition Relief): For ALEs with 100 or more full-time employees, if an ALE Member is subject to an assessable payment under section 4980H(a), the amount of the assessable payment for any calendar month in 2016 that falls within the 2015 plan year may be calculated by reducing the ALE Member’s number of full-time employees by the ALE Member’s allocable share of 80 (rather than 30).
2015 Plan Year Section 4980H(a) Transition Relief if an Offer of Health Coverage is Made to at least 70 Percent of Full-Time Employees (Form 1094-C, Lines 23–35, Column (a)): For any calendar month in 2016 that falls within the 2015 plan year, an ALE Member who offers minimum essential coverage to at least 70% (rather than 95%) of its full-time employees and their dependents may mark “Yes” in Column (a) to certify they met the requirement for that month.
2015 Plan Year Section 4980H(a) Transition Relief for Certain Arrangements that do not Offer Health Coverage for Dependents (Form 1094-C, Lines 23–35, Column (a)): Under certain circumstances, this transition relief applies for calendar months in 2016 that fall within the 2015 plan year so that, solely for purposes of section 4980H, an employer may treat an offer of health coverage to a full-time employee but not his or her dependents under a non-calendar year plan as an offer of health coverage to the full-time employee and his or her dependents.
Types of Transition Relief That No Longer Apply:
2015 Section 4980H(a) and (b) Transition Relief for Employers with Non-Calendar Year Plans (Form 1094-C, Lines 23–35, Column (a)): This relief that applied for calendar months in 2015 prior to the beginning of the 2015 plan year is no longer relevant in 2016.
Qualifying Offer Method Transition Relief for 2015: This optional method of simplified alternative reporting for 2015 is no longer available.
Other Form and Instruction Revisions and Changes to Indicator Codes
To accommodate the above changes and provide further clarification, the following additional revisions have been made to Forms 1094-C and 1095-C and the applicable indicator codes:
- On Form 1094-C, line 22, box B and Form 1095-C, line 14 indicator code 1I are now designated “Reserved.” The Qualifying Offer Method Transition Relief is not applicable for 2016.
- On Form 1095-C, line 14 indicator code 2I is now designated “Reserved.” 2015 Section 4980H(a) and (b) Transition Relief for Employers with Non-Calendar Year Plans 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 that the section 4980H definition of “full-time employee” applies for purposes of this column, not any other definition that an ALE Member may use for other purposes.
- On Form 1095-C, the language “Do not attach to your tax return. Keep for your records.” was inserted under the title of the form to inform the recipient that Form 1095-C should not be submitted with the return. Other minor clarifying changes were made to both forms.
- The draft 2016 instructions, compared to the 2015 instructions, include additional language and examples to help clarify various reporting processes, including filing an authoritative transmittal when an ALE Member files multiple Forms 1094-C.
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