According to Section 6056 (Internal Revenue Code, Affordable Care Act), applicable large employers (ALE’s) are required to report cohort medical coverage being offered to respective FTE’s (full-time employees) annually. The IRS under Section 6056 provides two forms for ALEs:-
- Form 1095-C: This form is to collect information regarding cost and coverage to FTE’s
- Form 1094-C: This form is to collect information regarding cost and coverage: an aggregation to the 1095-C form.
Section 6056's main purpose is to make it easy for the IRS to analyze whether FTE's are eligible for a premium tax credit. It is also needed to check ALE's compliance (or failure to comply) with the shared responsibility provision of the employer. These reporting requirements were initiated in 2015.
What are the information reporting requirements for employers in relation to the health coverage plans?
The ACA recently included the sections 6056 and 4980H under the Internal Revenue Code. Section 4980H states that ALE's are compelled to provide health coverage to their FTE's (and the families of FTE's). The purpose of Section 6056, on the other hand, requires ALE employers to provide all relevant information (related to the health coverage given to FTE’s) to the IRS. A copy of the information must be furnished to the employees as well.
Detailed definitions/criteria of ALE’s and FTE’s can be found under the IRS website ‘Employers Subject to Employer Shared Responsibility Provisions and Identification of Full-Time Employees’ sections in the Employer Shared Responsibility FAQs.
Section 6056, under the ‘regulations implementing’ section, mentions that an ALE can be either a single entity or a group of linked entities. The group may include subsidiary companies, shareholders, and potential partner companies. Related entities are known as 'Aggregated ALE Group'.
Nonetheless, reporting requirements are applicable to each party separately according to their respective FTE counts. A company reaches ALE status only when it has more than 50 full-time employees excluding seasonal workers. ALE and FTE detailed definitions can be checked for further clarity. Also for further information regarding the treated of related parties, refer to the IRS ‘Who is required to Report’ section and the 'Definitions' section for Form 1094-C.
(Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage)
The data provided through the 1094-C and 1095-C forms will be used to administer employers' shared responsibility provided. The IRS takes all such information in detailed accounts. Moreover, the employees of ALEs and the IRS will use the information to check whether an employee’s family is eligible for premium tax credit (under section 36B) or not.
The ALE’s which sponsor the expenses of self-insured group health coverage too are compelled to provide relevant details about employees and all family members who have registered for self-insured health plans. According to section 6055, these reporting requirements are for minimal coverage.
The IRS and related individuals use the 1094-C form to ensure that ALE’s are complying with individual shared responsibility provisions according to section 5000A. Self-insured groups that are sponsored by ALEs should know that the ALEs generally provide the required information under sections 6055 and 6056 of the 1094-C/1095-C forms.
For further details, refer to the section 6055 FAQs. For guidelines about the section 6056 information reporting requirements and additional guidance on how to complete Form 1094-C and Form 1095-C, check the Questions and Answers about Information Reporting by Employers on Form 1094-C and 1095-C.
The general method of reporting
Each ALE member:
- completes the requirement of filing a section 6056 report with the IRS by filing a Form 1094-C (transmittal) and, for each FTE, a Form 1095-C (employee statement); and
- completes the requirement to furnish a section 6056 statement to a full-time employee by providing each of its full-time employees a Form 1095-C.
More detailed information available about reporting requirements
The instructions under section 6056 give further details about reporting requirements for ALEs. They also include the regulations under section 6055 that provide guidance on the information reporting requirements for providers of minimum essential coverage. Regulations on the employer shared responsibility provisions under section 4980H, and the Employer Shared Responsibility FAQs guide determining an employer’s status as an ALE and determining an employee’s status as a full-time employee, including defining and providing rules for calculating hours of service. The Instructions for Forms 1094-C and 1095-C and the Question and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C provide guidance on how to complete Form 1094-C and Form 1095-C.
ALE Member hiring a third-party administrator or other third-party service providers to file the return with the IRS
The IRS gives permission to ALEs to hire a third-party administrator to send 1095 C/ 1094 C forms to the IRS. They can make arrangements with issuers or related service providers. Though, the potential liability under section 4980H remains with the ALE employer to send the ‘accurate’ reports to the IRS timely. There is an exception only in the case of a linked entity that is properly hired by government bodies.
If the hired person who forwards the returns to the IRS under section 6056 is a ‘tax return preparer’, then the person becomes eligible to the compulsions usually applicable to tax return preparers.
As ALE applicants hold responsibility for furnishing the forms under section 6056, the 1094-C that is provided on behalf of the ALE applicant must show that applicant’s EIN.
Moreover, if there are multiple third reporting facilitators for an ALE Member, there should be only one Form 1094-C Authoritative Transmittal reporting aggregate employee-level data for the ALE Member. Also, there must be only one Form 1095-C for each FTE in regard to the employment with that ALE Member.
The penalty relief has been granted only for the 2019 1095 B forms. Therefore, 1095C furnishing by ALEs to their respective FTEs must be done vigilantly to avoid the penalty under section 6055. The IRS website can be referred to as further details.
Takeaway
All ALE’s are recommended to frequently check the IRS website for updates related to section 6056 requirements. All necessary details about how to fill and furnish the forms are there. Make sure to file the returns to avoid penalties. Health coverage plans, according to section 1095-C, are to be sent to all FTE’s. A copy of the 1095-C must be given to the FTEs along with the IRS. FTE dependents must receive health coverage too. You may re-read this article to get hold of all basic integral 6056 section details.
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