IRS Notice 2016-4 — ACA Reporting Extension for Forms 1094 & 1095

IRS Notice 2016-4 makes for some happy reading. (IRS Notice 2016-4)

Background. All Applicable Large Employers (those with 50 or more full time equivalent employees) must report on Form 1095 whether they offered affordable, minimum essential coverage at minimum value to employees (and their dependents) who were full-time for at least one month during 2015. In addition, any employer sponsoring a self-funded medical plan must report on Form 1095-C all employees who enroll under the plan (including part-time employees, COBRA participants, beneficiaries and directors).
This information goes to the IRS via Forms 1095 and 1094. Here’s the good news:

  • 1095.  We think of the Form 1095 series as something like a W-2. It’s the form that is distributed to employees and explains their medical coverage. Under IRS Notice 2016-4, the deadline to furnish Form 1095 to employees is extended from February 1, 2016 to March 31, 2016.
  • 1094. Form 1094 is more like a cover sheet. It’s used to transmit copies of the employer’s Form 1095s to the IRS. Form 1094 includes some additional information to aid the IRS in looking at an employer’s ACA compliance, including the mysterious and confusing line 22. (More on this in future posts.)  The deadline for Form 1094 is extended from February 29, 2016 to May 31, 2016 (if filing paper) and it’s extended to June 30, 2016 if filing electronically.

Individuals.

  • The Notice makes it clear that individuals do not need to include Form 1095 with their individual tax returns.
  • The Notice also provides that individuals may rely on “other information received from their coverage providers” to confirm that they have minimum essential coverage for 2015 or to demonstrate that they are eligible for a premium tax credit.

Next Steps. Our thoughts on next steps for most employers:

  • Get the word out to payroll providers, tech-stakeholders and other ACA reporting partners.
  • Develop talking points for call centers and consider issuing “statements of coverage” that employees can keep with their tax records or show their tax preparer for purposes of premium tax credits and compliance with the individual mandate.

Last Thoughts.

  • We think ACA reporting will change in the future (maybe a lot) but it’s not going away for 2015. In a sweet and sour sort-of-way, IRS Notice 2016-4 both reminds employers that the late penalties for 2015 are real but also gives them hope for penalty waivers if a delinquent filing or distribution is due to reasonable cause and the employer can demonstrate that it acted in a “responsible manner.”  Keep track of your facts, continue gathering data and test your procedures. Records of these efforts may come in handy if you have trouble meeting even this extended deadline.
  • It’s clear the IRS is listening to employer complaints generated on their website and elsewhere. We encourage you to continue submitting comments.  (IRS Readiness Survey) (click on the “take our survey” box in the upper left)
  • At the risk of sounding preachy, don’t slow down here. Even with the extension we think a number of employers will have trouble with these deadlines.

Other Links

  • IRS Extends Some Obamacare Reporting Requirements for Employers. (Bloomberg)
  • Business roundup: Employers get another ACA reporting deadline extension. (Washington Post)

She’s not on our blog yet but our newest associate, Lindsay Docto, contributed to this post.

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Bob Seng

Bob Seng

With plenty of experience in private practice and as an Assistant General Counsel for Pay & Benefits in a Fortune 50 Company, Bob understands that employee benefits law isn’t for everyone. That’s why he takes pride in listening carefully and responding with clear answers and advice that can be followed by busy clients.

Holly Fistler

Holly Fistler

Holly Fistler is an associate in Dorsey’s Benefits and Compensation Group. She advises clients on ERISA, tax and related issues affecting qualified and non-qualified retirement plans. Additionally, she assists employers with their health and welfare benefit plans, including health care reform, HIPAA privacy and security compliance and other plan design and administration issues. She devotes a substantial portion of her practice to advising both public and private companies on compensation and benefit issues.

Tim Goodman

Tim Goodman

Tim Goodman works with employers on medical plans, retirement plans, executive compensation, and a wide range of benefits. Tim works with a broad array of employers, with a special focus on assisting cooperatives, agribusiness companies, hospitals and health care entities, banks and financial institutions, and Alaskan Native Corporations.Employers have Tim provide advice on health care reform (the ACA), wellness plans, and other welfare plan matters (ranging from cafeteria and health FSAs to severance and tuition plans). With respect to health care reform, Tim advises employers on the new fees (from the employer shared responsibility fee to the Cadillac tax), assists them in preparing for reporting on Form 1095-C, and explains the new requirements ranging from notice requirements to plan mandates.Tim recognizes the complex nature of the rules governing retirement plans and works with employers to review operations, address errors, and help employers maintain the tax-qualified status of their plans. Tim advises employers on qualified and nonqualified retirement plans (including defined benefit, 401(k), 403(b), 457(b), and 457(f) plans, and section 409A).

Lindsay R. Docto

Lindsay R. Docto

As an associate in Dorsey’s Benefits & Compensation Group, Lindsay advises clients on benefits issues in connection with mergers and acquisitions. Lindsay also counsels clients on ERISA and issues that arise in maintaining retirement and health and welfare plans for companies at various stages of growth. In addition, Lindsay provides guidance to clients working to comply with Affordable Care Act requirements as companies assess the applicability of market reforms and establish 4980H reporting procedures.

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