Health & Welfare Notes
Vol. 21, Issue 1 January-March 2016
IRS Extends Due Dates for ACA Information Reporting. Prior issues of Health and Welfare Notes have described the ACA reporting requirements for 2015 and which forms to use depending on whether coverage is insured or self-insured, provided by a multiemployer fund or offered by an applicable large employer to its full-time employees.
In late December 2015, the IRS issued Notice 2016‑4 extending the due dates for the 2015 ACA information reporting requirements, both for furnishing the applicable forms to individuals and for filing the forms with the IRS, under Code Sections 6055 and 6056. The IRS press release states that “this notice is intended to provide employers, insurers, and other providers of minimum essential coverage additional time to implement systems and procedures in this first year in order to gather, analyze, and report information about the health coverage they offer and provide.” However, the IRS is prepared to begin accepting this reporting in January, and employers and insurers are encouraged to begin reporting to employees and other individuals as soon as possible.
Specifically, the Notice automatically extends the due dates as follows:
Until March 31, 2016 (instead of February 1, 2016) to provide individuals with Forms 1095-B and 1095-C; and
If not filing electronically, until May 31, 2016 (instead of February 29, 2016), and if filing electronically, until June 30, 2016 (instead of March 31, 2016), to file Forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS.
The original provisions regarding automatic and permissive extensions of time for filing information returns and permissive extensions of time for furnishing statements will not apply to the extended due dates.
Employers or other coverage providers that do not comply with these extended due dates are subject to penalties under section 6722 or 6721 for failure to timely furnish and file. However, employers and other coverage providers that do not meet the extended due dates are still encouraged to furnish and file, and the IRS will take such steps into consideration when determining whether to abate penalties for reasonable cause. The IRS also stated in the Notice that it “will also take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting the required information to the Service and furnishing it to employees and covered individuals, such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the Service, or testing its ability to transmit information to the Service. In addition, the Service will take into account the extent to which the employer or other coverage provider is taking steps to ensure that it is able to comply with the reporting requirements for 2016.”
Guidance was also issued for individuals who might not receive a Form 1095‑B or Form 1095‑C by the time they file their 2015 tax returns. For 2015 only, individuals who rely upon other information received from their coverage providers about their coverage for purposes of filing their returns need not amend their returns once they receive the Form 1095‑B or Form 1095‑C or any corrections. These forms provide individuals with a record of their health coverage but do not need to be attached to the tax return.
Cadillac Tax Delayed to January 1, 2020. In response to concerns raised by both labor and management groups, Congress passed a law that delayed the start of ACA’s Excise “Cadillac” Tax for two years, until January 1, 2020. On December 18, 2015, President Obama signed into law the Consolidated Appropriations Act, 2016 (the Act), a $1.8 trillion omnibus spending deal which included the two‑year delay of the Cadillac Tax.
The Cadillac Tax, which was added to the Internal Revenue Code by the Affordable Care Act (ACA), imposes a 40% excise tax on the excess of the cost of an employer‑sponsored health care plan over a specified annual indexed dollar threshold. The tax was originally scheduled to be effective January 1, 2018, and would impose a penalty on employers, health insurers and “persons who administer plan benefits” with regard to high‑cost (“Cadillac”) health care coverage.
Now, the earliest that the Cadillac Tax will go into effect is January 1, 2020. In the meantime, the Act also authorized the U.S. comptroller general and the National Association of Insurance Commissioners to study whether the ACA uses appropriate age and gender benchmarks to determine the excise tax thresholds. Some commenters have speculated that delaying the Cadillac Tax is the first step toward its ultimate demise, as Congress may simply choose to postpone the tax year after year. But the Act doesn’t just delay the Cadillac Tax by two years; it also weakens the tax by making it deductible. Generally, businesses are not allowed to deduct their excise tax payments on their income tax returns. However, the Act, includes an exception for the Cadillac Tax, allowing businesses to deduct the amount that they pay in the Cadillac Tax from their taxable income.
Although the Cadillac Tax has been delayed for two years, employers should continue to review their health care programs to assess whether benefit changes are needed in the future to avoid the tax. The indexing under the Cadillac Tax will continue while the tax is delayed so that the dollar limits in effect in 2020 will reflect application of indexing had the delay not been enacted.
[Excerpts from Newsletter, McDermott Will & Emery, 12/29/2015; Tax Policy Blog by Scott Greenberg, Tax Foundation, 1/14/2016]
Proposed New SBC Template Available for Final Comment and Review. On February 26, the DOL issued a formal notice along with the proposed new Summary of Benefits and Coverage (SBC) template, instructions and related documents for final comment and review. Comments are due by March 28, 2016. The ACA requires SBCs as a means to provide individuals with standard information so they can better understand and compare medical plan offerings. Final regulations implementing SBC requirements were issued in June 2015, but release of final documents and forms was delayed to a later date. In this latest development, the DOL has released revised versions of the SBC template and other materials, based on input from the National Association of Insurance Commissioners (NAIC) and other stakeholders.
The general format of the SBC template is similar to the current version. Proposed changes to the template include:
Streamlined content, e.g., removal of Q&A about coverage examples, which reduced the template to 5 pages (SBC limit remains 8 pages/4 double‑sided pages);
An additional cost example for a foot fracture treated in an emergency room;
Updated claims/pricing data for the coverage example calculator;
New minimum essential coverage and minimum value language, as well as new continuation and appeals/grievance rights language;
Revised language for some sections of the template and an updated Uniform Glossary.
While the effective date for using the new template has not been announced, the DOL indicated in a phone call that the new SBC template will take effect for plan years beginning on or after April 1, 2017. In this scenario, calendar year plans with January 1 effective or renewal dates would not need to use the new template until the Fall 2017 enrollment period for 2018 coverage.
[Cigna Health Care Reform News Alert, February 29, 2016]
Disclaimer – This newsletter’s purpose is to inform our clients and colleagues of recent legislative health care-related developments. It is not intended, nor should it be used, as a substitute for specific legal advice.
Health and Welfare Notes is prepared four to six times annually and will accompany Retirement News. If there are questions concerning the information discussed, call richard Gabriel associates and ask for Gabe Zinni, Karen Irwin, Cindy Swartz or Nancy Cunningham.
richard Gabriel associates
Actuarial and Employee Benefits Consultants
601 Dresher Road, Suite 201
Horsham, PA 19044-2203
Phone (215) 773-0900 — Fax (215) 773-9907 — Email: firstname.lastname@example.org