Health & Welfare Notes
Vol. 20, Issue 4 July/August 2015
Reminder: Medicare Part D Notice Due by October 15, 2015. Plan sponsors whose health care plans include prescription drug benefits must notify Medicare-eligible plan participants by October 15 of each year whether their prescription drug benefit is “creditable coverage,” meaning that it is expected to cover, on average, as much as the standard Medicare Part D prescription drug plan. The Centers for Medicare & Medicaid Services (CMS) requires that a notice be sent prior to the start of the Medicare Part D Annual Election Period, which is October 15 to December 7 each year for coverage beginning January 1. The Creditable Coverage Notice must be given to all Part D-eligible individuals who are covered under, or apply for, an employer’s prescription drug benefits plan, including active employees and those who are retired, if applicable, as well as Medicare beneficiaries who are covered as spouses under active or retiree coverage. The CMS Creditable Coverage website (http://www.cms.hhs.gov/CreditableCoverage/) provides complete text of the guidance and sample disclosure notices.
IRS Releases Draft 2015 ACA Reporting Instructions and Forms. On August 7, 2015, the IRS released draft Instructions for the 2015 Forms 1094-B and 1095-B and Forms 1094-C and 1095-C, the forms employers, insurers, and other health plan sponsors will use to meet their reporting obligations for the employer and individual mandates under Sections 6055 and 6056 of the Affordable Care Act. As reported in earlier issues of Health and Welfare Notes, reporting will first be due early in 2016, based on coverage in 2015. All reporting will be for the calendar year, even for non-calendar year plans. Mid-size employers (those with 50 to 99 employees) will report in 2016, despite being in a period of transition relief in regard to having to offer coverage.
The 2015 instructions include a number of changes from the 2014 instructions. For the 1094-C and 1095-C forms, the following important clarifications were provided: (1) who must file, (2) information on extensions and waivers, (3) how to correct returns, (4) an example and further information on the 98% offer method, (5) information on the new plan start month box, (6) offers of COBRA coverage, (7) reporting on employee share of monthly premiums, (8) break in service information, and (9) multiemployer plan reporting. The instructions for the 1094-B and 1095-B forms include fewer updates than the C forms but they do include added information regarding penalties for not reporting and how to file for an extension.
Instructions for Forms 1094-C and 1095-C: http://www.irs.gov/pub/irs-dft/i109495c–dft.pdf
Instructions for Forms 1094-B and 1095-B: http://www.irs.gov/pub/irs-dft/i109495b–dft.pdf
Highlights of Clarifications and Changes for the 2015 Forms 1094-C and 1095-C include:
Who Must File: All Applicable Large Employers (ALEs) are required to file. An ALE is any single employer or group of employers that employed an average of at least 50 full-time employees (including full-time equivalent employees) during the previous calendar year. For 2015, an employer may determine its status as an ALE by reference to a period of at least six consecutive months during 2014 rather than the entire 2014 calendar year. A new employer in 2015 is an ALE if it actually employs an average of at least 50 full-time employees (including full-time equivalent employees) during the current calendar year.
Extensions and Waivers: The draft instructions provide information on requesting extensions and waivers for filing with the IRS. Automatic 30-day extensions will be given to entities filing Form 8809, and no signature or explanation is needed. Form 8809 must be filed by the due date of returns in order to be granted the 30-day
extension. Waivers from the required filing of the information returns electronically may be requested with Form 8508, and are due at least 45 days before the due date of the information returns.
Extensions to Furnish Statements to Employees: Employers may request an extension of time to furnish statements (Form 1095-C) to recipients by mailing a letter to the IRS with information including the reason for the delay. The request must be mailed by the due date of returns and if the request is granted, the maximum extension that will be given is 30 days.
Penalties: The draft instructions incorporate the new penalties for failing to file information returns. The Trade Preferences Extension Act of 2015, signed into law in July 2015, increases penalties for failing to meet the new reporting requirements (and certain older reporting requirements) from $100 to $250 per form, with the maximum limit on penalties rising from $1.5 million per year to $3 million per year. The IRS again noted that, for 2015 reporting, penalties will not be imposed for filing incorrect or incomplete information so long as the employer can show it made a good faith effort to comply with the requirements. The “grace period” does not apply to employers who fail to file or who file late.
COBRA Coverage: If COBRA is offered to a former employee upon termination of employment, it is only reported as an offer of coverage if the former employee enrolls in the coverage. If the former employee does not enroll (even if his or her spouse or dependents enroll), the ALE should use code 1H (no offer of coverage) for any month for which the offer of COBRA continuation coverage applies. If an employee is offered COBRA (due to loss of eligibility), that coverage is reported in the same way and with the same code as an offer of coverage to any other active employee.
Break in Service: The draft instructions clarify in the definition of “employee” that an individual should only be treated as an employee during a break in service for reporting purposes if the individual remained an employee during that period (had not terminated employment). An employee on unpaid leave would be treated as an employee for reporting purposes.
Multiemployer Plan Relief: The 2014 instructions directed ALEs not to enter a code in Part II, Line 14 of Form 1095-C for coverage that is not actually offered, as the information must reflect the coverage offered to the employee. Recognizing the reporting challenges that employers and multiemployer plans face, the 2015 draft instructions provide transition relief. On page 9, the instructions provide that an employer relying on the multiemployer arrangement interim guidance should enter code 1H on line 14 for any month in which the employer enters code 2E on line 16. Code 2E indicates an employer is required to contribute to a multiemployer plan on behalf of the employee for that month, and therefore is eligible for multiemployer interim rule relief. The multiemployer arrangement interim guidance is provided on page 14 of the draft instructions under the definition of “Offer of health coverage”: “An employer is treated as offering health coverage to an employee if the employer is required by a collective bargaining agreement or related participation agreement to make contributions for that employee to a multiemployer plan that offers, to individuals who satisfy the plan’s eligibility conditions, health coverage that is affordable and provides minimum value, and that also offers health coverage to those individuals’ dependents or is eligible for the Section 4980H transition relief regarding offers of coverage to dependents. For more information, see Section XV.E of the preamble to the final Code Section 4980H regulations.” For reporting for 2015, the instructions provide that Code 1H may be entered on line 14 without regard to whether the employee was eligible to enroll in coverage under the multiemployer plan. This multiemployer relief avoids concerns of multiemployer plans of disclosing protected health information (PHI) under HIPAA privacy rules to an ALE.
[Excerpts from Cowden Associates, Inc., UBA ACA Advisor, August 24, 2015; Mintz Levin, Employment Matters, August 10, 2015]
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.
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