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Presented by
Edward Fensholt, JD Scott Behrens, JD Rory Akers, JD Compliance Services, Lockton Benefit Group
Getting Ready for 2016 ACA Reporting: Because Some Things Are Too Much Fun to Do Only Once
© 2016 Lockton Benefit Group Images © 2016 Thinkstock. All rights reserved.
October 20, 2016
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Presented by
Edward Fensholt, JD Scott Behrens, JD Rory Akers, JD Compliance Services, Lockton Benefit Group
Getting Ready for 2016 ACA Reporting: Because Some Things Are Too Much Fun to Do Only Once
© 2016 Lockton Benefit Group Images © 2016 Thinkstock. All rights reserved.
October 20, 2016
Agenda
Agenda
ACA Reporting Snapshot
Which Employers Must Report?
Who Are ALEs Reporting On?
Changes for 2016: Transition Relief
When to Report
How to Report: Form 1095-C – Part II, Line 14
How to Report: Form 1095-C – Part II, Line 15
How to Report: Form 1095-C – Part II, Line 16
How to Report: Form 1095-C – Part III
How to Report: Form 1094-C
Odds and Ends: COBRA and Transfers
Cleaning Things Up
8
ACA Reporting Snapshot Ed Fensholt
ACA Reporting Snapshot – Our Focus Today
Process largely unchanged from last year; this presentation will touch on the basics, and many of the slides address and include examples of the basics, but we will mainly focus on the new things, the nuances, and the common errors from last year
Due dates are accelerated
“Good faith effort” standard does not apply
Some transition relief expires, some lingers through all or part of the 2016 reporting year
New codes for Line 14, 1095-C
Line 15 remains deceptively complicated for wellness and opt-out incentives, and some HRA and flex credits; vendor programming shortcomings are likely going to manifest here
COBRA remains a mess, M&A remains a bit of a mystery
“Accepted with errors” messages…what to do and when to do it, especially about missing or erroneous SSNs, and how the IRS intends to provide additional clarity around errors on 2016 filings
10
ACA Reporting Snapshot – A Quick Refresher
ACA reporting serves two functions (once you understand this, the reporting Forms – what
they’re asking for, and why – make more sense) :
Allows the IRS to verify individuals’ compliance with the individual mandate, and
Allows the IRS to verify “applicable large employer” (ALE) compliance with the employer mandate
The reporting forms are, with one exception, specific to the employee (like W-2)
11
ACA Reporting Snapshot
Here’s the exception…ALEs also file Form 1094-C, which also serves multiple purposes
Transmittal document to accompany all the Forms 1095-C sent to the IRS, identifying the transmitter (the ALE)…similar to a W-3 in that regard
ALE also demonstrates compliance with the employer mandate’s “aggregate obligation”…the “Tier 1” obligation to offer coverage to at least 95% of FTEs and their children
ALE also identifies the other members of its controlled group, to facilitate IRS enforcement of the employer mandate between employer members of an ALE Group
12
Employer Reporting - Summary
Form Used by...
1095-B
Insurers to report actual coverage provided to primary insureds and their dependents; form is supplied to the covered primary insured, copy to IRS
Non-ALEs to report actual non-supplemental self-insured coverage provided to primary insureds and their dependents; form is supplied to the covered primary insured, copy to IRS
ALEs (at their option) to report actual self-insured coverage to non-employees (retirees, partners, outside directors, COBRA beneficiaries, contractors, etc.); form is supplied to the covered primary insured, copy to IRS
1094-B Insurers, non-ALEs and ALEs (as applicable) to transmit the individual Forms 1095-B to IRS
1095-C Parts I and III, and maybe II
ALEs to report self-insured coverage provided to primary insureds and their dependents; employer makes abbreviated entry in Part II if the primary insured was not an ACA full-time employee for at least a month during the year
Form is supplied to the primary insured, copy to IRS
1095-C Parts I and II, and maybe III
ALEs to report coverage offers to individual full-time employees, to demonstrate Tier 2 compliance
If the full-time employee is covered under insured coverage, or not covered under any coverage, the employer completes just Parts I and II; if covered under self-insured coverage, the employer completes Parts I, II and III
Form is supplied to the FTE, copy to IRS
1094-C ALEs to transmit the individual forms 1095-C to the IRS, and demonstrate Tier 1 compliance
13
Which Employers Must Report? Rory Akers
Which Employers Must Report?
Applicable Large Employers (ALEs):
In short, employers subject to the employer mandate…
…that is, employers that, together with controlled group and affiliated service group members, have an average of 50 or more full-time employees (including full-time equivalent employees…fictional full-timers made up of part-time hours) during the prior calendar year
Calendar year look-back; some employers confuse this look-back with their measurement periods for determining FTEs
Controlled groups: Generally, at least 80% common ownership
This is the only place where part-time hours or fictional full-timer employees matter; if the relevant numbers put the employer “in the boat” (i.e., if they subject the employer to the employer mandate), coverage offers are compelled only with respect to real flesh-and-blood FTEs
Small Employers Providing Non-Supplemental Self-Insured Coverage
Rare; we’ll speak no more about this
15
Which Employers Must Report?
There is an ALE Group (the green box) consisting of HoldCo, SubCo1 and SubCo 2
Each of these three entities is an ALE, subject to the employer mandate and reporting, even though considered separately none of them would be an ALE; SubCo3 is not an ALE
Even though HoldCo, SubCo1 and SubCo2 are all ALEs by virtue of their being part of an ALE Group, each of them applies Tier 1 and Tier 2 of the employer mandate separately, and reports separately…even though their employees might be covered under a single plan; this is EIN-by-EIN reporting, not plan-level reporting like the Form 5500
HoldCo, Inc. [EIN 12-3456789]
15 full-time employees
83%
SubCo 2, Inc. [EIN 34-5678912]
25 full-time employees
50%
SubCo3, Inc. [EIN 45-6789123]
10 full-time employees
100%
SubCo 1, Inc. [EIN 23-4567891]
35 full-time employees
16
Who Are ALEs Reporting On ? Scott Behrens
Who Are ALEs Reporting On?
18
Any person who had coverage for at least a day during the calendar year, under a self-insured plan offered through the employer
Can be a common law employee (FTE, part-timer, regular, temp, seasonal, per diem, etc.), non-common law employee (contractor, former employee, retiree, partner, outside director, COBRA enrollee or dependents of any of these)
OR
Any common law employee, who was an ACA FTE for at least a month during the calendar year, and who had cleared his or her “limited non-assessment period” (LNAP) before year end
Who Are ALEs Reporting On?
19
What’s a Common Law Employee?
Tax Code question
Not partners, independent contractors, outside directors
What about “temps”?
Is the employer hiring them, or obtaining them from a staffing firm?
Staffing industry takes the view that a staffing associate is a common law employee of the staffing firm
Factors: A bunch of them, key among them the right control what the individual does and how he/she does it; allow the employer to decide the common law employee question
Who Are ALEs Reporting On?
20
When is a Newly-Hired Employee an “ACA FTE”
The newly-hired FTE :
Is not an ACA FTE until the first day of fourth full calendar month, as long as coverage offered by then
Example: Employee hired in Sept. or later, gets a coverage offer by Jan. 1
What if the coverage offer comes earlier, and the employee enrolls?
Is literally measured month-to-month; even if employer applies look-back measurement method to determine FTEs, the newly hired FTE is measured month-to-month until employed through an entire standard measurement period (SMP), then FTE status depends on average hours over SMPs, as with everyone else
Those emerging from SMPs averaging 30+ hrs/week are ACA FTEs for the ensuing stability period (plan year)
Change from FTE to VH/PT/Seasonal before completing an SMP: Continue to measure month-to-month
Lockton clients: Ask your Account Team for our white paper titled, “Those Vexing Changes in Status”
Who Are ALEs Reporting On?
21
When is a Newly-Hired Employee an “ACA FTE”
The newly-hired variable hour/part-time/seasonal employee
Is not an ACA FTE until:
The first day of the Initial Stability Period or (if not then, because he or she averaged fewer than 30 hours of service per week over the Initial Measurement Period) then…
…The first day of the Standard Stability Period (plan year) following the first Standard Measurement Period in which he/she averages 30+ hrs/week
Changes from VH/PT/Seasonal to FTE during the initial measurement period (IMP): Treat as an ACA FTE on the earlier of two dates:
First day of the Initial Stability Period, if the employee averaged 30+ hrs/week over the IMP
First day of the fourth full calendar month following the change in status, as long as a coverage offer is made by then
Lockton clients: Ask your Account Team for our white paper titled, “Those Vexing Changes in Status”
Who Are ALEs Reporting On?
22
Determining FTEs: “Hours of Service”
Paid hours
NOT hours worked abroad
NO NEED to convert certain payments to hours: workmen’s comp, state-mandated disability leave payments, disability benefits funded by employees on an after-tax basis
Some unpaid leaves can’t hurt the employee, in an “average hours of service” calculation
Lockton clients: Ask your Account Team for our white paper detailing what hours must be taken into account, and what hours may be disregarded.
Who Are ALEs Reporting On?
23
What Are “Limited Non-Assessment Periods” and When Are They Cleared?
LNAPs include:
The first partial month of employment
An initial measurement and administrative period, for newly-hired variable hour, part-time or seasonal employees tracked via the look-back measurement method
To “claim” this as an LNAP, an employee emerging from the measurement period must be offered coverage for the ensuing stability period…it’s the timely coverage offer that “buys” the relief
The waiting period for newly-hired FTEs, as long as an ACA-compliant coverage offer is made not later then the first day of the fourth full calendar month of employment
Similar period following a variable hour, part-time or seasonal employee’s switch to full-time status during the initial measurement period
For employers first qualifying as an ALE because of growth in FTE/FTEq count for the prior CY), the first three months of the CY, with respect to employees not offered coverage at any point during the prior CY
Changes for 2016: Transition Relief Ed Fensholt
Changes for 2016: Transition Relief (A Quick Summary)
Had 50-99 FTEs/FTEqs in 2014: Free pass from the employer mandate for 2015 (but not reporting!)
If had non-CY plan relief, free pass from employer mandate through the end of the 2015-16 plan year; begin making adequate coverage offers by first day of PY beginning in 2016 or risk penalties
Employer mandate’s Tier 1 “aggregate obligation”: Make coverage offer to at least 70% of FTEs in the EIN, and their children
Becomes 95% for months in 2016 and later
For employers with non-CY plan relief, it remains 70% for months in 2016 through the end of the 2015-16 plan year1
Penalty calculation “Free 80” vs. the “Free 30” for “aggregate obligation” penalty calculations For employers with non-CY plan relief, it remains “Free 80” through the end of the 2015-16
plan year1
Multiemployer plan relief (employer bound to make contributions to a multiemployer plan (not MEWA) under a bargaining agreement; union supplies MV and affordable coverage, and offers coverage to children) Relief continues for 2016 reporting
1 Employers in a controlled group/affiliated service group with an employer that qualifies for non-CY plan relief can
also take advantage of it 25
When to Report Rory Akers
When to Report – 2016 Reports Due in 2017
Form Due Date How Extensions &
Waivers
1095-C Jan. 31 to FTEs, others
with self-insured coverage
On paper or electronically with
consent
May apply to IRS via letter for 30-day extension
1095-C 1094-C
Feb. 28 to IRS, unless e-filing, then March 31
Must e-file if submitting 250+ Forms 1095-C,
unless get waiver
Automatic 30-day extension via Form 8809; may apply for additional 30-
day extension
May apply for e-filing waiver on
Form 8508
27
How to Report: Form 1095-C – Part II, Line 14 Scott Behrens
How to Report: Form 1095-C – Part II, Line 14
Remember…
An employer only deals with Line 14 of Part II of Form 1095-C if it’s dealing with:
An employee who was an ACA FTE (i.e., common law employee, 30+ hours of service per week on average, cleared any LNAP etc.) for at least one month during the reporting year, OR
An individual (FTE or otherwise) with self-insured coverage for at least a day during the reporting year (very abbreviated entry…more on that in a minute)
29
How to Report: Form 1095-C – Part II, Line 14
30
Generally, Line 14 tells the IRS whether the ALE offered coverage to the FTE for a given month or months……and if it did, whether the coverage was “Minimum Value” (MV), meaning at least 60% actuarial value (i.e., Bronze-level coverage) or merely “Minimum Essential Coverage” (MEC), and whether coverage was offered to the employee only, or family members too…
This is all described by the use of 1 of 10 codes, 2 are new and MUST be used if applicable
The reporting employer MUST ACCOUNT FOR ALL 12 MONTHS ON LINE 14
Only report a coverage offer for a month if offered for entire month…otherwise, report “No coverage” (1H) even if there’s a legit reason for no offer
How to Report: Form 1095-C – Part II, Line 14 Codes
Line 14 Codes
Means…
1A Qualifying Offer for the month in question; a Qualifying Offer is an offer of MV coverage to the employee, with the employee’s cost for single coverage not in excess of 9.66% of the mainland single poverty level; at least MEC must be offered to spouse and children
1B Offered MV to e’ee only, for entire month
1C Offered MV to e’ee, at least MEC to kids (not spouse) for entire month
1D Offered MV to e’ee, at least MEC to spouse (not kids) for entire month; don’t use 1D if offer to spouse was conditional (use 1J)
1E Offered MV to e’ee, at least MEC to spouse and kids for entire month; don’t use 1E if offer to spouse was conditional (use 1K)
1F Offered MEC but not MV to e’ee or to e’ee and any combination of family unit, for entire month
1G E’ee was not a FTE for any month but covered under employer’s self-insured plan
1H No MV or even MEC coverage offered to e’ee, for one or more days of the month
1I Reserved by the IRS
1J Offered MV to e’ee, conditional offer of at least MEC to spouse (no offer to kids)
1K Offered MV to e’ee, at least MEC to kids; conditional offer of at least MEC to spouse
31
How to Report: Form 1095-C – Part II, Line 14
32
Line 14…common situations
MV coverage offered to the employee and family for the entire month – 1E
Employer offers MV coverage to the employee for the entire month, at an employee cost less than 9.66% of the mainland poverty level, and offers at least MEC to the spouse and children – 1A
Employer offers MV coverage to employee and family, but coverage for spouse is conditioned on spouse NOT being eligible for coverage elsewhere, such as through his or her own employer – 1K
MEC but not MV coverage offered to the employee and family for the entire month – 1F
Coverage not offered, or offered for less than entire month, because the employee was hired mid-month – 1H
Coverage not offered, or offered for less than entire month, because the employee was in a waiting period – 1H
Coverage not offered, or offered for less than entire month, because the employee was in an initial measurement or initial administrative period – 1H
How to Report: Form 1095-C – Part II, Line 14
33
Line 14…common situations
Coverage not offered for the entire month because the employee terminated mid-month, and coverage didn’t continue to month’s end – 1H
Employer didn’t offer coverage to the FTE, even including where the employer is bound by a bargaining or similar agreement to make contributions to a union-affiliated health plan on the employee’s behalf (and even where the employee was enrolled in that coverage) – 1H
Person was enrolled in self-insured coverage of the employer for at least a day (meaning employer must complete Part III of Form 1095-C) but the person was not a full-time employee for even a single month – 1G in the “All 12 months” box
Offer of COBRA coverage for all or part of the month, to a former employee – 1H
COBRA coverage actually supplied for all or part of the month to a former employee – 1H
How to Report: Form 1095-C – Part II, Line 14
34
Line 14…Examples
Employer offers MV coverage to eligible employees and their spouses and children thru the month the children attain age 26.
The employee is an FTE and eligible for coverage the entire calendar year (whether enrolled or not is not relevant for Line 14 purposes…only the offer)
1E
How to Report: Form 1095-C – Part II, Line 14
35
Line 14…Examples
Same coverage offer as on previous slide.
Employee joins the employer on March 10 as an FTE, and is offered coverage on June 1 (first of the month following 60 days) through the end of the year
1H 1H 1H 1H 1H 1E 1E 1E 1E 1E 1E 1E
How to Report: Form 1095-C – Part II, Line 14
36
Line 14…Examples
Same coverage offer as on previous slide. Employee begins the year as an eligible FTE, and remains so through May 12, when he terminates.
What if eligibility had continued through May 31?
1E 1E 1E 1E 1H 1H 1H 1H 1H 1H 1H 1H
How to Report: Form 1095-C – Part II, Line 14
37
Line 14…Examples
Same coverage offer as on previous slide. A variable hour employee joins the employer on July 10, 2015, completes an initial measurement period on July 9, 2016 and is offered coverage as an FTE effective August 1, 2016, through the end of the 2016 calendar year
1H 1H 1H 1H 1H 1H 1H 1E 1E 1E 1E 1E
How to Report: Form 1095-C – Part II, Line 14
38
Line 14…Examples
Employer offers self-insured coverage to hourly employees, whether FTEs or PTEs. A part-time employee, who is not an FTE for even a single month during the year, enrolls in the self-insured coverage for all or even part of the year.
What if she had never enrolled?
What if the coverage had been fully insured and she had enrolled?
1G
If using 1G, put it in the “All 12 Months” box
How to Report: Form 1095-C – Part II, Line 14
39
Line 14…Examples
Employer offers MV coverage to an FTE for the entire year; coverage is made available to the family. The eligibility of the spouse is conditioned on the spouse NOT being eligible for group coverage offered by another employer.
1K
If 1J or 1K applies, must use it!
How to Report: Form 1095-C – Part II, Line 14
Key Takeaways – Line 14
Every month must be accounted for; leave no month blank!
Of course, if completing the “All 12 Months” box, no need to complete the rest of the line
Insert a code for a coverage offer ONLY if the coverage was available for the ENTIRE month
This is a different standard than under Part III, where coverage is listed for a month if the individual had coverage for merely a day
Generally, report coverage as having been offered for a month if the employee could have had it for that month, had he elected it (potential wrinkles here)
Watch conditional offers…new codes for 2016
Watch non-CY plan transition relief…
Don’t leave line 14 blank for the months prior to the first day of the 2016-17 PY, and
Don’t show 1H where there was actually a coverage offer made for the months prior to the first day of that PY, even though the employer wasn’t subject to the employer mandate
Use 1G on line 14, and don’t complete lines 15 and 16, where self-insured coverage is provided to someone who was not an FTE for even a single month
40
Lockton clients: Ask your Account Team for our white paper on Lines 14-16 of the Form 1095-C, updated for 2016!
How to Report: Form 1095-C – Part II, Line 15 Ed Fensholt
Here is where your
vendor is most likely to err
How to Report: Form 1095-C – Part II, Line 15
42
Line 15…
Only complete for a month if code 1B, 1C, 1D, 1E, 1J or 1K is on line 14 (the minimum value offers)…IRS doesn’t care about the affordability of MEC coverage
1A is also a MV offer, but it’s dealt with differently…1A on line 14 means NOTHING in line 15
Tells the IRS how much the FTE is asked to pay for the least expensive employee-only MV coverage option offered to him or her…this will often not be what the employee is actually paying!
How to Report: Form 1095-C – Part II, Line 15
43
Line 15…
Include cents. If there is no e’ee contribution, insert $0.00…don’t leave blank for any month in which 1B, 1C, 1D, 1E, 1J or 1K is on line 14
This number can be an average of the monthly costs for the plan year (not the calendar year ); reflecting and average is easy for CY plans, little complicated for non-CY plans
E.g., April 1 – March 31 PY; average monthly cost for the 2015-16 PY could be placed in the Jan., Feb. and March boxes; average monthly cost for the 2016-17 PY could be placed in the boxes for April through December
See the definition of “Employee Required Contributions” on page 15 of the Instructions
0.00
How to Report: Form 1095-C – Part II, Line 15
44
Line 15…
Qualifying Offers. If the employer makes a ”qualifying offer” to the employee and inserts code 1A on line 14 for one or more months, line 15 is NOT completed for those months
What’s a “qualifying offer”? An offer of at least MV coverage to the employee, and at least MEC to the spouse and children to age 26, where the employee would pay no more than 9.66% (for 2016) of the mainland poverty level for employee-only coverage
Why no entry on line 15? The actual cost of the offer is irrelevant because the employer is effectively claiming the poverty level safe harbor, for affordability purposes
1A
…Leave line 15 blank
If code 1A is in line 14…
How to Report: Form 1095-C – Part II, Line 15
45
Line 15…
Opt-Out Incentives:
Include the value of an opt-out incentive in the employee’s cost on Line 15, unless the opt-out incentive is a “qualifying” incentive (or the incentive pre-dated Dec. 2015 – this grandfather rule goes away for 2017)
An incentive is qualifying if it’s not provided unless and until the employee attests he and his tax family (individual for which he expects to claim an exemption) have or will have other group coverage
Potential FLSA issues related to opt-outs
Here is where your
vendor is most likely to err
How to Report: Form 1095-C – Part II, Line 15
46
Line 15…
Wellness Incentives and Penalties:
Adjust the line 15 coverage cost as follows, for wellness incentives and penalties:
Assume the employee failed to meet the criteria to win incentive/avoid penalty for non-tobacco-related components of a wellness program, i.e., don’t deduct the incentive amount, but add the penalty
Assume the employee met the criteria to win the incentive/avoid the penalty for tobacco-related components, i.e. deduct the incentive amount, but don’t add the penalty
Here is where your
vendor is most likely to err
How to Report: Form 1095-C – Part II, Line 15
47
Line 15…
HRA Credits:
If they can be applied to pay premium (or premium and pay for OOP expenses), adjust the employee monthly cost by a monthly ratable portion of the HRA benefit for the year
If they can only be applied to reimburse OOP costs (and can’t be used to pay premium), do not adjust the employee cost on line 15 to account for any portion of the HRA benefit
Here is where your
vendor is most likely to err
How to Report: Form 1095-C – Part II, Line 15
48
Line 15…
Flex Credits:
If the flex credit can ONLY be used to pay premium for medical coverage, apply the credits to reduce the employee cost on line 15
If the flex credit can also be taken as cash, or used to pay premiums for non-medical care (like a dependent care FSA), do not adjust the employee cost on line 15 to account for any portion of the flex credits
Here is where your
vendor is most likely to err
How to Report: Form 1095-C – Part II, Line 15
49
Line 15…Examples…in most examples we’ll assume a CY plan, and full year’s eligibility…
Employer offers a single MV coverage option to eligible employees and their spouses and children under a calendar year plan.
The employee is an FTE and eligible for coverage the entire calendar year (whether enrolled or not is not relevant for Line 15 purposes…only the offer is relevant).
The cost to the employee, for e’ee-only coverage under the MV option, is $105.28 per month, and this rate stays in effect for all 12 months.
1E
105.28
How to Report: Form 1095-C – Part II, Line 15
50
Line 15…Examples
Same facts, except the employee declines employee-only coverage, and enrolls in family coverage for $220.00 per month.
Same facts, except the employer also offers a second MV option that is slightly more expensive ($128.75 per month for employee-only coverage). The employee enrolls in the more expensive option.
1E
105.28
How to Report: Form 1095-C – Part II, Line 15
51
Line 15…Examples: Non-CY Plan Year, Change in Cost
Employer offers MV coverage to eligible employees and their spouses and children under a plan with a July 1 – June 30 PY.
Employee is eligible all calendar year. The employer charges $105.10/mo for the least expensive e’ee-only coverage offer supplying minimum value for the 2015-16 PY, and $120.20/mo for that coverage for the 2016-17 PY
1E
105.10 120.20 105.10 105.10 105.10 105.10 105.10 120.20 120.20 120.20 120.20 120.20
How to Report: Form 1095-C – Part II, Line 15
52
Line 15…Examples: Opt-Out Incentive
Same facts, except the employer offers a new (for 2016) $50/month opt-out incentive if the employee attests that he and his “tax family” have or will have other group coverage
What if no attestation were required?
1E
105.28
How to Report: Form 1095-C – Part II, Line 15
53
Line 15…Examples: Wellness Programs
Employer offers a single MV coverage option to eligible employees and their spouses and children under a CY plan. The employee is an FTE and eligible for coverage the entire calendar year.
The cost to the employee, for e’ee-only coverage under the MV option, is $155 per month, and this rate stays in effect for all 12 months. The cost for family coverage is $260 per month. The employee enrolls in family coverage.
The employer offers a wellness program providing a $75/month incentive for employees whose weight and blood pressure are within range, and $50/month for tobacco non-users. The employee qualifies for the first, but as a tobacco user he does not qualify for the latter. His actual premium for family coverage is $185/month.
1E
105.00
How to Report: Form 1095-C – Part II, Line 15
54
Line 15…Examples: Wellness Programs
How do we get $105.00?
1. Start with the cost to the employee, for e’ee-only coverage under the cheapest (in this case, only) MV coverage option available to the e’ee: $155 per month, not what the employee is actually paying
2. Even though the employee qualifies for the $75/mo. discount for weight and blood pressure, we have to assume he did not. We’re still at $155 per month
3. Even though the employee does NOT qualify for the tobacco incentive, we have to assume he does: $155 - $50 = $105.00
1E
105.00
How to Report: Form 1095-C – Part II, Line 15
Key Takeaways – Line 15
Line 15 is rather straightforward, for most employers
Often, the amount on line 15 won’t be what the employee is paying
Adjustments for opt-out incentives (for new incentives in 2016, and for 2017 or later), wellness incentives, HRA credits and flex credits (same effective dates) are almost certainly going to be jacked up
Opt-outs: Key question is, “Is it a new incentive? If so, is it a qualified incentive?”
Wellness: Calculate deemed employee-only premium, assuming failure to meet non-tobacco standards, but assuming success in meeting tobacco standards
HRAs: Key question is, “Can the account balance be applied to premium?”
Flex credits: Key question is, “Can the credits be taken as cash or used to pay for non-medical coverage, or can they only be used to pay for medical coverage?”
1A on line 14 means no entry on line 15
COBRA is a mess; more on it later. Different results depending on nature of the employee’s qualifying event
55
Lockton clients: Ask your Account Team for our white paper on Lines 14-16 of the Form 1095-C, updated for 2016!
How to Report: Form 1095-C – Part II, Line 16 Ed Fensholt
How to Report: Form 1095-C -- Part II, Line 16
57
Line 16…tells the IRS, via 1 of 8 codes (if any are applicable)…
Whether a FTE was enrolled in employer-based coverage (MV or even MEC) for a given month
If the employer reports no coverage offer on Line 14 (1H), why the employer didn’t offer coverage (i.e., the “Exculpatory Codes”…that is, “I didn’t offer coverage but the IRS can’t fine me because I didn’t have to offer coverage”)
If the employee waived MV coverage, whether the employer offered the e’ee-only tier at a price point within an “affordability safe harbor”
How to Report: Form 1095-C – Part II, Line 16 Codes
Line 16 Code Means…
2A E’ee not employed by the employer for a single day during the month
2B E’ee was employed during the month but was not a full-time employee for the month, or terminated before end of month and coverage lapsed before end of month
2C E’ee was enrolled in at least MEC for every day of the month Use this code if it and another 2-series code applies, except where 2E applies. Do not enter 2C on line 16: • If 1G is entered in the “All 12 Months” box (line 16 should be blank) • For terminated employees enrolled in COBRA (use 2A)
2D E’ee was not covered for the entire month, but was employed during the month but was in a limited non-assessment period for the month (first partial calendar month of employment, first three full calendar months of employment, initial measurement and administrative period, period following certain change in status during initial measurement period)
2E Multiemployer (union-affiliated) health plan relief rule applied to the employer for every day of the calendar month
2F E’ee not covered for the entire month, but was offered MV coverage that was affordable under W-2 safe harbor
2G E’ee not covered for the entire month, but was offered MV coverage that was affordable under poverty level safe harbor
2H E’ee not covered for the entire month, but was offered MV coverage that was affordable under rate of pay safe harbor
2I Reserved by the IRS
Trump Code!
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How to Report: Form 1095-C -- Part II, Line 16
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Line 16…common situations
Employee enrolled in the employer’s MEC or MV coverage – 2C (“trump code”)
Employee received no offer of coverage for the entire month because he wasn’t even an employee at any point in that month – 2A
Employee received no offer of coverage for the entire month because she terminated employment during the month and lost coverage mid-month as a result – 2B
Employee received no offer of coverage for the entire month because it was his first month of employment, and he joined the employer other than on the first day of the month – 2D
Employee received no offer of coverage for the entire month because she was a newly-hired FTE and was in her waiting period (but not beyond the first three full months of employment) – 2D
Employee received no offer of coverage for the entire month because he was still in an initial measurement or administrative period – 2D
How to Report: Form 1095-C -- Part II, Line 16
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Line 16…common situations
Employee received no offer of coverage from the employer for the entire month but the employer was bound by a collective bargaining or similar agreement to make contributions to a union-affiliated health plan (that offers MV and affordable coverage to employees, and coverage to family members) on the employee’s behalf – 2E
The employee waived MV coverage but the price point, for e’ee-only coverage, was within one of the three affordability safe harbors – 2F, 2G, 2H
The employee waived a qualifying offer – 2G (optional)
How to Report: Form 1095-C -- Part II, Line 16
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Line 16 Examples: Full year of coverage
Employer offers MV coverage to eligible employees and their spouses and children under a CY plan. The employee is an FTE and eligible for coverage the entire calendar year and enrolled (whether enrolled or not IS relevant for Line 16).
The employer charges the employee $105.28 per month for e’ee-only coverage under its only MV option, for all 12 months.
1E
105.28
2C
How to Report: Form 1095-C -- Part II, Line 16
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Line 16 Examples: Full year of eligibility, employee declines coverage
Same facts, only the employee declined coverage for the year. Assume the offer of coverage was within the “rate of pay safe harbor.”
What if the offer had not been within any affordability safe harbor?
Can the employer pick and choose which safe harbor to apply?
1E
105.28
2H
How to Report: Form 1095-C -- Part II, Line 16
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Line 16 Examples: New employee eligible mid-year, enrolls
Employer offers MV coverage to eligible employees and their spouses and children.
Employee joins the employer on March 10 as an FTE, and is offered coverage on June 1 (first of the month following 60 days) through the end of the year. She enrolls in the coverage…what’s the coding for Jan-Feb, March, Apr-May, June-Dec?
1H 1H 1H 1H 1H 1E 1E 1E 1E 1E 1E 1E
Ignoring Line 15 for purposes of these examples
2A 2A 2D 2D 2D 2C 2C 2C 2C 2C 2C 2C
How to Report: Form 1095-C -- Part II, Line 16
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Line 16 Examples: New employee eligible mid-year, declines enrollment
Same facts. What if employee-only coverage was within a W-2 safe harbor, and the employee declined the offer of coverage? What’s the line 16 coding for Jan-Feb, March, Apr-May, and June-Dec?
1H 1H 1H 1H 1H 1E 1E 1E 1E 1E 1E 1E
Ignoring Line 15 for purposes of these examples
2A 2A 2D 2D 2D 2F 2F 2F 2F 2F 2F 2F
How to Report: Form 1095-C -- Part II, Line 16
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Line 16 Examples: Employee covered for part of year, terminates
Employer offers MV coverage to eligible employees and their spouses and children.
Employee is eligible and covered as an FTE January through May 12, when he terminates.
What’s the coding for Jan-Apr, May, June-Dec?
What if the employer offered COBRA due to the loss of coverage on account of employment termination? (more on this later)
1E 1E 1E 1E 1H 1H 1H 1H 1H 1H 1H 1H
Ignoring Line 15 for purposes of these examples
2C 2C 2C 2C 2B 2A 2A 2A 2A 2A 2A 2A
How to Report: Form 1095-C -- Part II, Line 16
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Line 16 Examples: Bargaining unit employee; coverage may be available through union
For all of 2016, the employer is bound by a bargaining agreement to make contributions to a union-affiliated plan (that offers affordable MV coverage, and treats family members as eligible) on the employee’s behalf. What’s the coding?
What if the employee is not enrolled in the union plan?
What if the employee is not even eligible under the union plan?
What if the union plan’s coverage is NOT MV or affordable? How would employer know?
1H
2E
How to Report: Form 1095-C -- Part II, Line 16
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Line 16 Examples: Waived Qualifying Offer
The employer makes a qualifying offer for all of 2016, but the employee waives the offer all year.
What goes on line 16, if anything? Is it optional?
1A
2G
How to Report: Form 1095-C -- Part II, Line 16
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Line 16 Examples: Non-FTE covered under self-funded plan
Employer offers self-insured coverage to hourly employees, including part-time employees. A part-time employee, who is not an FTE for even a single month during the year, enrolls in the self-insured MEC coverage for all or even part of the year.
What’s the coding for lines 14-16? Nothing goes on Lines 15 or 16
1G
How to Report: Form 1095-C – Part II, Line 16
Key Takeaways – Line 16
Use Code 2C when employee enrolls, except where 1G is on line 14 (never an FTE for a single month during the year) or for COBRA coverage following termination (more on COBRA later)
Where employee declines coverage, no requirement to put anything on line 16
Where employee declines coverage, and the coverage offer was within an affordability safe harbor, the employer may insert an affordability safe harbor code on line 16
Where the coverage offer was a “qualified offer” (1A on line 14) and the employee declines, the employer may use 2G on line 16 but is not required to
Line 16 (and line 15) are blank when self-insured coverage is provided to an individual who was not an FTE for even a single month during the year. Code 1G is placed on line 14, but the rest of Part II is left blank
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Lockton clients: Ask your Account Team for our white paper on Lines 14-16 of the Form 1095-C, updated for 2016!
How to Report: Form 1095-C – Part III Ed Fensholt
How to Report: Form 1095-C – Part III
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Part III is easy…
Only applies for self-insured coverage, MV or MEC
Check the box
Identify the covered person(s), listing employee (if applicable) first
Report coverage for anyone, not just employees, and not just full-time employees
Plug in their SSNs (or birthdates, for spouses and dependents, if no SSN)
Indicate months for which they had the self-insured coverage for at least a day…
If the primary insured shown on the form was not an FTE for at least a month during the reporting year, remember to insert code 1G on line 14
How to Report: Form 1095-C – Part III
Key Takeaways – Part III
ONLY completed to report self-insured coverage
Report self-insured coverage for anyone
Unlike in Part II, line 14, where the employer reports a coverage offer only if the offer would result in coverage for an entire month, in Part III the employer reports self-insured coverage for a month if it was in force for even a single day in the month
Insert code 1G on line 14 of Part II, if the primary insured reflected in Part III was not an FTE for even a single month during the reporting year. 1G should go in the “All 12 Months” box
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How to Report: Form 1094-C Scott Behrens
How to Report: Form 1094-C
Remember…Form 1094-C serves four purposes:
Serves as a “transmittal form” to accompany the employer’s Forms 1095-C to the IRS
Proves compliance with Tier 1 of the employer mandate…the “aggregate obligation”
Identifies other members of the controlled group/affiliated service group
Claims certain relief (e.g., claim the “Free 30” for a Tier 1 violation, or the ability to skip a reporting step)
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How to Report: Form 1094-C
Lines 1-17 are self-explanatory; basically, identifies the employer
Line 18: How many 1095-Cs accompany this 1094-C?
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How to Report: Form 1094-C
Line 19:
Is this Form 1094-C the employer’s only 1094-C? If so, it is the “authoritative transmittal” and the employer should check the box
If this employer (this EIN) is submitting its 1095-Cs to the IRS in more than one batch, each batch must be accompanied by Form 1094-C. But the IRS only wants the rest of the Form completed just once. That one Form 1094-C is the “authoritative transmittal”
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How to Report: Form 1094-C
Line 20: Will typically be the same as Line 18
Line 21: Was the employer a member of a controlled group or affiliated service group for at least part of the reporting year?
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How to Report: Form 1094-C
Line 22:
An employer is NOT REQUIRED to check a box on line 22
An employer might qualify to check more than one box on line 22
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Lockton clients: Ask your Account Team for our white paper on Line 22 of the Form 1094-C, updated for 2016!
How to Report: Form 1094-C
Line 22:
Check box “A” if the employer used code 1A (“qualifying offer”) on line 14 for one or more FTEs
A qualifying offer is MV coverage to employee, at least MEC to spouse and children; employee-only cost to the employee is within 9.66% of mainland poverty level ($95.64 for 2016)
Box “B” is reserved, for 2016
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How to Report: Form 1094-C
Line 22:
Box “C” is rarely applicable; check box “C”only if:
Employer has a non-CY plan and qualifies for non-CY plan transition relief, and either
Employer had an average of 50-99 FTEs/FTEqs in 2014, so its relief lingers into 2016, through the end of the 2015-16 PY, or
Employer failed Tier 1 for some months in 2016 and is claiming the “Free 80” (instead of merely the “Free 30”) for the months in its 2015-16 PY that fall in 2016
Might also apply if Tier 2 penalties would exceed Tier 1, as Tier 2 penalties are capped at Tier 1
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How to Report: Form 1094-C
Line 22:
Check box “D” only if the employer made an offer of MV and affordable coverage to at least 98% of its employees receiving a 1095-C – not just FTEs – and at least MEC to their children, for all months during the year that they were employees, except for when they were in an LNAP
What’s going on here? If coverage was offered that extensively, employer clearly met Tier 1, and gets to skip Part III, column (b), the month-by-month count of FTEs
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How to Report: Form 1094-C
Part III…Tier 1 Compliance
Column (a)…was at least MEC offered to at least 95% of FTEs, and their biological and adopted children to age 26, for the entire month? Employers with non-CY plans and qualifying for non-
CY plan transition relief can check the “Yes” box for months in their 2015-16 PY falling in 2016 if they hit at least 70% for those months
Employer is deemed to have offered coverage to FTEs with respect to whom it claimed Code 2E (multiemployer plan relief) on line 16
DISREGARD employees in an LNAP…but they might still receive their own Form 1095-C if they had self-insured coverage for at least a day!
Take credit for an offer to an employee and children for the entire year if it was offered, even where employee enrolls in single coverage and only he/she is offered COBRA due to a reduction in hours
Most employers will check the “All 12 Months” box, under “Yes”
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How to Report: Form 1094-C
Part III…Tier 1 Compliance
Column (b)…how many FTEs did the employer have, in its EIN?
We’re concerned with true FTEs, not the FTEqs we counted in determining whether the employer mandate applied
Again, DISREGARD employees in an LNAP
SKIP this column (b) in its entirety if the employer checked box “D” – “98% Offer Method,” on Line 22
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How to Report: Form 1094-C
Part III…Tier 1 Compliance
Column (c)…how many total employees did the employer have, in its EIN?
INCLUDE EVERYONE
Full-timers
Part-timers
Seasonals
Employees in an LNAP
Make the count as of one of four dates each month (but use the same method for all 12 months)
First day of the month
Last day of the month
First day of first payroll period starting during the month
Last day of first payroll period starting during the month, but only if that day is in the same month that payroll period started
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How to Report: Form 1094-C
Part III…Controlled Group/ Affiliated Service Group Disclosure
Column (d) is directly related to line 21 on the Form 1094-C; if the employer checked “Yes” on Line 21, indicate whether for all 12 months, or only some months, the employer was part of a controlled group or affiliated service group
Usually, if this applies, it will apply for all 12 months. But sometimes a single employer will make an acquisition during the year, or a two-company group will sell off one of its companies
If there are controlled group or affiliated service group members, identify them in Part IV
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How to Report: Form 1094-C
Part III…Identifying Relief the Employer is Claiming via Box C on Line 22
Column (e)…rarely applicable
If the employer has non-CY plans and checked box “C” on Line 22, use code “A” or “B” here in column (e) to indicate what transition relief it’s claiming:
“A” - Claiming relief from the employer mandate under the “50-99 FTE/FTEq” rule for the months of the 2015-16 PY falling in 2016
“B” – Failed Tier 1 for one or more months in the 2015-16 PY falling in 2016, and claiming the “Free 80” for those months
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How to Report: Form 1094-C
Part IV…Identifying Controlled Group/Affiliated Service Group Members
List controlled group or affiliated group members in descending order, starting with the member with the highest average monthly number of FTEs, and ending with the member with the lowest monthly average.
If there are more than 30 members, use the 30 with the highest average monthly number of full-time employees.
Common errors from last year:
Each entry must have a valid EIN. Use the name of the employer associated with that EIN, as registered with the IRS
DON’T include the reporting employer
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How to Report: Form 1094-C
Key Takeaways – Form 1094-C
Each reporting EIN must file its own 1094-C; no 1094-Cs are filed for controlled groups or affiliated service groups
Each reporting EIN must file a 1094-C with each batch (if more than one) of Forms 1095-C filed with the IRS
Where an EIN files more than one 1094-C, only one should be completed beyond Part I; that one 1094-C is the “authoritative transmittal”
Line 22 is widely misunderstood by employers and vendors
Employers are not required to check any boxes on line 22, but might qualify to check more than one
Box “A” will be more prevalent than you think
Box “C” will rarely be relevant
Many employers (those hiring predominantly only FTEs, and offering good coverage to them) will qualify to check box “D” (and thus skip column (b) in Part III, but don’t check the box
Part III, column (d) is related to line 21; column (e) is related to line 22, box “C”
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Odds and Ends – COBRA Coverage Ed Fensholt
Odds and Ends – COBRA Coverage
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1E 1E 1E 1E 1E 1H 1H 1H 1H 1H 1H 1H
105.10 105.10 105.10 105.10 105.10
Termination of employment
Report “no offer” on line 14 (1H) for full months after termination, and for month of termination if coverage ended mid-month
Use 2A on line 16 even if the former employee elected COBRA coverage and thus was enrolled in the employer’s plan…that is, DON’T use the Trump Code 2C
Example: Employee enrolled in family coverage under a CY minimum value plan, under which e’ee-only coverage cost to an employee is $105.10/mo; employee terminates on May 18, coverage ends May 31. Employee is offered COBRA coverage and accepts it
What if coverage had ended on May 18? 1H on line 14, 2B on line 16 for May
2C 2C 2C 2C 2C 2A 2A 2A 2A 2A 2A 2A
Odds and Ends – COBRA Coverage
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1E 1E 1E 1E 1E 1E 1E 1E 1E 1E 1E 1E
311.17 105.10 105.10 105.10 105.10 105.10 311.17 311.17 311.17 311.17 311.17 311.17
Reduction in hours
Report the COBRA coverage offer on line 14 as any other coverage offer, and e’ee-only cost on line 15; use 2C on line 16 if the employee elected COBRA coverage
Example: Same employee enrolled in family coverage under a CY plan, suffers reduction in hours on May 18, loses eligibility on May 31. Is offered COBRA coverage and accepts it
What if the employee had declined family coverage but elected employee-only coverage effective Jan. 1, so that upon the qualifying event only the employee received the offer of COBRA coverage? What goes on line 14?
Instructions say use 1B for the COBRA offer, on line 14, for June-Dec…treat like a second coverage offer and report it differently, since only the employee received it
2C 2C 2C 2C 2C 2C 2C 2C 2C 2C 2C 2C
Odds and Ends – COBRA Coverage
Key Takeaways – Reporting COBRA Coverage
For Part II reporting, with respect to the employee affected by the qualifying event, the process differs depending on the qualifying event (termination vs. reduction in hours)
For Part III reporting, for years in which self-insured COBRA coverage being reported is supplied to an individual who was not an FTE for even single month, remember to add 1G on line 14
Treat retiree, severance and similar non-COBRA coverage, as applicable, like COBRA coverage, for reporting purposes
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Odds and Ends – Employee Transfers Rory Akers
Odds and Ends – Employee Transfers
Transfers between divisions within the same EIN
All hours count
The EIN reports on coverage offers etc. in Part II and, for self-insured coverage, actual coverage in Part III, irrespective of division
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Odds and Ends – Transfers
Transfers between EINs in a controlled group/affiliated service group
All hours count; no break in service
For whole months prior to the transfer, the transferor EIN “owns” the employee (will show coverage offers, etc. for those months; will show 1H/2A for full months after the transfer)
For whole months after the transfer, the transferee EIN “owns” the employee (will show coverage offers, etc. for those months; will show 1H/2A for full months prior to the transfer)
Who owns the employee for the month of the transfer?
The ALE member for whom the employee had the most hours of service for the month; if the hours of service are the same, the two ALE members can decide
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Odds and Ends – Transfers
Key Takeaways – Transfers
ACA reporting applies on an EIN-by-EIN basis, so when an employee transfers between operating divisions or departments within the same EIN, that transfer is inconsequential for ACA reporting purposes
Where the transfer occurs between separate EINs in the same controlled group or affiliated service group:
The employee doesn’t have a break in service (because all hours of service in the controlled/affiliated service group are counted for FTE determinations)
The transferor “claims” the employee for reporting purposes for complete months prior to the transfer
The transferee “claims” the employee for reporting purposes for complete months after the transfer
For the month of the transfer, the employee “belongs” for ACA reporting purposes to the employer for whom he or she had the most hours of service during the month; if that number is the same, the two EINs decide the matter…
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Odds and Ends – Mergers & Acquisitions Ed Fensholt
Odds and Ends – Mergers and Acquisitions
M&A activity raises many ACA questions, but the IRS has been largely silent about how to handle
Three main issues come up –
Determining ALE status
Determining full-time status for acquired employees
Reporting (related to the first two issues)
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Odds and Ends – Mergers and Acquisitions
ALE Status:
Non-ALE Acquired by an ALE or ALE Group Mid-Year
Stock purchase: Safe play is to say that the newly acquired entity becomes an ALE immediately
Asset purchase: Acquired employees treated as new e’ees of buyer; treat as any other new hire
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Odds and Ends – Mergers and Acquisitions
ALE Status:
ALE Acquired by a Non-ALE Mid-Year
Stock purchase: Same result for the non-ALE, arguably…immediately an ALE?
Asset purchase: Acquired employees treated as new e’ees of buyer; might affect the non-ALE’s ALE determination for following year; successor rules apply to make the non-ALE an ALE immediately?
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Odds and Ends – Mergers and Acquisitions
ALE Status:
Two Non-ALEs Merge, Combined Company has 50+ FTE/FTEqs - Couple possibilities:
Treat like an entirely new ALE, esp. if new EIN; offers of coverage should go out by the first day of the fourth month following the transaction?
Treat one of the companies as the survivor (particularly where one EIN survives) and take the view that ALE status for next year will be determined based on this year’s FTE/FTEq count
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Odds and Ends – Mergers and Acquisitions
ALE Status:
Spin-off from ALE group
Does the spun off employer maintain ALE status or is it looked at separately?
Probably best to play it conservatively; ideally the M&A lawyers will have thought through this
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Odds and Ends – Mergers and Acquisitions
Determining FTE status for acquired employees
This is hard enough on its own, and combining separate systems adds additional complexity
Does transaction type matter?
Asset purchase: Can the buyer in an asset purchase treat newly acquired employees as they would new employees, or does some other rule apply? What if it is a “successor?”
Stock purchase: Different EINs within the same controlled group can have different MPs/APs/SPs, but what about employees who switch EINs or if they want to have a single system for administrative ease?
The general rule when employees transition from one set of rules to another is to not let the new rules negatively affect the employee. In short, proposed guidance says:
Employees in a SP: Maintain status under seller’s SP ends, then determine status in buyer’s SP using hours worked for both buyer and seller in seller’s MP
Employees in a MP: Employee is placed in buyer’s MP using hours worked for both buyer and seller
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Odds and Ends – Mergers and Acquisitions
Reporting Implications of the M&A
Which entity reports what information will depend on the transaction type and the positions the parties take with respect to ALE and FTE status
The key is to have access to information (e.g., hours), especially if we represent the buyer
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Odds and Ends – Mergers and Acquisitions
Reporting Implications of the M&A
In a stock deal, the newly acquired entity will have its own reporting responsibility (remember, reporting is EIN-by-EIN)
If it becomes an ALE on close, the acquired entity will still report for the entire year; currently there’s no Line 16 “excuse code” for “We weren’t an ALE for these months!”
If acquired company merges out of existence, it will still have a reporting obligation for the year, if it was an ALE for part of the year
Different controlled group information might need to be reported
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Odds and Ends – Mergers and Acquisitions
Reporting Implications of the M&A
In an asset deal, both the buyer and seller might have a reporting obligation for the period of time they were employers
What happens if the seller ceases to exist? Is it buyer’s problem?
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Odds and Ends – Mergers and Acquisitions
Key Takeaways – Mergers and Acquisitions
When an ALE client acquires a small, non-ALE mid-year in a stock purchase, the small non-ALE becomes an ALE upon the closing
Dealing with different MPs, APs and SPs between merged companies is complicated; as the client transitions everyone onto a consistent platform make sure employees get the better of two results: under the new periods, or under the periods they’re in at the time of the change
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Cleaning Things Up Scott Behrens
Background
Employer is required to provide IRS with correct SSNs (or another TIN where SSN isn’t available) on the 1095-C
Failure can trigger penalties of up to $260 per form
Employers receive “Accepted with Errors” message…for self-funded employers issuing 1095-Cs with dependents in Part III, these messages don’t identify where the error occurred
Cleaning Things Up – Missing/Incorrect SSNs
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IRS won’t levy penalties until after it issues the employer Form 972CG, Notice of Proposed Civil Penalty
The common “Accepted with Errors” message is NOT a Form 972CG notice…so that message does NOT necessarily mean the employer will be penalized…
…Literally, the employer who receives the “Accepted with Errors” message doesn’t have to do or demonstrate anything (about getting to the bottom of the error message) until it receives Form 972CG…
…But the employer may want to take remedial steps earlier rather than later…
…It’s easier to solicit the SSN earlier rather than after receiving Form 972CG. If the employer waits to solicit the missing or correct SSN until after the 972CG shows up, the form and manner of the request is dictated by the IRS, and may be cumbersome
If the request is mailed, must include a return envelope
Special rules for electronic distribution
Must include a notice to the individual that failure to supply a correct SSN can result in $50 penalty to the individual
Cleaning Things Up – Missing/Incorrect SSNs
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Employer Defenses to Incorrect/Missing SSNs
“Good Faith Effort”
Applies for 2015 reports only
Not clear if the employer loses that defense if it fails to try to get to the bottom of the problem after receiving the “Accepted with Errors” message
“Reasonable Cause”
Available for missing SSNs, and for incorrect SSNs, but the employer’s hurdles vary just a bit
Both situations require the employer to ask for the SSN up to 3 times, but at different times
Incorrect/missing SSNs for the employee are looked at separately from an incorrect/missing SSN for the spouse; ditto for other dependents
Cleaning Things Up – Missing/Incorrect SSNs
Incorrect SSNs – Establishing “Reasonable Cause” for the Error
Ask for SSN at initial enrollment (probably ok to have asked for it later, but prior to 1095-C submission)
Ask again by Dec. 31 following receipt of Form 972CG (Jan. 31 if the form comes in Dec.) if the employee is still employed
There’s the appearance of an anomaly here, because the Form 972CG will ask for a response within 45 days
Ask a third time by Dec. 31 of the year following the initial request if the employee is still employed
Employer has met its obligation – has a solid “reasonable cause” defense – once it makes the request at enrollment and the two requests following receipt of the 972CG (follow IRS procedures for the post-972CG requests!)
What if the employer obtains the correct SSN from the employee or dependent?
Does not appear to be an obligation to re-file…rather, use the correct SSN going forward
However, if the employer obtains the correct SSN before receiving a 972CG, voluntarily re-filing with the correct information makes it less likely the employer will receive a Form 972CG (i.e., stay off the IRS’s radar screen)
Cleaning Things Up – Missing/Incorrect SSNs
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Missing SSNs – Establishing “Reasonable Cause” for the Error
Ask for SSN at initial enrollment or, if later, first OE period after September 17, 2015
If that date was missed, but the person was enrolled on July 29, 2016, this “first request” requirement is waived
Second requests should be made within 75 days of the initial request; this means someone/something should be evaluating the enrollment forms, alerting plan sponsor when no SSN is provided
For 2015 filings, where you’re already past the 75-day deadline, you get a “reasonable” amount of time—making the second request by Oct. 12, 2016 (see our Alert from late Sept.) is deemed reasonable; no need to solicit the SSN if employee is no longer employed
Ask a third time by Dec. 31 of the year following the initial request, if employee is still employed
Employer has met its obligation – has a solid “reasonable cause” defense – in response to Form 972CG, once it makes the three requests
What if the employer obtains the missing SSN?
Does not appear to be an obligation to re-file…rather, use the correct SSN going forward
However, if the employer obtains the missing SSN before receiving a 972CG, voluntarily re-filing with the correct information makes it less likely the employer will receive a Form 972CG (i.e., stay off the IRS’s radar screen)
Cleaning Things Up – Missing/Incorrect SSNs
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If the employer has received an “Accepted with Errors” message, and it’s not crazily burdensome to do so, try to run down the SSN before Form 972CG shows up (the employer can avoid having to comply with the IRS’s procedures)
If the Form 972CG shows up, and the problem is an incorrect SSN, make the additional requests as described on the previous slides, if the employee is still employed; comply with IRS procedures
For missing SSNs related to 2015 filings, make the effort before Oct. 12, 2016 (see our Alert from late Sept.) and – if the employer doesn’t receive the SSN – again at the following open enrollment, if the employee is still enrolled; if the Form 972CG has shown up, comply with IRS procedures
If the employer receives what it believes to be the missing or correct SSN, even before Form 972CG shows up, consider re-filing Form 1095-C voluntarily
The employer should keep records of all requests
If the problem is a missing SSN for a spouse or dependent, for Part III purposes, during and after the three-step process the employer can use spouse/dependent date of birth if the SSN on file remains missing
DOB does not appear to work for employees, in Part I of Form 1095-C
Cleaning Things Up – Missing/Incorrect SSNs: Recommendations
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Questions
Our Mission
To be the worldwide value and service leader in insurance brokerage, employee benefits, and risk management
Our Goal
To be the best place to do business and to work
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