Final ACA Employer Reporting Rules Released

Author: Tracy Morley, XpertHR Legal Editor

March 13, 2014

The US Department of the Treasury and the Internal Revenue Service (IRS) released two final rules implementing annual information-reporting requirements for insurers and employers pursuant to the individual and employer mandate provisions of the Affordable Care Act (ACA).

According to Assistant Secretary for Tax Policy Mark J. Mazur, "Treasury's final rules significantly streamline and simplify information reporting while making it easier for employers and insurers of all sizes to provide the quality, affordable health coverage that every American deserves."

Reporting Requirements

The final rule on Information Reporting of Minimum Essential Coverage implements reporting requirements under Section 6055 of the Internal Revenue Code (IRC). It requires employers that provide minimum essential health coverage to annually report to the IRS information about the coverage they provide and about the individuals to whom such coverage was provided.

The final rule on Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer-Sponsored Plans pertains to IRC Section 6056. It implements the information reporting requirements for applicable large employers (ALEs) regarding the type of health coverage offered to full-time employees.

The final rules require employers and insurers to report the following information:

For IRC Section 6055:

  • Information about the entity providing coverage, including contact information; and
  • Which individuals are enrolled in coverage, with identifying information and the months for which they were covered.

For IRC Section 6056:

  • Information about the employer offering coverage (including contact information and the number of full-time employees); and
  • For each full-time employee, information about the coverage (if any) offered to the employee, by month, including the lowest employee cost of self-only coverage offered.

Single, Combined Form for Information Reporting

Responding to several comments to the earlier, proposed rules, the final rules allow ALE's that sponsor self-insured plans to use a consolidated form that combines reporting requirements under sections 6055 and 6056 in order to allow for a simplified reporting process and avoid duplicative reporting. The combined form will have two sections: (i) the top half will include the information needed for section 6056 reporting; and (ii) the bottom half will include the information needed for section 6055.

According to the final rule, an employer that is:

  • Large enough to be subject to the employer mandate requirements and self-insures must complete both parts of the combined information reporting form.
  • Subject to the employer mandate requirements but does not self-insure must complete only the top section of the form (reporting for section 6056).

Insurers and other providers of health coverage will report on a separate form and only under section 6055. Insurers do not have to report on enrollees in the Health Insurance Marketplace ("Marketplace"), since the Marketplace will already provide information on individuals' coverage.

James Anelli, a Shareholder in the Newark, NJ office of LeClairRyan and leader of the firm's Affordable Care Act Team stated that "Even with the combined reporting option, the new rules are extremely complex and will, more than likely, cause confusion for employers. While the first reports are not due until 2016, it is important that employers begin planning their compliance efforts now."

Simplified Option for Employer Reporting

Under the final rule governing section 6056, if an employer provides a "qualifying offer" to its full-time employees, it may be able to use a simplified alternative to reporting monthly, employee-specific information on those employees. A qualifying offer is an offer of minimum value coverage that provides employee-only coverage at a cost to the employee of no more than 9.5 percent of the federal poverty level, combined with an offer of coverage for the employee's family. For employees that receive a qualifying offer for:

  • All 12 months of the year, an employer will need to report only the names, addresses and taxpayer identification numbers of those employees and the fact that they received a full-year qualifying offer. An employer will also have to give the employees a copy of that simplified report, or a standard statement indicating that the employee received a full year qualifying offer.
  • Fewer than all 12 months of the year, an employer will be able to simplify reporting to the IRS and to the employee for each of those months by entering a code indicating that a qualifying offer was made.

For 2015 only, an employer may use an even simpler alternative reporting method if it certifies that it has made a qualifying offer to at least 95 percent of its full-time employees and their families. In this instance, an employer may be able to use the simplified, streamlined reporting method for its entire workforce, including for any employees who do not receive a qualifying offer for the full year. An employer will have to provide employees with standard statements relating to their possible eligibility for premium tax credits.

The final rule implementing section 6056 also provides an employer the option to avoid identifying in the report which employees are full-time and, instead, to include in the report only those employees who may be full-time. To take advantage of this option, the employer must certify that it offered affordable, minimum value coverage to at least 98 percent of the employees it is reporting.

Streamlined Information

The final section 6056 rule also omits data elements in the ACA that are not necessary to an understanding of coverage offered and provided including, but not limited to, the:

  • Length of any waiting period;
  • Employer's share of the total allowed costs of benefits provided under the plan; and
  • Amount of advance payments of the premium tax credit and cost-sharing reductions.