The IRS recently released draft instructions for required information reporting under the Affordable Care Act. The instructions pertain to Forms 1094-B, "Transmittal of Health Coverage Information Returns," 1095-B, "Health Coverage," 1094-C, "Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns," and 1095-C, "Employer-Provided Health Insurance Offer and Coverage." They include a notable due date extension for providing taxpayers with 2020 Forms 1095-B and 1095-C.
Internal Revenue Code Section 6055 requires health insurance issuers, self-insuring employers, government agencies and other providers of minimum essential coverage (MEC) to file and furnish annual information returns and statements regarding coverage provided.
Sec. 6056 requires applicable large employers (ALEs) to file and furnish annual information returns and statements relating to the health insurance, if any, that the employer offers to its full-time employees. As you're likely aware, ALEs are generally employers with 50 or more full-time employees, including full-time equivalents, in the previous year.
Tax code regulations require every person and entity that provides MEC to an individual during a calendar year to file with the IRS an information return and a transmittal. Except as provided in the following paragraph, the agency has designated Forms 1094-B and 1095-B to meet these requirements.
In addition, regulations require every ALE or a member of an aggregated group that's determined to be an ALE (commonly known as an ALE member) to file with the IRS an information return and a transmittal. The IRS has designated Forms 1094-C and 1095-C to meet these requirements.
In Notice 2020-76, the IRS recently extended the due date for 2020 information reporting for both MEC ALEs from January 31, 2021, to March 2, 2021. The extension would apply to due dates for providing to taxpayers Form 1095-B and Form 1095-C. However, the deadline hasn't been extended to file 2020 Forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS.
Also, the IRS extended transition relief on penalties otherwise applicable under Sec. 6721 and Sec. 6722 to reporting entities that can show good-faith efforts to comply with reporting requirements in 2020.
Draft instructions for Forms 1094-B and 1095-B contain several new elements. Here are some highlights:
Individual Coverage Health Reimbursement Arrangement (ICHRA) reporting. For plan years beginning on or after January 1, 2020, employers may offer ICHRAs, subject to certain conditions. (These are, essentially, HRAs integrated with individual health insurance coverage or Medicare.) Generally, an HRA, including an ICHRA, is a self-insured group health plan and, therefore, is an eligible employer-sponsored plan.
New type of coverage code. A new code G must be entered on Form 1095-B, line 8 to identify an ICHRA.
Relief for failure to furnish statements. The IRS won't impose a penalty for failure to furnish Form 1095-B to individuals if the conditions in Notice 2020-76 are met.
Extension of good faith relief for reporting and furnishing. The IRS won't impose a penalty for reporting incorrect or incomplete information on Forms 1095-B if the reporter makes a good faith effort to comply with the information reporting requirements in Notice 2020-76.
Draft instructions for Forms 1094-C and 1095-C also contain new elements. Here are some of those highlights:
Extension of due date for furnishing statements. The due date for furnishing Form 1095-C to individuals is extended from January 31, 2021, to March 2, 2021, as per Notice 2020-76.
Relief for failure to furnish statements to certain employees enrolled in self-insured health plans. The IRS won't impose a penalty for failure to furnish Form 1095-C to any employee enrolled in an ALE member's self-insured health plan who's not a full-time employee for any month of 2020 if certain conditions spelled out in Notice 2020-76 are met.
Extension of good faith relief for reporting and furnishing. The IRS won't impose a penalty for reporting incorrect or incomplete information on Forms 1095-C if the reporter makes a good faith effort to comply with the information reporting requirements in Notice 2020-76.
ICHRA reporting. Form 1095-C has been modified to add new codes for reporting offers of ICHRAs and new lines for reporting required information.
Plan start month. This information is required for the 2020 Form 1095-C. An ALE must enter a two-digit number.
Information reporting is an enduring aspect of the Affordable Care Act. If you have questions about any of the Forms 1094 or 1095, contact your tax or employee benefits advisor.
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