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Information Reporting Requirements Under The Affordable Care Act

Published in Health Lawyers Weekly (May 10, 2013) American Health Lawyers Assciatin American Health Lawyers Assciatin May 10, 2013 Vl. XI Issue 17 Infrmatin Reprting Requirements Under The
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Published in Health Lawyers Weekly (May 10, 2013) American Health Lawyers Assciatin American Health Lawyers Assciatin May 10, 2013 Vl. XI Issue 17 Infrmatin Reprting Requirements Under The Affrdable Care Act By Catherine E. Livingstn, Jnes Day, Washingtn, DC The Affrdable Care Act impses tw new tax infrmatin reprting requirements n large self-insured emplyers (i.e., emplyers with a cmbinatin f 50 r mre full-time emplyees and full-time equivalents). As f this date, the Internal Revenue Service (IRS) has nt yet issued prpsed regulatins explaining the details f the requirements. T help emplyers anticipate the systems changes they will need t put in place while they wait fr further guidance, this piece prvides a list f the data elements required by the statute fr each type f reprt, alng with sme cmmentary abut what it wuld be reasnable t expect the IRS t d given its systems and apprach t data matching. Hwever, until the IRS issues prpsed regulatins and drafts f the frms t be used fr reprting, emplyers cannt be certain what data elements will be required r what the details f the apprach t reprting will be. Reprting n Cverage Prvided Thrugh the Self-Insured Plan (r Plans) New Sectin 6055 f the Internal Revenue Cde requires annual reprting n each individual t whm minimum essential cverage has been prvided during the year. It ges int effect n January 1, The requirement applies nt nly t spnsrs f selfinsured plans but als t private issuers that prvide minimum essential cverage and t gvernment entities that administer prgrams that prvide minimum essential cverage. The fcus fr this summary is n the applicatin f the requirements t spnsrs f selfinsured plans. The first year fr which reprting is due is 2014, and the first reprts must be submitted in early The IRS has nt yet specified the due date fr the returns, but cpies f them must be prvided t the cvered individual by January 31, Which cverage is subject t the reprting requirement? Reprting is required fr minimum essential cverage. The cverage prvided t current emplyees thrugh a self-insured majr medical plan is minimum essential cverage. Visin, dental, and ther similar cverage that cnstitutes excepted benefits is nt minimum essential cverage. Current guidance implies that minimum essential cverage includes true cverage prvided thrugh a retiree-nly plan and als retiree-nly health reimbursement arrangements (HRAs) (thugh it wuld seem the mre sensible answer frm a plicy perspective wuld be that retiree-nly HRAs are nt minimum essential cverage). Current guidance is unclear with respect t whether reprting wuld be required fr integrated HRAs ffered t current emplyees wh are als ffered cverage (thugh it wuld seem the sensible answer frm a plicy perspective wuld be that reprting wuld nt be required fr integrated HRAs because they, by themselves, shuld nt be minimum essential cverage). COBRA cverage is minimum essential cverage. What data des the statute require t be reprted? Sectin 6055(b) describes the cntents f the return: The name, address, and taxpayer identificatin number (TIN) f the primary insured and the name and TIN f each ther individual btaining cverage under the plicy. Fr citizens and virtually all legal residents, a TIN is the Scial Security Number. The statutry language implies that there will be ne return fr each family unit (rather than a separate return fr each individual wh is cvered). The dates during which such individual was cvered under minimal essential cverage during the calendar year. The requirement t have minimum essential cverage applies mnth by mnth, and the penalty fr lacking cverage can apply mnth by mnth. The Service will ultimately need t knw whether an individual was cvered fr each mnth. If there are multiple family members n a return, the Service wuld need t knw abut cverage fr each separately, mnth by mnth, unless they prvide a simplified ptin where all family members have identical infrmatin fr all 12 mnths. Prpsed regulatins n the individual mandate have established that if an individual is cvered fr even ne day during a mnth, that individual is treated as cvered fr the mnth. What will nt be clear until there are regulatins r a frm n this reprting requirement is whether there will be a simplified way f reprting if the infrmatin is the same fr all 12 mnths r whether there must be separate entries fr each mnth, even if they are all identical. The statute als requires certain data elements where the cverage cnsists f health insurance (rather than a self-insured plan). These data elements wuld be relevant where an insurer is reprting n the individuals it cvers, rather than the emplyer reprting n a self-insured plan. Finally, the statute requires reprting f such ther infrmatin as the Secretary may require. In general, the IRS nly wants data that is useful t tax administratin. Presumably, it will want the party that prvides the cverage and is respnsible fr the reprting t be identified by name and emplyer identificatin number (EIN). There may be sme questin abut which name and EIN t use where there are emplyees f multiple members f a cntrlled grup cvered thrugh the same plan. There may be additinal data elements that the IRS wuld want t help it administer the full cnstellatin f 2014 Affrdable Care Act tax prvisins (i.e., the premium credit, the individual cverage requirement, and the emplyer mandate penalty). The statute requires the emplyer spnsring the self-insured plan t prvide a cpy f the return t the individuals whse infrmatin is reprted n it. As the statutry expectatin seems t be ne return per husehld, it is reasnable t expect that there wuld be ne cpy sent t that husehld. Fr emplyee relatins purpses, nte that where a divrced parent is cvering a child under the emplyer s plan, and the ex-spuse wh is nt the emplyer s emplyee claims the child as a dependent fr tax purpses, the ex-spuse is ging t want a cpy f the return shwing that the child has cverage. The tax law des nt blige the emplyer t prvide a cpy t the ex-spuse. Presumably, the tw frmer spuses will have t wrk it ut between them. Reprting n Full-Time Emplyees This requirement als ges int effect n January 1, Thus, the first year fr which reprting is due is 2014, and the first reprts must be submitted in early The IRS has nt yet specified the due date fr the return, but cpies f the returns must be prvided t the full-time emplyees by January 31, Which entity is subject t the reprting requirement? New Sectin 6056(a) requires annual reprting frm every applicable large emplyer (emplyers with 50+ full-time emplyees r equivalents) t the IRS. The statute defines the aggregated cntrlled grup as a single applicable large emplyer. Hwever, the IRS identifies crprate entities separately by EIN and des nt have identifiers fr cntrlled grups. This reprting is required in rder t help the IRS determine which emplyers we the pay-rplay penalty, and if s, hw much they we. The prpsed regulatins n the pay-r-play penalty analyze each member f the cntrlled grup separately fr purpses f whether it wes a penalty, and if s, hw much it wes. The IRS has said that the infrmatin reprting will track the apprach t the penalty, with each separate entity in the cntrlled grup required t reprt separately n its emplyees. The IRS has nt said hw t reprt where an emplyee wrks enugh ttal hurs fr a cntrlled grup t be a full-time emplyee but divides time between different members f the cntrlled grup. What is the scpe f each infrmatin return? Reprting is required fr each full-time emplyee. Because the statute requires the emplyer t prvide a cpy f the infrmatin return t each full-time emplyee whse infrmatin is reprted, and as each emplyee shuld get his wn infrmatin and nt that f any ther emplyee, it als seems reasnable t expect that there will be a separate return fr each full-time emplyee rather than a single master return with all the full-time emplyees listed. The set f infrmatin returns culd then be submitted with a transmittal reflecting the ttal bundle, much like the Frm W-3 that ges with the bundle f Frms W-2 when submitted. Wh is a full-time emplyee? The standard fr wh is a full-time emplyee is the same as fr the pay-r-play penalty: a cmmn-law emplyee wrking an average f 30 hurs per week r 130 hurs per mnth. As the standard measures fr weeks r mnths, and as the emplyer penalty applies n a mnthly basis, it is reasnable t expect the IRS t require the emplyer t reprt fr any emplyee wh was full-time fr any mnth in the year. Sectin 6056(b) describes the cntents f the return. The name, date, and EIN f the emplyer. A certificatin f whether the emplyer ffers the full-time emplyee (and his r her dependents) the pprtunity t enrll in minimum essential cverage under an eligible emplyer-spnsred plan. And if it des s, The length f any waiting perid with respect t such cverage. The mnths during the calendar year fr which cverage was available. The mnthly premium fr the lwest cst ptin in each f the enrllment categries under the plan. Given that the test fr affrdability applies nly t the emplyee cntributin fr the self-nly premium, there shuld be n need t require reprting f premiums in any ther enrllment categry whatever that might be. If different categries f emplyees (e.g., hurly vs. salaried) are in different enrllment categries meaning they have different required cntributins, that wuld be reflected in the data n the individual s return. That individual wuld nt need data n categries t which he r she des nt belng. The emplyer share f the ttal allwed csts f benefits prvided under the plan. Whether the plan ffered by the emplyer met the minimum value standard. The IRS will use this item and ther infrmatin reprted n these returns t plice whether any f emplyees claim a tax credit t which they are nt entitled. The number f full-time emplyees fr each mnth during the calendar year. As this is data that applies at the emplyer level and is nt relevant fr each individual emplyee, it might g n a transmittal fr the bundle and nt n each individual emplyee s return. The name, address, and TIN f each full-time emplyee during the calendar year and the mnths during which such emplyee (and dependents) were cvered under the eligible emplyer-spnsred plan. It is nt clear why the emplyer wuld need t reprt n dependents. If the dependents are actually cvered, that wuld be reflected in the reprting under Sectin Such ther infrmatin as the Secretary may require. Emplyers will nte that the statute mixes tgether data at the aggregate emplyer level and data specific t the emplyee. If, as seems mst likely, there is a separate return fr each emplyee, then ne wuld expect mnth by mnth reprting f each data element fr the emplyee. Fr each mnth, was the emplyee (a) cvered by the emplyer s plan; (b) ffered cverage but declined r terminated; (c) in a waiting perid fr cverage t start; (d) full-time but nt ffered cverage; r (e) nt full-time fr that mnth (whether determined by actual hurs r lkback/stability)? If cverage was ffered, what was the emplyee cntributin fr the lwest cst self-nly ptin? If cverage was ffered, did it prvide minimum value? There may be a transmittal fr the full set f emplyee returns (similar t the transmittal that ges with a full set f W-2s r 1099s) that prvides sme f the aggregate infrmatin. Again, nthing is fixed in place until the IRS prpses regulatins and publishes a draft frm. With the clck running, and the need t adjust systems t prduce the reprts, the infrmatin set frth abve, drawn frm the statute, is what is available fr the time being. The statute says that the IRS may cmbine the reprting required fr applicable large emplyers with W-2 reprting r the reprting n cverage. It is hard t see hw reprting culd be cmbined in that fashin. The W-2 aggregates data n an annual basis and des nt prvide any reprting that differentiates by mnth. The reprting n wh is cvered will apply t an verlapping but nt identical ppulatin as the reprting n wh was ffered cverage. Mrever, the amunt f data needed fr each reprt may make it hard t cmbine the reprts. Cathy Livingstn is a partner at Jnes Day and a leading authrity n the Affrdable Care Act. She has in-depth knwledge f the multitude f tax prvisins cntained in the act, including the emplyer cverage requirement, the individual cverage requirement, the premium tax credit, insurance refrms, insurer fees, the medical device excise tax, and new requirements fr tax-exempt hspitals. Prir t jining Jnes Day in 2013, Cathy was Health Care Cunsel in the IRS Office f Chief Cunsel where she served as principal legal advisr t IRS senir leadership n all aspects f the Affrdable Care Act and its implementatin. Prir t wrking n the Affrdable Care Act, Cathy supervised all IRS legal wrk with respect t tax-exempt rganizatins, emplyment taxes, and gvernment entities. Cathy als served at the Office f Tax Plicy at the Treasury Department where she handled matters affecting tax-exempt rganizatins and charitable giving American Health Lawyers Assciatin 1620 Eye Street NW Washingtn, DC Phne: Fax:
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