At the end of August 2014, the IRS finally issued the proposed instructions for the reporting forms, and even today the IRS issued updated questions and answers regarding the reporting rules. While those rules remain somewhat in flux, there is no time to waste because beginning January 2015, you will need to have the systems in place to capture the data necessary to comply with these complex reporting rules on a month-by-month basis.
There are two separate reporting requirements: (1) individual mandate reporting and (2) employer mandate reporting. Both reporting requirements become effective January 1, 2015.
INDIVIDUAL MANDATE REPORTING
The purpose of the individual mandate reporting is to provide information regarding “minimum essential coverage” (MEC) and whether an individual satisfied the individual mandate (to have coverage or pay a penalty) for the preceding calendar year. Insurance companies who issue individual and group health insurance will be required to comply with the individual mandate reporting requirements, as will employers who sponsor self-funded health plans (even those private employers with less than 50 full-time equivalents and governmental employers).
The reporting will basically require a two-step process: (1) reporting to the employee by January 31 of the following year; and (2) reporting to the IRS by March 31 of the following year (or February 28 if filing by paper). For example, for the 2015 calendar year, an employer who has a self-funded health plan will be required to report certain information to each employee by January 31, 2016. That same employer will be required to report certain information to the IRS by March 31, 2016.
Because this reporting requires the reporting entity to report the SSN of each individual who is covered under the policy or program, many self-funded employers who will be required to do this reporting will need to take steps – now – to track down the SSNs of their employees’ dependents. There is a step-by-step process that a reporting entity must follow to satisfy its obligation to track down this information.
In addition to the reporting to the IRS as mentioned above, a reporting entity will also be required to furnish a statement – with the same information that is reported to the IRS – to the “responsible individual,” which includes the primary insured, the employee, or the former employee. Note that there is no requirement to provide statements to beneficiaries or dependents (such as spouses or covered adult children).
The purpose of the employer reporting requirement is to help the IRS determine which large employers are subject to play-or-pay penalties and identify which individuals are eligible for federal subsidies through a marketplace exchange.
Just like the individual mandate reporting described above, the employer mandate reporting will be a two-step process: (1) reporting to the employee by January 31 of the following year; and (2) reporting to the IRS by March 31 of the following year (or February 28 if filing by paper). For example, for the 2015 calendar year, a large employer will be required to report certain information to each employee by January 31, 2016. That same employer will be required to report certain information to the IRS by March 31, 2016.
Even though reporting will first be required in early 2016, you will need to start capturing the needed data beginning in January 2015. Thus, now really is the time to be working on a plan.
Please contact us if you have questions about this or any other aspect of complying with the Affordable Care Act.