FINAL 1094 C AND 1095 C FORMS AND INSTRUCTIONS FOR 2016 POSTED BY IRS
The IRS has released final 1094
C and 1095 C forms for 2016 and has posted final instructions as well. The
changes from the 2015 forms were minor. However, the instructions for
completing the 1094 C and 1095 C forms for 2016 have changed significantly. The
changes primarily were more extensive explanations on how to complete the
forms.
The final forms and instruction
can be found at:
As of now, a full cycle of
reporting and penalty determinations has not yet been seen. The due dates for
providing the forms and submitting them to the IRS were delayed for the 2015
forms. Employers may not see penalty determinations from the IRS for these
forms.
The reporting requirements will
affect applicable large employers (ALEs) every year. Employers should establish
a process for populating the forms and submitting them to the IRS. If you are
responsible for completing these forms, we recommend reviewing the final
instructions to ensure understanding of the requirements for completing
&submitting the forms.
FINAL
INSTRUCTIONS
The
following summarizes key points from the 2016 final instructions:
- For all ALEs,
Part II communicates ACA full-time employee status, coverage offered or not
offered to full-time employees and the reason the full-time employee will not
trigger a penalty under ACA rules. For employers that self-fund their plans,
the forms also explain who is covered for individual mandate purposes (Part
III).
- Employers must
either keep copies of the 1094 C and 1095 C forms that they file with the IRS
or be able to reconstruct the forms for at least three years after the due date
of the returns.
- The new
instructions explain more clearly how ALEs file. The IRS first determines
whether the organization is an ALE (50 or more full-time and full-time
equivalents). Status as an ALE is determined based on the IRS controlled group.
A 1094 C must be completed for each EIN that has employees associated with it.
An employer may submit more than one 1094 C for an EIN but one must be marked
as the authoritative transmittal. At least one 1094 C must be submitted for
each employer with a different EIN that is part of an IRS control group and has
employees associated with that EIN.
- The due dates
remain the same. Employers must send 1095 C forms to employees by January 31st. Employers
must also send the 1094 C and 1095 C forms to the IRS. The due date depends on
how the forms are submitted. Forms submitted on paper (under 250 forms) must be
sent to the IRS by February 28th. Forms submitted electronically (250 or more
forms) must be sent to the IRS by March 31st.
- Extensions were
available in 2015 but they didn’t apply because the submission dates were
delayed. Going forward, the following potential extensions are available:
- Employers can get
an automatic 30-day extension on IRS submissions by completing Form 8809 before
the due date. They can file Form 8809 on paper or electronically through the
FIRE system.
- Under certain
hardship conditions, an employer can follow the instructions on Form 8809 to
apply for an additional 30-day extension.
- Employers issuing
more than two hundred fifty 1095 Cs must submit them to the IRS electronically.
Employers can apply to waive electronic filing by submitting Form 8508. This
Form should be submitted at least 45 days before the due date. The IRS will not
process any waiver requests before January 1 of the calendar year in which the
forms are due. Waivers must be applied for and approved each year. If a waiver
is approved, it will apply to any corrected forms submitted for that same year.
If you submit the initial forms electronically, you can submit corrections on
paper as long as there are 250 or fewer. If there are more than 250 corrected
forms, they need to be submitted electronically or you need an approved waiver
for submitting the forms on paper. If you fail to file electronically when you
are required to and do not have an approved waiver, you may have to pay a
penalty of up to $260 per form. Penalties may be waived if you can show
reasonable cause for not filing electronically. This penalty will not apply to
the first 250 forms.
- Employers who
want to send electronic 1095 C forms to employees must first obtain their
employees’ consent. The same process and rules apply to these forms that apply
to providing the W-2 electronically. Employers need consent specific to Form
1095 C in order send electronically.
- Instructions
include details on filing corrected forms. Most employers had their filing
accepted even though there were errors. Many filed corrected forms this year.
The correction process did not change for 2016.
- New instructions
update the penalties:
- Penalty for
failing to file a correct information return with the IRS is generally $260/per
return. The total penalties that can be assessed for failing to file a correct
return in a calendar year is capped $3,193,000
- Penalty for
failing to give an individual a correct form is generally $260/per form. The
total penalties that can be assessed for not giving an individual a correct
form in a calendar year is capped $3,193,000.
- Special rules
apply that may increase the per form penalty and penalty caps. An increased
penalty applies if the employer intentionally disregards the requirement to
file the forms and/or provide the forms to eligible individuals.
- Penalties may be
waived if the failure was due to reasonable cause and not willful neglect.
- The final 2016
instructions explain how to report coverage under a Health Reimbursement
Arrangement (HRA).
- The final 2016
instructions clarify COBRA reporting situations. A qualified beneficiary may
become COBRA eligible for different reasons and the reason may impact how to
report the situation.
- The 2016
instructions also clarify how to report on post-employment coverage, for
example, retiree health plan coverage.
The 2016 instructions are much
clearer than the filing instructions from 2015.
FORM 1094 C
The following summarizes key
points from the final 2016 Form 1094 C:
- On 1094 C Form, line 22, some of the transition relief
options have been removed, and others remain. The options that were removed did
not apply beyond 2015.
- Line 22 relates to offers of coverage and transitional
relief. The instructions clearly indicate you need to either check box “A” (the
“qualifying offer method”) if you intend to use code 1A on line 14 for at least
one employee or provide a substitute statement to any full-time employee.
- On page 2, column A, the circumstances for checking
“yes” to Minimum Essential Coverage Offer Indicator have changed.
- On page 2, column (b), do not include any employees in
a limited non-assessment period in the full-time employee headcount for the
month.
- On page
2, column ©, you are required to enter a total employee count. This count
does include full-time and part-time employees. It also includes employees in
limited non-assessment periods.
The 1094 C has changed
minimally for 2016.
FORM 1095
The following summarizes key
points from the final 2016 Form 1095 C:
- An employee in a limited non-assessment period is not
considered an employee for reporting purposes. Limited non-assessment periods
include time spent in a new hire waiting period as well as the new hire
measurement period for employees that are look-back measured.
- The
instructions clarify how self-funded employers need to report.
- New instructions note that ALEs offering coverage
through an insured plan or a multi-employer health plan should not complete
Part III on Form 1095 C. In these cases, the insurance carrier or plan sponsor
of the multi-employer health plan provides Form 1095 B to indicate who was
covered under the contract during the year.
- The new instructions state there may be more than one
way to report an employee offer of coverage. Employers can report using any
code combination that accurately reflects coverage situations.
- Self-funded employers can use Forms 1094 B and 1095 B
to report coverage on non-employees who may be covered under the self-funded
plan. This could include non-employee directors, those retired for the entire
year, or a non-employee COBRA qualified beneficiary. These individuals can be
reported on the 1095 C forms as well.
- The 2016 1095 C Form includes the Plan Start Month.
This box is optional again in 2016. The employer simply enters a two-digit code
to indicate the first month of the plan year. For example, January is 01,
February is 02 and so on.
- The approach for reporting individuals covered by a
multi-employer arrangement (for example, union trust plans) remains the same in
2016.This process may change in
2017.
- Line 14 has two new code options. New codes show
conditional spouse coverage:
- 1J – Minimum
essential coverage (MEC) providing minimum value is offered to employee. MEC is
conditionally offered to spouse. No coverage offered to dependent children.
- 1K – Minimum
essential coverage providing minimum value is offered to employee. MEC is
offered to dependent children. MEC is conditionally offered to the spouse.
A conditional coverage offer to
a spouse does not include a spousal surcharge. It does include spousal force
outs (spouse not offered coverage if coverage is available through spouse’s
employer). Another conditional offer would be if you required spouses to enroll
in their employers’ plan, before they could be eligible for your plan.
- The 2016 instructions note that an employer can’t
enter safe harbor codes (2F, 2G, 2H) in line 16 if the employer fails to offer
95% of full-time employees/dependent children minimum essential coverage (MEC).
- Instructions note that the safe harbors apply the
indexed percentage amount going forward. It is 9.66% in 2016 and 9.69% in 2017.
- The
2016 instructions cover situations where two or more employees of an ALE are
married or parent and child.
CONCLUDING
THOUGHTS
Employers should start
addressing how they will handle reporting for 2016. If you are responsible for
completing or checking the forms, read through the instructions. The final 2016
instructions explain more practically the reporting requirements. More examples
are included as well.
If you are a self-funded plan
and choose to use the B forms for specific non-employees, the B forms and
instructions can be found at:
Both the 1095 B forms and the
1095 C forms have a VOID box in the upper right hand corner. Employers are
instructed to never check the VOID box.
Both the 1095 B and 1095 C
forms include instructions for taxpayers to retain the form with their tax
records. It appears these forms will not have to be submitted with tax returns
in 2017.
The good faith compliance
standard will not apply in 2016 unless the IRS decides at a later date to
extend it. In addition, the original deadlines will apply.
Employers should be gearing up now to complete
the necessary forms for 2016.
