ACA COMPLIANCE TOOLKITIRS SECTION 6056 EMPLOYER REPORTING

AUGUST 2015

ACA CompliAnCe ToolkiT: iRS SeCTion 6056 emploYeR RepoRTinG

TABle oF ConTenTS

Overview of New IRS Employer Reporting Requirements ................................................................. 1

Sample of IRS Form 1095-C for Review & Reporting Preparation ................................................... 2

Instructions for Use of IRS Section 6056 Employer Reporting Data Calculator ................................ 3 – 4

Sample 6056 Reporting Data Calculator ............................................................................................ 5

Extra Resources ................................................................................................................................. 6 – 7

Legal Disclaimer ................................................................................................................................. 8

ACA Compliance Toolkit

oVeRVieW oF neW iRS RepoRTinG ReQUiRemenTS

SeCTion 6055 & 6056 RepoRTinG

The Affordable Care Act (ACA) added Section 6056 to the Internal Revenue Code (IRC) requiring annual information reporting to the Internal Revenue Service (IRS) by applicable large employers with fully insured plans relating to the health insurance that the employer offers (or does not offer) to full-time employees and their dependents. Applicable large employers have 50 or more full-time (FT) plus full-time equivalent (FTE) employees (For details on how to calculate FTE see page 7).

Section 6055 requires annual information reporting to the IRS by health insurance issuers, employers with self-insured plans, government agencies, and other providers of health coverage.

n Employers are required to give employees a copy of the information reported for them on or before January 31st of the following year.

n The IRS will use these reports to determine whether or not the large employer has to pay any penalties and whether the employees are eligible for Premium Tax Credits.

n Reporting is voluntary for 2014, but reporting is mandatory for the 2015 calendar year.

n Employers with 50-99 FTE must comply with IRS Section 6056 Reporting for 2015; even though they qualify for transition relief so the employer mandate is delayed until 2016.

n IRS 6056 Employer Reporting Requirements At-a-Glance (Click here to view).

ACA Compliance Toolkit page 1

here

oVeRVieW oF neW iRS RepoRTinG ReQUiRemenTS (continued)

RepoRTinG FoRmS

n Form 1095-C, Part II, Line #15, requests the following: Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage

(see line highlighted in yellow on Form 1095-C on page 3)

n Word & Brown’s exclusive Section 6056 Reporting Chart, which you and your client received with the large group medical case approval letter from Underwriting, does this labor-intensive work for you, saving everyone valuable time! (Click here to view sample. Reporting chart with Employee Contribution for IRS 1095-C Line 15 highlighted in yellow).

n Form 1095-C, Part II, Line #16, requests the following: Applicable 4980H Safe Harbor (enter code if applicable)

(see line highlighted in green on Form 1095-C on page 3)

n Using the data from Word & Brown’s exclusive Section 6056 Reporting Chart, which is customized for your large group client’s company free of charge, you and your client will be able to easily determine if the employer-sponsored coverage complies with one of the Affordability Safe Harbors. If it does, then your client can select the appropriate Affordability Safe Harbor code from Form 1095-C Instructions (see pgs 8-9) and enter it on Line #16. (Click here to view sample Reporting chart with Affordability column highlighted in green).

n If you do this calculation promptly after receiving the case approval and find that some full-time employees are paying more than 9.5% of their rate of pay, or monthly salary, for employee-only coverage on the lowest cost plan offered that provides minimum value, the employer has time to make an adjustment in order to prevent an expensive penalty.

n Employers eligible for the Qualifying Offer Method (A) or 2015 Qualifying Offer Transition Relief (B) as reported on Form 1094-C, Part II, Line #22 do not have to enter the Employee Share on Form 1095-C, Part II, Line #15. Click here for a resource to help you in determining eligibility for this less detailed reporting.

ACA Compliance Toolkit page 2

ACA Compliance Toolkit

oVeRVieW oF neW iRS RepoRTinG ReQUiRemenTS (continued)

SAmple oF iRS FoRm 1095-C

page 3

CALCULATOR INSTRUCTIONSIn some of the links below, you will be directed to our Health Reform Resource Center (HRRC). Word & Brown’s HRRC offers you a variety of useful Affordable Care Act calculators as well as FAQs, sales collateral, and other tools to help you and your clients understand, adapt, and meet the compliance and other requirements of the ACA. As a reminder, you can access these tools at our California HRRC or our Nevada HRRC .

STEP 1 Download your 6056 Reporting Data Calculator in the California HRRC

Download your 6056 Reporting Data Calculator in the Nevada HRRC (Sign inAAccept DisclaimerAClick on IRS Section 6056 Reporting Data Calculator)

Determine if the group size for 2015 will be 50 or more full-time (FT) plus full-time equivalent (FTE) employees.

Download the Word & Brown Group Size Calculator in the California HRRC

Download the Word & Brown Group Size Calculator in the Nevada HRRC (Sign inAAccept DisclaimerAClick on Group Size Calculator)

IMPORTANT: IRS regulations in Section 414 regarding a controlled group apply to ACA employer size, so if your client has common ownership in multiple small companies (even if the businesses have separate tax ID numbers and are unrelated), we urge your client to consult with a tax advisor to verify whether or not he or she is a controlled group of 50+. The correct determination of the group size is critical because an error could result in unexpected employer penalties for non-compliance. Download the IRS Frequently Asked Questions on Employer Shared Responsibility under ACA (see Q&A #42).

STEP 2If your client’s group size is less than 50 FT plus FTE employees in 2014, then he or she will be considered a small employer for all of 2015, and, therefore, not be subject to IRS Section 6056 Employer Reporting for 2015.

The calculator in this toolkit could prove very helpful to your client for another purpose. If one of his or her full-time employees goes to the Exchange and applies for a Premium Tax Credit (i.e, subsidy) they will be asked whether or not their employer offers affordable coverage but they will not be asked for the size of their employer. Therefore, even employers of less than 50 FTE could be contacted by the Exchange and/or IRS in order to confirm whether or not an employee is eligible for a subsidy. If this occurs, it will be most helpful for even a small employer of less than 50 FTE to have documentation showing the affordability calculation.

STEP 3If your client is a 50+ FTE employer, refer to the “Overview of New IRS Reporting Requirement” (see pages 1-2) explanation to understand the new IRS reporting responsibilities. Encourage your clients to contact you if they have questions.

STEP 4Review the entries in the sample calculator of this toolkit “Sample 6056 Reporting Data Calculator” (see page 6) to help your client understand the process.

ACA Compliance Toolkit page 4

CAlCUlAToR inSTRUCTionS (continued)

STep 5

Begin working on calculations by entering the employer name in the top orange row of the calculator labeled “ENTER EMPLOYER NAME HERE.”

STep 6

Enter full-time* employee names in Column A.

*ACA defines full-time as 30 hours of service per week or 130 hours of service per month.

STep 7

In Column B, enter the employee portion of monthly premium (for employee-only coverage on the lowest cost plan with minimum value offered by the employer†) for each listed employee.

By now your client is probably asking how to figure this out. Word & Brown has saved your client valuable time by providing this amount for each enrollee in the IRS Section 6056 Reporting Chart delivered by Word & Brown Underwriting with your large group case approval letter (see Column 6 of this chart). If you or your client cannot locate this chart, please contact us to request a copy.

† Please note, the employer is not entering the employee’s portion of the actual plan each employee selected. Even if an employee elected to cover dependents, ACA still requires the Affordability Safe Harbor calculation to use employee-only coverage on the lowest cost plan offered with minimum value as the basis for this calculation.

STep 8

Enter either the hourly wage in Column C, or Monthly Salary in Column G, for each listed employee.

STep 9

If your client is using hourly wage for an employee, enter the monthly hours of service in Column D for each listed employee in your “IRS Section 6056 Reporting Data Calculator.”

STep 10

After steps 5–9 are completed, the calculator will display the affordability percentage for each employee and provide a summary total of the number of hourly wage employees and monthly salary employees with unaffordable coverage at the top of the calculator.

ACA Compliance Toolkit page 5

ACA Compliance Toolkit

CAlCUlAToR inSTRUCTionS (continued)

SAmple 6056 RepoRTinG DATA CAlCUlAToR

page 6

Download your 6056 Reporting Data Calculator in the California Health Reform Resource Center

Download your 6056 Reporting Data Calculator in the Nevada Health Reform Resource Center (Sign inAAccept DisclaimerAClick on IRS Section 6056 Reporting Data Calculator)

exTRA ReSoURCeS

GRoUp SiZe DeTeRminATion – THe lARGe emploYeR mAnDATe

The Large Employer Mandate requires employers to determine group size to ensure coverage is offered as mandated in 2015 if employer size is 100+ FTE.

n Large Employer = 50+ Full-Time Equivalent Employees (FTE)

n In 2015, 100+ FTE Employers must offer ACA-defined “affordable” coverage with minimum value (60%) or face penalties.

n In 2016, 50+ FTE Employers must offer “affordable” coverage with minimum value or face penalties.

n Employers determine in 2014 their group size for all of 2015.

n Small Employers (less than 50 FTE) = no penalty and no mandate

n Employers with 50-99 FTE must comply with IRS Section 6056 Reporting for 2015, even though the employer mandate does not apply until 2016.

FUll-Time AnD FUll-Time eQUiVAlenT DeFiniTionS

Full-Time (FT) Employees: ACA defines full-time status as employees who work an average of 30 hours per week (130* hours per month).

Full-Time Equivalent (FTE) Employees: Total all hours worked** by part-time (PT) employees for the month and divide by 120* to get the number of FTE employees.

Example: 20 Part-Time employees with an average of 15 hours per week = 1,200 hours per month divided by 120 = 10 FTE employees

Large Employers = 50 or more FT plus FTE employees

*ACA uses different full-time hours in these two provisions**Maximum of 120 hours should be used for each PT employee (Example: PT employee works 121-129 hours per month. In calculating FTEs this PT employee’s hours should be entered as 120.)

ACA Compliance Toolkit page 7

exTRA ReSoURCeS (continued)

ConTRolleD GRoUp / Common oWneRSHip & GRoUp SiZe

Two or more companies that have a common owner are combined for the purpose of calculating group size. The combined FTE calculation will render mandated responsibility or not of each individual organization regardless of the individual organization’s group size.

n Beginning 1/1/15, 100+ FTE employers not offering “affordable” coverage with minimum value (60%) will be assessed a $2,080 annual fine multiplied by the number of full-time employees (minus the first 80 FT), if at least one FT employee receives subsidized coverage on a State (or Federally Facilitated) Exchange.

n Effective 1/1/16, the employer mandate applies to 50+ FTE employers and the penalty computation changes from “minus first 80 FT” to “minus first 30 FT.”

n Minus first 80 FT (in 2015) or minus first 30 FT (in 2016) must be shared by all companies making up the controlled group.

iRS SeCTion 6056 RepoRTinG ReSoURCeS (Information last updated August, 2015.)

Understanding Employer Reporting Requirements of the Health Care Law IRS Publication 5196 (2-2015) (On page 2 of publication are helpful lists of the information that is needed in order to complete Form 1094-C and Form 1095-C.)

Form 1095-C Employer-Provided Health Insurance Offer and Coverage - Draft 2015 (Revised 8-6-2015) (Be sure to read the newly added Instructions for Recipient on page 2)

Form 1094-C Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns - Draft 2015 (Revised 6-15-2015)

Instructions for Form 1094-C and 1095-C - Draft 2015 (Revised 8-6-2015)

Codes for IRS Form 1095-C (Part II)

View IRS questions and answers on Reporting of Offers of Health Insurance Coverage by Employers (Section 6056).

IRS Information Reporting Penalties for 2015.n The Trade Preferences Extension Act of 2015, signed into federal law 6/29/2015, increased

potential employer penalties for missing info or inaccurate forms.

n IRS previously announced they will not assess penalties to employers who demonstrate a “good faith” effort towards compliance for 2015.

ACA Compliance Toolkit page 8

WoRD & BRoWn AFFoRDABle CARe ACT (ACA) CompliAnCe ToolkiT DiSClAimeR (Rev. 11/20/2014)

Word & Brown Insurance Administrators, Inc. (“W&B”) is providing the ACA Compliance Toolkit for your and your clients’ (the “User”) information and convenience. The ACA Compliance Toolkit (“Content”), includes the links to URL addresses, forms and 6056 Reporting Data Calculator (“Calculator”). All information contained within or provided in conjunction with the Content is subject to change without notice. Reasonable efforts have been taken to ensure the accuracy and integrity of all information provided within and in conjunction with the Content, but W&B is not responsible for misprints, out-of-date information, or errors. W&B provides all Content on “as is” basis and as such, makes no representations or warranties, express or implied, concerning the accuracy, reliability, timeliness, completeness, or suitability of the Content, including any other material which is expressed, referenced, linked, or connected thereto.

The Content may contain Links to outside third-party websites. By selecting any of these Links, User understands and hereby agrees that User may be transferred to a website that is not affiliated with, or under the ownership, security, or control of W&B. User is hereby cautioned to proceed at User’s own risk in so doing. W&B disclaims all responsibility and liability for the operation, content, security, or policies of the non-affiliated Link/website to which User is linking, and does not endorse, recommend, control, supervise, or review the respective Link/website policies or content. User should address any concerns or questions User may have regarding any such website to the Site Administrator or Webmaster of each applicable website.

W&B does not, will not, and cannot guarantee the accuracy, reliability, timeliness, completeness, or suitability of the Calculator Content to any User to determine whether: (i) User is in compliance with insurance coverage requirements and whether any penalties might be applicable; (ii) the premium rates are accurate; or (iii) User will receive any tax credit amount that may be estimated by the Calculator. The Calculator provides only an estimate of a potential tax credit based upon employment and wage projections and is provided solely for demonstrative purposes. User is responsible for accurately entering data into the Calculator and confirming that the respective organization qualifies for the credit. User also understands, acknowledges, and accepts that there are many variables that can affect an organization’s tax credit eligibility and/or tax credit amount, and that the Calculator may not account for each and every variable. As such, the User of the Calculator agrees that use of the Calculator is at User’s own risk.

W&B specifically disclaims, to the fullest extent permitted by law, all warranties, express or implied, including without limitation the warranties of merchantability, fitness for a particular purpose, and non-infringement with respect to any of the Content. In no event will W&B be liable for any general, special, indirect, incidental, or consequential damages, even if W&B has been advised of the possibility of any such damages. The Content is not intended by W&B, nor should it be considered to be, a substitute for professional advice, whether legal, tax, financial, or otherwise, and Users are strongly urged to consult appropriate professional tax, financial, legal, or other qualified advice regarding any such matters. Specific laws may vary by jurisdiction. Moreover, should statements of fact and/or opinions be expressed within or in conjunction with the Content, such statements and/or opinions are those of the participants individually and, unless expressly stated to the contrary, are not the views or opinions of W&B, or any of the W&B Companies, and may not be relied on as such. User hereby acknowledges and agrees that, in addition to W&B’s licensors and/or suppliers, W&B shall in no event be liable to User, nor anyone, for any decision made or action taken in reliance upon information expressed or displayed within or in conjunction with the Content. Thus, it is User’s sole responsibility to directly verify any information obtained from the Content before making any decisions or incurring costs or liability based upon any such information.

W&B is not responsible for technical malfunctions, inabilities to access the Content, failures, omissions, interruptions, deletions, or defects in any telephone systems or networks, computer online systems, computer equipment, server providers, or software, including any injury or damage to User’s, or any other person’s, computer or system relating to or resulting from any use of the Content.

All rights to all of the Content are expressly reserved by W&B and/or the respective legal owners of such information, including, without limitation, copyright, trademark, and service mark rights. By accessing and utilizing the Content, User does not acquire any legal rights whatsoever to any such information. The Content may also contain information that is proprietary and/or confidential and User has no authority or right to reproduce, publish, or distribute such information without the express written consent of W&B.

User’s access and use of the Content constitutes User’s acceptance of the terms and conditions contained herein and any Terms of Use and/or Privacy Policy related to the Content.

ACA Compliance Toolkit page 9

www.wordandbrown.com

Northern California | 800.255.9673 | Los Angeles 800.560.5614 | Inland Empire 877.225.0988

Orange 800.869.6989 | San Diego 800.397.3381 | Nevada 800.606.4996

WB.GA.6056.Reporting.Tool.Kit.v11_08.15