Repeal and replacement of the Affordable Care Act (ACA) by the American Health Care Act (AHCA) may be underway in Washington D.C., but until a final version of the AHCA is signed into law, the ACA is the law of the land. In fact, the IRS is currently issuing notices to employers that require them to disclose whether they complied with ACA large employer reporting duties, or their excuse for not doing so, where applicable.
The ACA required large employers to furnish employee statements (Forms 1095-C) and file them with the IRS under transmittal Form 1094-C, and the Internal Revenue Code (“Code”) imposes separate penalty taxes for failing to timely furnish and file the required forms. Large employer reporting was required for 2015 and 2016, even if transition relief from ACA penalty taxes applied for 2015. The potential penalties can be very large – up to $500 per each 2015 Form 1095-C statement ($250 for not furnishing the form to the employee and $250 for not filing it with IRS) – up to a total annual penalty liability of $3 million. The penalty amounts and cap are periodically adjusted for inflation.
Employers that failed to furnish Form 1095-C and file copies with Form 1094-C may receive the IRS notices, called “Request for Employer Reporting of Offers of Health Insurance Coverage (Forms 1094-C and 1095-C)” and also known as Letter 5699 forms. Forms may be received regarding reporting for 2015 or 2016. Employers that receive a Letter 5699 form will have only thirty days to complete and return the form, which contains the following check boxes:
Employer already complied with reporting duties;
Employer did not comply but encloses required forms with return letter;
Employer will comply with reporting duties within ninety days (or later, if further explained in the form);
Employer was not an Applicable Large Employer for the year in question; or
Other (requiring a statement explaining why required returns were not filed, and any actions planned to be taken).
The Letter also provides: “[i]f you are required to file information returns under IRC Section 6056, failure to comply may result in the assessment of a penalty under IRC Section 6721 for a failure to file information returns.”
Employers receiving Letter 5699 forms should contact their benefit advisors immediately and plan to respond as required within the thirty-day limit; it may be necessary to request an extension for employers that are just realizing that they have reporting duties and need to prepare statements for enclosure with their response. In this regard, the IRS offers good faith relief from filing penalties for timely filed but incomplete or incorrect returns for 2015 and 2016, but relief from penalties for failures to file entirely for those years is available only upon a showing of “reasonable cause,” which is narrowly interpreted (for instance, due to fire, flood, or major illness).
Large employers should not look to coming ACA repeal/replacement process for relief from filing duties and potential penalties. The House version of the AHCA does not change large employer reporting duties and it is unlikely the Senate or final versions of the law will do so. This is largely because procedural rules limit reform/repeal provisions to those affecting tax and revenue measures, which would not include reporting rules. Thus the reporting component of the ACA will likely remain intact (though it may be merged into Form W-2 reporting duties), regardless of the ACA’s long-term fate in Washington.
The health reform law imposes a number of fees, taxes and other assessments on health insurance companies and sponsors of self-funded health plans to help subsidize a number of endeavors. One such fee funds the Patient-Centered Outcomes Research Institute (PCORI).
The PCORI fee for calendar year plans is $2.26 per covered life for the 2016 plan year, and must be reported on (and remitted with) IRS Form 720 by July 31, 2017. For non-calendar year plans, if the 2015-16 plan year ended on or before Sept. 30, 2016, the fee is $2.17 per covered life. If the 2015-16 plan year ended between Oct. 1 and Dec. 31, 2016, the fee is $2.26 per covered life. In either case, the filings are similarly due on July 31, 2017. (Note: The Form 720 must be filed by July 31 of the calendar year that begins after the last day of the plan year.)
For self-funded plans, the employer/plan sponsor will be responsible for submitting the fee and accompanying paperwork to the IRS. Third-party reporting and payment of the fee is not permitted for self-funded plans. The process for remitting payment by sponsors of self-funded plans is described in more detail below.
PCORI Fee Reporting and Payment
The IRS will collect the fee from the insurer or, in the case of self-funded plans, the plan sponsor/employer in the same way many other excise taxes are collected. IRS regulations provide three options for determining the average number of covered lives (actual count, snapshot and Form 5500 method).
The U.S. Department of Labor believes the fee cannot be paid from plan assets. In other words, the PCORI fee must be paid by the plan sponsor; it is not a permissible expense of a self-funded plan and cannot be paid in whole or part by participant contributions. The IRS has indicated the fee is, however, a tax-deductible business expense for employers with self-funded plans.
How to File IRS Form 720
The filing and remittance process to the IRS is straightforward and largely unchanged from last year. On page two of Form 720, under Part II, the employer needs to designate the average number of covered lives under its “applicable self-insured plan.” The number of covered lives is multiplied by the applicable amount ($2.26 or $2.17) to determine the total fee owed to the IRS. The Payment Voucher (720-V) should indicate the tax period for the fee is “2nd Quarter.” Failure to properly designate “2nd Quarter” on the voucher will result in the IRS’s software generating a tardy filing notice, with all the incumbent aggravation on the employer to correct the matter with IRS.
Employers will be relieved, at least temporarily, to learn that the requirement to file injury information through an electronic recordkeeping system that was scheduled to take effect this July 1 has been delayed. The Occupational Safety and Health Administration (OSHA), which had issued a rule requiring the posting of such information for most employers in May 2016, announced yesterday that the filing deadline will be postponed for an undetermined period of time.
Delay Expected But Details Not Yet Forthcoming
Many had expected the Trump administration to delay implementation, or Congress to deny funding to the program, so this news does not necessarily come as a surprise. What is unknown at this point is the exact rationale for the delay and when a new deadline will be set (if at all). No further information has been forthcoming about the rule or the delay, however, presumably because we only just recently gained a Secretary of Labor and we still do not have a new Director of OSHA or deputies in place.
Although the filing deadline is just six weeks away, it was telling that the agency had not yet even provided the online portal for employers to begin collecting and submitting the information required (the previous calendar year’s recordable injury and illness cases and rates for each workplace).
What The Rule Would Have Done
It is important to remember that electronic recordkeeping rule would not have created new obligations in terms of reporting. Those employers covered by the new rule would have been asked to simply use data from their OSHA Forms 300, 300A, and 301 when using the electronic reporting method. However, OSHA was prepared to electronically post injury and illness data on its website from all workplaces with 20 or more employees and for those in certain high-risk industries, making the information publicly available for consumption by unions, plaintiffs’ attorneys, and others. Submission was to be phased in based on employer establishment size and industry.
Although the Obama administration interpreted new anti-retaliation provisions in a manner that has significant effects on automatic post-accident drug testing, safety incentive plans, and injury reporting procedures, there is no word yet on whether these agency pronouncements will also change.
What’s Next
We will be in a better position to understand the future of the rule once Labor Secretary Alexander Acosta settles into his new role, and once an OSHA Director is in place. One would expect that the agency will announce its intentions with respect to the new rule in the coming months. Several employer groups had been requesting that the Trump administration reopen the rules making process to consider changes to the rules, and such an option could possibly be on the table.
It would not be surprising to see unions or other worker advocacy groups bring legal challenges to force OSHA to meet the July 2017 implementation date. A collection of groups had already been waging a media campaign supporting the new rule. Just today, in fact, the former Assistant Secretary of Labor for OSHA under President Obama complained that the decision to delay the rule was made for political purposes and was not technical in nature.
Also, although two federal court lawsuits are pending challenging the new rule (including one filed by the U.S. Chamber of Commerce), several unions and worker advocacy groups have already petitioned the court to step in and defend the rule now that the new administration seems to be taking a more hands-off approach to defending Obama-era regulatory actions. The fate of any such legal challenges is difficult to predict at this point, but what is certain is that we have not yet heard the last of this issue.
OSHA Electronic Reporting Requirements Required by July 1, 2017
Why is OSHA issuing this rule?
This simple change in OSHA’s rulemaking requirements will improve safety for workers across the country. One important reason stems from our understanding of human behavior and motivation. Behavioral economics tells us that making injury information publicly available will “nudge” employers to focus on safety. And, as we have seen in many examples, more attention to safety will save the lives and limbs of many workers, and will ultimately help the employer’s bottom line as well. Finally, this regulation will improve the accuracy of this data by ensuring that workers will not fear retaliation for reporting injuries or illnesses.
What does the rule require?
The new rule, which takes effect Jan. 1, 2017, requires certain employers to electronically submit injury and illness data that they are already required to record on their onsite OSHA Injury and Illness forms. Analysis of this data will enable OSHA to use its enforcement and compliance assistance resources more efficiently. Some of the data will also be posted to the OSHA website. OSHA believes that public disclosure will encourage employers to improve workplace safety and provide valuable information to workers, job seekers, customers, researchers and the general public. The amount of data submitted will vary depending on the size of company and type of industry. The electronic submission requirements do not change an employer’s obligation to complete and retain the injury & illness records.
How will electronic submission work?
OSHA will provide a secure website that offers three options for data submission. First, users will be able to manually enter data into a webform. Second, users will be able to upload a CSV file to process single or multiple establishments at the same time. Last, users of automated recordkeeping systems will have the ability to transmit data electronically via an API (application programming interface). OSHA is not yet accepting electronic submissions at this time. Updates will be posted to the OSHA website at www.osha.gov/recordkeeping when they are available.
Anti-retaliation protections
The rule also prohibits employers from discouraging workers from reporting an injury or illness. The final rule requires employers to inform employees of their right to report work-related injuries and illnesses free from retaliation, which can be satisfied by posting the already-required OSHA workplace poster. It also clarifies the existing implicit requirement that an employer’s procedure for reporting work-related injuries and illnesses must be reasonable and not deter or discourage employees from reporting; and incorporates the existing statutory prohibition on retaliating against employees for reporting work-related injuries or illnesses. These provisions become effective August 10, 2016, but OSHA has delayed their enforcement until Dec. 1, 2016.
Compliance schedule
The new reporting requirements will be phased in over two years:
Establishments with 250 or more employees in industries covered by the recordkeeping regulation must submit information from their 2016 Form 300A by July 1, 2017. These same employers will be required to submit information from all 2017 forms (300A, 300, and 301) by July 1, 2018. Beginning in 2019 and every year thereafter, the information must be submitted by March 2.
Establishments with 20-249 employees in certain high-risk industries must submit information from their 2016 Form 300A by July 1, 2017, and their 2017 Form 300A by July 1, 2018. Beginning in 2019 and every year thereafter, the information must be submitted by March 2.
OSHA State Plan states must adopt requirements that are substantially identical to the requirements in this final rule within 6 months after publication of this final rule.
On May 4, 2017, the IRS released Revenue Procedure 2017-37 setting dollar limitations for health savings accounts (HSAs) and high-deductible health plans (HDHPs) for 2018. HSAs are subject to annual aggregate contribution limits (i.e., employee and dependent contributions plus employer contributions). HSA participants age 55 or older can contribute additional catch-up contributions. Additionally, in order for an individual to contribute to an HSA, he or she must be enrolled in a HDHP meeting minimum deductible and maximum out-of-pocket thresholds. The contribution, deductible and out-of-pocket limitations for 2018 are shown in the table below (2017 limits are included for reference).
Note that the Affordable Care Act (ACA) also applies an out-of-pocket maximum on expenditures for essential health benefits. However, employers should keep in mind that the HDHP and ACA out-of-pocket maximums differ in a couple of respects. First, ACA out-of-pocket maximums are higher than the maximums for HDHPs. The ACA’s out-of-pocket maximum was identical to the HDHP maximum initially, but the Department of Health and Human Services (which sets the ACA limits) is required to use a different methodology than the IRS (which sets the HSA/HDHP limits) to determine annual inflation increases. That methodology has resulted in a higher out-of-pocket maximum under the ACA. The ACA out-of-pocket limitations for 2018 were announced are are $7350 for single and $14,700 for family.
Second, the ACA requires that the family out-of-pocket maximum include “embedded” self-only maximums on essential health benefits. For example, if an employee is enrolled in family coverage and one member of the family reaches the self-only out-of-pocket maximum on essential health benefits ($7,350 in 2018), that family member cannot incur additional cost-sharing expenses on essential health benefits, even if the family has not collectively reached the family maximum ($14,700 in 2018).
The HDHP rules do not have a similar rule, and therefore, one family member could incur expenses above the HDHP self-only out-of-pocket maximum ($6,650 in 2018). As an example, suppose that one family member incurs expenses of $10,000, $7,350 of which relate to essential health benefits, and no other family member has incurred expenses. That family member has not reached the HDHP maximum ($14,700 in 2018), which applies to all benefits, but has met the self-only embedded ACA maximum ($7,350 in 2018), which applies only to essential health benefits. Therefore, the family member cannot incur additional out-of-pocket expenses related to essential health benefits, but can incur out-of-pocket expenses on non-essential health benefits up to the HDHP family maximum (factoring in expenses incurred by other family members).
Employers should consider these limitations when planning for the 2018 benefit plan year and should review plan communications to ensure that the appropriate limits are reflected.
The American Health Care Act Passes the House of Representatives
Yesterday (May 4, 2017) , the House of Representatives narrowly passed the American Health Care Act of 2017 (AHCA), which contains major parts that would repeal and replace the Affordable Care Act (commonly referred to as Obamacare or ACA). The next obstacle the bill faces is making it through the Senate, which proves to be a formidable challenge.
The nonpartisan Congressional Budget Office has not had time yet to analyze the current version of the bill, but this is expected next week. The bill must now pass the Senate and could get pushed back to the House if it sees changes in the upper chamber.
In the meantime, here are some highlights we know about the bill based on how it is written today and how it would work:
The AHCA bill would eliminate the requirement that people buy health insurance (known as the individual mandate).
The bill would eliminate penalties for large employers (50+ employees) that do not provide insurance to their employees.
The bill would impose a penalty for people who don’t maintain continuous health insurance. The AHCA would create a penalty for people who have a gap in their health insurance of more than 63 days. People buying insurance in the individual market who have a gap of 63 days or longer could be charged a “late enrollment penalty” by the carriers that could be up to 30% of the premium price.
The bill would end Medicaid expansion.
The bill would cut Medicaid spending.
The bill would change how subsidies to buy health insurance are allocated.
The bill keeps requirements that insurers must sell coverage to everybody.
The bill would allow states to change which benefits insurers are required to provide to people who buy plans on their own. The AHCA would allow states to waive the current requirements of “Essential Health Benefits” (aka EHB) under Obamacare that are imposed on plans or allow states to set up their own list of EHBs that insurers must cover in the individual market.
The bill would allow insurers to charge older people more than under the current law. The ACA limits insurers to charging older customer to 3 times a much as younger customers in the individual market. The AHCA expands that ratio to allow insurers to charge older customers 5 times as much as younger customers (it was 10 times prior to Obamacare).
The bill would allow states to let insurers charge older people even more. Under the AHCA, states could seek a waiver from the federal government regarding the age ratios which would let them set their own ratios above the 5 times ratio set by the government.
The bill would allow states to end requirements that insurers cover pre-existing conditions.
The bill could lead to states setting up special insurance programs for high cost patients. The main requirements for a waiver on pre-existing conditions is that states must set up some kind of program to cover the most costly customers (aka high risk pools).
The bill could impact the benefits covered by employer sponsored insurance.
The bill would keep the insurance exchanges in place.
The bill would allow kids to stay on their parent’s plan until age 26.
The bill would repeal multiple taxes that helped fund the ACA.
The bill would cut federal spending by hundreds of billions of dollars.
The bill would return over the counter medications to the list of qualified medical expenses for the 2017 tax year.
The bill would reduce the tax penalty on health savings accounts from 20% to 10% for distributions that are not used for qualified expenses.
The bill would repeal the limitation of $2500 on health FSA contributions.
The bill would increase H.S.A. contributions for a year to equal the maximum on the sum of the annual deductible and out of pocket expenses.
The bill would allow both spouses to make catch up contributions in one H.S.A.
We will continue to keep you up to date on the bill as it progress through legislation.
Landmark Appeals Court Ruling Extends Title VII Protections To LGBT Employees
Late yesterday (4/4/17), the 7th Circuit Court of Appeals became the first federal court of appeals in the nation to rule that sexual orientation claims are actionable under Title VII. Their decision opened the door for LGBT plaintiffs to use Title VII to seek relief for allegations of employment discrimination and retaliation.
The April 4th ruling is important to employers because it broadens the class of potential plaintiffs who can bring workplace claims against them, and will require employers to ensure fair and equal treatment to all applicants and workers regardless of their sexual orientation (Hively v. Ivy Tech Community College).
Background: What Does Title VII Cover?
The initial aim of Title VII of the Civil Rights Act of 1964 was to protect employees from race discrimination in the workplace. Just before it was enacted, however, Congress added a provision prohibiting discrimination based on “sex.” Initially, federal courts took the position that “sex” should be interpreted narrowly.
However, over the years, plaintiffs have sought a much broader interpretation of what should be covered as sex discrimination. Following the landmark 2015 Supreme Court decision which made same-sex marriage legal across the country, federal courts have grappled with determining which types of claims are actionable under the “sex” provision of Title VII. Meanwhile, the Equal Employment Opportunity Commission (EEOC) issued a July 2015 administrative decision ruling that “sexual orientation is inherently a ‘sex-based consideration’ and an allegation of discrimination based on sexual orientation is necessarily an allegation of sex discrimination under Title VII” (Baldwin v. Foxx).
Although this decision involved a federal employee and was only binding on federal employers, other lower federal courts have discussed the rationale behind the EEOC’s conclusion and seemed ready to adopt the same approach. Indeed, on November 4, 2016, the U.S. District Court for the Western District of Pennsylvania agreed with the EEOC and held that sexual orientation falls within the protection of Title VII (EEOC v. Scott Medical Center). However, no federal appellate court went that far – until now.
Employee Loses First Two Rounds Of Her Battle…
Kimberly Hively began working as a part-time adjunct professor for Ivy Tech Community College in South Bend, Indiana in 2000. She worked there for 14 years until her part-time employment contract was not renewed in 2014. During her employment, she applied for six full-time positions but claims never to have even been offered an interview, even though she said she had all the necessary qualifications and had never even received a negative evaluation.
Hively filed a federal lawsuit alleging sexual orientation discrimination under Title VII, and in 2015, the trial court dismissed her case. She appealed to the 7th Circuit Court of Appeals (which oversees federal courts in Illinois, Indiana, and Wisconsin), which initially agreed with the lower court by upholding the dismissal of her claim in July 2016.
The three-person panel of judges indicated that it had no choice but to deny Hively’s claim after reviewing a string of cases stretching back almost 40 years from across the country. The panel concluded that no other federal appellate court had decided that sexual orientation discrimination is covered under Title VII. The judges noted that we live in “a paradoxical legal landscape in which a person can be married on Saturday and then fired on Monday for just that act,” but indicated they were all but powerless to rule otherwise absent a Supreme Court directive or a congressional amendment to Title VII.
…But Wins Crucial Third Round
In October 2016, the full collection of 7th Circuit judges set aside the ruling and agreed to re-hear the case en banc, which means all the judges would hear the case together. Late yesterday, the en banc panel issued a final ruling overturning its initial decision by an 8 to 3 vote and breathing new life into Hively’s case. More importantly, however, the 7th Circuit created a new cause of action under Title VII for other LGBT employees in Illinois, Indiana, and Wisconsin.
In the opinion, drafted by Chief Judge Wood, the court concluded that “discrimination on the basis of sexual orientation is a form of discrimination” and that it “would require considerable calisthenics” to remove the “sex” from “sexual orientation” when applying Title VII. In addition, the court noted that efforts to do so had led to confusing and contradictory results.
In the end, the court concluded that the practical realities of life necessitated that it reverse its prior decision. It remanded Hively’s case back to the trial court for a new hearing under this broad new standard.
What This Means For Employers
Employers in Illinois and Wisconsin are already subject to state laws protecting private workers based on sexual orientation, so yesterday’s decision should simply reaffirm their commitment to ensuring fairness and equality for these employees. For private employers in Indiana, however, the time is now to take proactive steps to ensure sexual orientation is treated the same as any other protected class – this includes reviewing your written policies, handbooks, training sessions, workplace investigations, hiring methods, discipline and discharge procedures, and all other aspects of your human resources activities.
As for employers in the rest of the country, it appears likely that yesterday’s ruling will be followed by decisions in other circuit courts similarly extending Title VII rights to cover sexual orientation. In fact, the plaintiff in a prominent case recently decided by the 11th Circuit Court of Appeals (hearing cases from Florida, Georgia, Alabama) has indicated she could seek a full en banc review of her case in the hopes of extending Title VII to cover LGBT workers in that circuit. It would not be surprising for the Hively case to be the first in a series of dominoes that brings about a new day for Title VII litigation across the country.
We can expect to see further judicial rulings in the coming years fleshing out this issue in more detail. For example, one issue not addressed by the 7th Circuit is how this new theory will affect religious institutions given that different standards apply to them under federal antidiscrimination laws. These and other considerations will be debated in courts across the country in the near future.
Even if these appeals court decisions do not immediately materialize, there are two other avenues whereby employers could still face immediate liability for such claims. The first is through state law. Almost half of the states in the country have laws prohibiting sexual orientation discrimination in employment (California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont, Washington, and Wisconsin), and some additional states protect state workers from such discrimination (Alaska, Arizona, Indiana, Kentucky, Louisiana, Michigan, Missouri, Montana, North Carolina, Ohio, Pennsylvania, and Virginia).
Second, plaintiffs have successfully argued to various federal courts that Title VII sex discrimination covers claims where plaintiffs allege mistreatment based on gender non-conformity actions. This includes situations where employers are alleged to have discriminated against workers for failing to live up to stereotypical gender norms. Courts have noted that drawing a line that separates these “sex-stereotyping” claims from pure sexual orientation claims is “exceptionally difficult” because the distinction is often “elusive,” meaning that employers anywhere could face a Title VII claim akin to sexual orientation discrimination that would be accepted as valid by a federal court no matter what the federal appeals courts say. This concept was discussed in the 11th Circuit’s recent Evans v. Georgia Regional Hospital decision, and the court in fact permitted the plaintiff to proceed with her case on a stereotyping theory.
While possible that the Supreme Court or Congress will step in and reverse this trend, as a recent court stated, “it seems unlikely that our society can continue to condone a legal structure in which employees can be fired, harassed, demeaned, singled out for undesirable tasks, paid lower wages, demoted, passed over for promotions, and otherwise discriminated against solely based on who they date, love, or marry.” Employers should take heed and prepare for what appears to be an inevitable extension of workplace protection rights for LGBT workers based on their sexual orientation.
A New Employer Healthcare Plan: Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
Until very recently, employers were at risk of receiving steep fines if they reimbursed employees for non-employer sponsored medical care – the Affordable Care Act (ACA) included fines of up to $36,500 a year per employee for such an action. Late in 2016, however, President Obama signed the 21st Century Cures Act and established Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). As of January 1, 2017, small employers can offer these tax-free medical care reimbursements to eligible employees.
How Do QSEHRAs Work?
If an employee incurs a medical care expense, such as health insurance premiums or eligible medical expenses under IRC Section 213(d), the employer can reimburse the employee up to $4,950 for single coverage or $10,000 for family coverage. Employees may not make any contributions or salary deferrals to QSEHRAs.
The maximum amount must be prorated for those not eligible for an entire year. For example, an employer offering the maximum reimbursement amount should only reimburse up to $2,475 to an employee who has been working for the company for six months. For a complete list of medical expenses covered under IRC 213(d), see https://www.irs.gov/pub/irs-pdf/p502.pdf. Employers may tailor which expenses they will reimburse to a certain extent, and do not have to reimburse employees for all eligible medical expenses.
Much like other healthcare reimbursement arrangements, employees may have to provide substantiation before reimbursement. The IRS has discretion to establish requirements regarding this process, but has not yet done so. Although reimbursements may be provided tax-free, they must be reported on the employee’s W-2 in Box 12 using the code “FF.”
Which Employers Can Offer QSEHRAs?
To offer QSEHRAs, an employer cannot be an applicable large employer (ALE) under the ACA. Only employers with fewer than 50 full-time equivalent employees can offer this benefit. Further, a group cannot offer group health plans to any employees to qualify.
Which Employees Are Eligible For QSEHRAs?
Typically, an employer that chooses to offer a QSEHRA must offer it to all employees who have completed at least 90 days of work. The few exceptions to this rule include part-time or seasonal employees, non-resident aliens, employees under the age of 25, and employees covered by a collective bargaining agreement.
Employers may offer differing reimbursement amounts based on employee age or family size. However, such variances must be based on the cost of premiums of a reference policy on the individual market. It is currently unclear which reference policy will be selected or how permitted discrepancies will be calculated.
To be eligible for a tax-free reimbursement, employees must have proof of minimum essential coverage. It is uncertain how closely employers will have to scrutinize such proof, although guidance will hopefully be available soon.
Interaction Between QSEHRAs And Health Exchanges
Eligible employees must disclose to health exchanges the amount of QSEHRA benefits available to them. The exchanges will account for the reported amount, even if the employee does not utilize it, and will likely reduce the amount of the subsidies available. Employers should take this into account before adopting a QSEHRA.
Other Administrative Issues
In order to establish a QSEHRA, employers will have to set up and administer a plan. Group health plan requirements, such as ACA reporting and COBRA requirements, do not apply to QSEHRAs. But in order to properly provide reimbursements to employees, employers will likely have to establish reimbursement procedures.
Additionally, any eligible employees must be notified of the arrangements in writing at least 90 days before the first day they will be eligible to participate. For the current year, the IRS is giving employers who implement QSEHRAs an extension until March 13, 2017 to provide a notice. The notice must provide the amount of the maximum benefit, and that eligible employees inform health insurance exchanges this benefit is available to them. It also must inform eligible employees they may be subject to the individual ACA penalties if they do not have minimum essential coverage.
On February 23, 2017, the Centers for Medicare and Medicaid Services released an insurance standards bulletin allowing states once again to extend the life of “grandmothered” (aka transitional health insurance or non-ACA) medical policies to policy years beginning on or before October 1, 2018, as long as the policies do not extend beyond December 31, 2018. These plans will continue to be exempt from most of the ACA’s insurance reform provisions which otherwise became effective on January 1, 2014.
Background
On November 14, 2013, facing political pressure from millions of consumers who were receiving cancellation notices for their 2013 coverage, the Obama administration announced in guidance that states could allow insurers to extend noncompliant coverage for policy years beginning before October 1, 2014, free from certain of the ACA reforms. In March of 2014, the administration extended the life of these “grandmothered” or “transitional” plans to coverage renewed by October 1, 2016 and eventually until the end of 2017.
While the original transitional decision could perhaps have been justified by the inherent authority in the executive to reasonably delay the implementation of new legal requirements, the extension of the original delay looked increasingly political and was harder to justify legally. It also likely did serious damage to the ACA-compliant individual market. Insurers had set their 2014 premiums in the expectation that the entire non-grandfathered market would transfer to ACA-compliant plans. Instead, healthier individuals likely remained with their earlier, health-status-underwritten coverage, making the pool of consumers that actually bought 2014 coverage less healthy than expected. The transitional policy very likely played a significant role in the large insurer losses in the individual market for 2014, and played a role in raising premiums going forward.
As of today, there are probably a little fewer than a million Americans still in individual market transitional plans, although the percentage of the individual market in transitional plans varies greatly from state to state, and many remain covered in small group transitional plans. It has been thought that consumers and employers prefer transitional plans because they cost less or have lower cost-sharing.
The Guidance
The Trump administration’s guidance states that it is based on a commitment to “smoothly bringing all non-grandfathered coverage in the individual and small group market into compliance with all applicable” ACA requirements. One must wonder, however, why four years will be enough for a smooth transition if three years was not.
The guidance gives states the option of extending the transition for a shorter (but not longer) period of time and also of applying it to both the small group and individual markets or to either market separately. States also have the option of authorizing part-year policies if necessary to ensure that coverage ends at the end of 2018.
IRS to Accept Tax Returns Lacking Health Coverage Status & Employer Reporting Remains Unchanged
On Feb. 15, the IRS announced on its ACA Information Center for Tax Professionals webpage that it would not reject taxpayers' 2016 income tax returns that are missing health coverage information.
This information is supposed to be included on line 61 of the Form 1040 and line 11 of the Form 1040EZ to demonstrate compliance during the year with the Affordable Care Act's (ACA's) mandate that individuals have health insurance that meets ACA standards, or else pay a penalty.
Two crucial points regarding the IRS announcement should be stressed:
The announcement only applies to personal income tax filers—it does not affect employers disclosure and reporting obligations.
It is not a repeal of the individual mandate- penalty provisions are still in place and are currently being enforced.
The IRS indicated that it will accept tax returns lacking this information in light of President Donald Trump's executive order directing agencies to minimize the ACA's regulatory burden. While the requirement to have ACA-compliant coverage or pay a tax penalty has been in place since 2014, starting this year the IRS was to have begun automatically flagging and rejecting tax returns missing that information.
"This action by the IRS doesn't mean it won't enforce the individual mandate," said Lisa Carlson, senior Employee Retirement Income Security Act (ERISA) attorney at Lockton Compliance Services in Chicago. "This action simply means the IRS won't reject a taxpayer's return outright if the taxpayer doesn't answer the health coverage question. The IRS reserves the right to follow up with a taxpayer, at a future date, regarding his or her compliance with the individual mandate, if the person's tax return doesn't provide information about his or her health insurance coverage during 2016."
Enforcement Uncertainty
For those individuals who previously filed without providing health insurance information or who indicated that they did not carry coverage as was required, "whether the IRS will assess penalties depends on the retroactive nature of [a possible future] repeal of the individual mandate or its penalties," Carlson said.
While the IRS announcement does not suggest that the agency won't be strictly enforcing the individual mandate tax penalty, "we just don't know" what enforcement actions the agency might take, said Garrett Fenton, an attorney with Miller & Chevalier in Washington, D.C., whose practice focuses on employee benefits, tax and executive compensation.
While it's unclear how strenuous IRS enforcement actions might be, "the individual mandate and its related tax penalties are certainly still on the books, and it would require an act of Congress to change that," Fenton noted. If tax filers leave unchecked the box indicating that they have ACA-compliant coverage, "the IRS may come back and ask them follow-up questions, and they still may get audited and potentially owe the tax penalty."
Employer Compliance
The ACA is still the law of the land and prudent employers will want to continue to comply with the ACA, including the play-or-pay mandate and reporting requirements, including furnishing Forms 1095-C to employees and making all required filings with the IRS, until formal guidance relieves them of those compliance obligations.
Despite the IRS announcement, employers are still required to file their ACA reporting forms and those forms will be rejected if they do not contain the requisite information. Because the President has indicated that we may not see a repeal until 2018, employers will still be required to operate their health plans in an ACA-compliant manner until notified otherwise.
In the context of the employer mandate, waiver of penalties seems unlikely because these penalties are written into law and are a significant source of revenue for the federal government.
The bottom line: Those who are responsible for issuing and filing 1094s and 1095s on behalf of their organizations should continue to comply with all relevant laws, regulations, reporting requirements and filing specifications during the repeal-and-replace process.
Deadlines Loom
The IRS issued Notice 2016-70 in November 2016, giving employers subject to the ACA's 2016 information-reporting requirements up to an additional 30 days to deliver these forms to employees. The notice affected upcoming deadlines for ACA information reporting as follows:
The IRS extended the deadline to deliver ACA reporting forms to employees from Jan. 31 to March 2. Employers must deliver to workers the 2016 Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) and Form 1095-B (Health Coverage).
The Treasury Department and the IRS determined that a substantial number of employers and other insurance providers needed additional time "to gather and analyze the information [necessary to] prepare the 2016 Forms 1095-C and 1095-B to be furnished to individuals," Notice 2016-70 stated. This extension applies for tax year 2016 only and does not require the submission of any request or other documentation to the IRS.
The IRS did not change the deadline for filing Forms 1094 and 1095 with the agency.This indicated no automatic extension was likely to file the 2016 Form 1094-B (Transmittal of Health Coverage Information Returns) along with copies of Form 1095-B, and Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) along with copies of Form 1095-C.
Employers filing these forms by mail will still need to do so by Feb. 28.
Employers filing electronically (as those submitting 250 or more forms are required to do) must do so by March 31.
Although the date for filing with the IRS was not extended, employers can obtain a 30-day extension by submitting Form 8809 (Application for Extension of Time to File Information Returns) by the due date for the ACA information returns.
Note: For small businesses with fewer than 50 full-time equivalent employees that provide employees with an ACA-compliant group plan, the rules are a bit different. If fully insured, the insurance company that provides coverage is required to send enrollees a copy of Form 1095-B and to submit Forms 1995-B (along with transmittal Form 1094-B) to the IRS in order to report minimum essential coverage.
If a small company is self-insured and provides group coverage, it must also provide employees and the IRS with Form 1095-B. But small business that offer insurance are not required to send Form 1095-Cs to employees or to the IRS.
Small business that do not provide group coverage are not subject to ACA reporting.
While Congress considers options to repeal and replace the ACA, businesses should prepare to comply with the current employer mandate through 2018. Businesses should pay close attention to decisions over the next few weeks, but be prepared to stay patient because significant details on employer obligations are unlikely to take shape for some time.
Affordable Care Act is Target of Trump Executive Order on Inauguration Day
In one of his first actions in office, President Donald Trump signed an Executive Order to “Minimize the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal.” In a few short paragraphs, President Trump has given a very broad directive to federal agency heads, including the Department of Health and Human Services, to take steps to grant waivers, exemptions, and delay provisions of the ACA that impose costs on states or individuals.
Although the Order does not refer to employers specifically, the intent and breadth of its sweeping statements appear to direct agencies to take the same type of actions with regards to provisions of the ACA that similarly affect employers.
The Order does not itself effect any change, but rather acts as a road map to some of the desired changes of the administration, while urging the agencies to soften enforcement of pieces of the ACA until a repeal can be accomplished. It is clear that the Order cannot undo the ACA itself as that will take a coordinated act of Congress. Trump and Congressional Republicans still have much work ahead in agreeing on the legislation that will repeal and replace the ACA, including taking into account the unsettling effect such initiatives will have on the health insurance market in general.
The language of the Order addresses the actions of agencies in the interim period before a repeal occurs, but does not grant any powers above what already exist. The Order also acknowledges that any required changes to applicable regulations will follow all administrative requirements and processes, including notice and comment periods. However, it leaves the important question of how much discretion the agencies have and in what manner (and on what timetable) will they exercise that discretion.
We will continue to closely monitor agency reaction to the Executive Order, especially as it relates to the responsibilities of employers.
Reminder: OSHA 300A Logs Must Be Posted by Feb 1st
All OSHA 300A logs must be posted by February 1st in a visible location for employees to read. The logs need to remain posted through April 30th.
Please note the 300 logs must be completed for your records only as well. Be sure to not post the 300 log as it contains employee details. The 300A log is a summary of all workplace injuries and does not contain employee specific details. The 300A log is the only log that should be posted for employee viewing.
Please contact our office if you need a copy of either the OSHA 300 or 300A logs.
President-elect Donald Trump and Republican congressional leaders have announced repeatedly their intentions to repeal the Affordable Care Act (ACA) once President Barack Obama leaves office. But how that will exactly play out has been the topic of speculation by many.
Washington watchers expect that shortly after his inauguration on Jan. 20, President Trump and GOP leaders will try to pass a measure to repeal the ACA outright. That effort, however, will assuredly face a Democratic filibuster in the Senate, which would require at least 60 votes to overcome—and Republicans have only 52 Senate votes in the new Congress.
Facing a filibuster, Republicans are likely to turn to the budget reconciliation process, in which a simple Senate majority is needed to pass measures related to federal revenues and spending, as long as those measures are budget-neutral, meaning they neither increase nor decrease overall spending or revenue. Much of the ACA was originally passed by Democrats in 2010 using reconciliation.
For the parts of the ACA that are not directly related to federal spending, such as the insurance market reforms, Republicans may start negotiating with Democrats on changing the law in ways that can attract enough senators from both parties to reach the 60-vote threshold.
Repeal Bill Is Happening
Opponents "cannot stand in the way of a repeal bill if the president goes out and says he wants it. They may be able to do some things to modify the transitional uncertainty, but it is happening," said Randy Hardock, a partner at law firm Davis & Harman in Washington, D.C.
The taxes that the ACA imposed on employers will "go away," he predicted. "But once they pass repeal, they won't work on replace for two or three years, because the Democrats need to be brought to the table, and they'll never cut a deal until the end" of the Congressional session.
Repeal and Replace Will Be Piecemeal
"I do think they'll pass a repeal bill, but I would speculate that they'll try to do pieces of replace along with repeal," said Katy Spangler, senior vice president, health policy, for the American Benefits Council, a trade association based in Washington, D.C.
The repeal bill that Congress passed last January, which was vetoed by Obama, "saved a half-trillion dollars" based on the elimination of direct federal subsidies for ACA coverage, she noted. If a similar bill is passed in 2017, those funds would be available to fund an ACA alternative—perhaps along the lines of a bill previously supported by House Budget Committee Chairman Tom Price, R-Ga., Trump's nominee to be secretary of Health and Human Services. That measure would provide tax credits for people to buy insurance if they don't have access to coverage through an employer or government program.
However, Spangler called it "a big gamble" to hope that the Senate will rule that money saved by repealing the ACA could be treated as a kind of budgetary fund that could later be used to make a replacement measure budget-neutral, when passed through the budget reconciliation process. "That's a half-trillion-dollar gamble that [Republicans] might not be willing to take," she said. "So maybe they do their version of the tax credits … as part of that original repeal bill."
Doing so, she suggested, "helps moderate Republicans know that you're not just going to have 20 million people kicked off their insurance. And that gives you time to come back and get Democrats to perfect some of the market reforms and to perfect some other things to make [ACA repeal and replacement] better."
ACA Resolution Introduced in New Congress
On Jan. 3, Republicans introduced a resolution in the U.S. Senate to set up a reserve fund for future health care legislation under an ACA replacement bill, based on savings to be derived from the repeal of the Affordable Care Act.
While measures passed through the budget reconciliation process must be budget neutral, the resolution and related rules would give special protection to bills repealing or “reforming” the ACA, even if such bills cause a temporary increase in spending.
House Speaker Paul Ryan, R-Wis., said in a statement, "This resolution sets the stage for repeal followed by a stable transition to a better health care system. … Today we begin to deliver on our promise to the American people."
The New York Times reported that in the week of Jan. 9, according to a likely timetable sketched out by Rep. Greg Walden, R-Ore., incoming chairman of the House Energy and Commerce Committee, the House will vote on a budget blueprint, which is expected to call for the repeal of the Affordable Care Act. Then, in the week starting Jan. 30, Walden's committee will act on legislation to carry out what is in the blueprint. That bill would be the vehicle for repealing major provisions of the health care law.
Carolyn Smith, a benefits attorney with Alston & Bird in Washington, D.C., agreed that the Republicans' vetoed repeal bill from last January could be "a model for what they're thinking about now. It's been blessed by the Senate parliamentarian, so you know that everything in there works in reconciliation. It basically got rid of pretty much all the [ACA] taxes. It got rid of the Medicaid expansion with a delayed effective date."
Left intact, Smith pointed out, were "all of the market reforms." But, she said, "I don't think that insurers are going to think it's sustainable to have none of the risk adjustment and premium subsidies," leaving them with a number of federal mandates, including required services that their health plans must cover.
A Road Map by April
"We're going to need a road map for individual and small group market coverage [for plan year 2018] by April at the latest, given the timelines for filing products and rates, and getting approval by states," said Kris Haltmeyer, vice president, health policy and analysis, for the Chicago-based Blue Cross Blue Shield Association.
The insurance industry will "need to see stability and that Congress will honor the [subsidy] commitments that have already been made for 2016 and 2017 for products that have been priced and are out in the market. And we need predictability going forward to see what the pathway is for the next two to three years."
"There are a lot of challenges if you go ahead and repeal, even with a transition, and don't provide signals to the health insurance market about what the industry is going to look like," said Jeanette Thornton, senior vice president at America's Health Insurance Plans, a Washington, D.C.-based trade association representing the health insurance community.
She agreed with Haltmeyer that "making design changes to benefits and networks takes time" and that "plans are developing products and rates in the spring for the following year. We've been stressing the need to have some certainly, some rules of the road, to understand what the market is going to transition to so we can be prepared and make those changes."
With the market reforms and consumer protections that Republicans are signaling they want to keep, "what's it all going to look like?" Thornton wondered. "There's no shortage of work if you work in health policy right now."
Congress Passes 21st Century Cures Act with HRA Provisions
Earlier this week, President Obama signed the 21st Century Cures Act ("Act"). This Act contains provisions for "Qualified Small Business Health Reimbursement Arrangements" ("HRA"). This new HRA would allow eligible small employers to offer a health reimbursement arrangement funded solely by the employer that would reimburse employees for qualified medical expenses including health insurance premiums.
The maximum reimbursement that can be provided under the plan is $4,950 or $10,000 if the HRA provided for family members of the employee. An employer is eligible to establish a small employer health reimbursement arrangement if that employer (i) is not subject to the employer mandate under the Affordable Care Act (i.e., less than 50 full-time employees) and (ii) does not offer a group health plan to any employees.
To be a qualified small employer HRA, the arrangement must be provided on the same terms to all eligible employees, although the Act allows benefits under the HRA to vary based on age and family-size variations in the price of an insurance policy in the relevant individual health insurance market.
Employers must report contributions to a reimbursement arrangement on their employees' W-2 each year and notify each participant of the amount of benefit provided under the HRA each year at least 90 days before the beginning of each year.
This new provision also provides that employees that are covered by this HRA will not be eligible for subsidies for health insurance purchased under an exchange during the months that they are covered by the employer's HRA.
Such HRAs are not considered "group health plans" for most purposes under the Code, ERISA and the Public Health Service Act and are not subject to COBRA.
This new provision also overturns guidance issued by the Internal Revenue Service and the Department of Labor that stated that these arrangements violated the Affordable Care Act insurance market reforms and were subject to a penalty for providing such arrangements.
The previous IRS and DOL guidance would still prohibit these arrangements for larger employers. The provision is effective for plan years beginning after December 31, 2016. (There was transition relief for plans offering these benefits that ends December 31, 2016 and extends the relief given in IRS Notice 2015-17.)
Florida is raising its minimum wage to $8.10 an hour beginning Jan. 1, up 5 cents from $8.05 in 2016, the state Department of Economic Opportunity has announced. For tipped employees, the minimum wage will be at least $5.08 an hour.
The minimum wage rate is recalculated each year on Sept. 30, based on the Consumer Price Index. In 2016, the state's minimum wage was unchanged from the previous year.
Be sure to update your required Florida Minimum Wage Posting to reflect this change. You can download a copy of the new poster here.
Last Minute Ruling Preliminarily Halts Overtime Rules
Rules Will Not Take Effect On December 1; Future Thereafter Uncertain
In a dramatic last-minute development, a federal judge in Texas on Tuesday (11/22/16) blocked the U.S. Department of Labor’s (DOL) overtime rule from taking effect on December 1. The judge issued a preliminary injunction preventing the rules from being implemented on a nationwide basis.
The fate of the overtime rules is now uncertain. The Trump administration will take over the DOL in less than two months’ time, and the incoming administration has repeatedly indicated that it wants to eliminate unnecessary regulations hampering the business community. Unless an appeals court reverses course in the next several weeks and breathes new life into the rules, it is quite possible that the rules will be further delayed, completely overhauled, or altogether scrapped once President Trump takes office.
Background: Proposed Rules Would Have Brought Massive Changes And Upheaval
On May 18, 2016, the DOL unveiled a package of revised regulations altering the compensation requirements relating to which employees may be treated as exempt from the federal Fair Labor Standards Act's (FLSA’s) overtime and minimum-wage requirements under the so-called “white collar” exemptions. The two changes with the broadest impact: the minimum salary threshold to characterize an employee as non-exempt would increase from $455 to $913 per week, which annualizes to $47,476 (up from $23,660 per year); and this amount would be “updated” every three years (meaning that it will likely increase with each update) with the first update scheduled for January 1, 2020.
Once announced, the DOL informed employers that the new rules would take effect on December 1, 2016. By this date, employers would have been forced to make sometimes difficult decisions on how to compensate the estimated 4.2 million workers who are currently classified as exempt under the so-called “white collar” exemptions but earn less than the new threshold.
Almost immediately, an outcry sprung from the business community, especially those advocating on behalf of small businesses. By doubling the existing salary threshold, the DOL’s actions would likely reduce the proportion of exempt workers sharply while increasing the compensation of many who will remain exempt, rather than engaging in the fundamentally definition process called for under the FLSA. As many pointed out, manipulating exemption requirements to “give employees a raise” has never been an authorized or legitimate pursuit.
Moreover, publishing what amounts to an automatic “update” to the minimum salary threshold is something that has never before happened in the more-than-75-year history of the FLSA exemptions. This departs from the prior DOL practice of engaging in what should instead ultimately be a qualitative evaluation that would take into account a variety of considerations.
Businesses And States Turn To Court For Relief
In response to these announced changes, a group of 21 states and several business associations filed lawsuits in the Eastern District of Texas seeking a court order that would block the rules from going into effect. The cases were all consolidated into one action, to be heard by District Court Judge Amos Mazzant.
The challengers argued that the DOL did not properly carry out its responsibility under the FLSA to define these exemptions, failing to take into account the duties of white-collar workers as the best indicator for whether threshold increases were needed. The plaintiffs also argued that the automatic indexing mechanism which would ratchet up the salary levels every three years was improper because it would ignore current economic conditions or the effect on public and private resources.
Court Blocks Overtime Rules
On November 22, 2016, District Court Judge Mazzant agreed with the state challengers and blocked final implementation of the rule mere days before the December 1 effective date. In his ruling, he stated that it was improper for the DOL to adopt a salary test that categorically excludes a substantial number of workers who meet the exemptions’ duties-related requirements. Although he acknowledged that Congress delegated definitional power to the agency with respect to these exemptions, he concluded that the DOL overstepped its authority.
He concluded that the rule change equated to a de facto “salary-only test,” because it would have had the effect of causing some 4.2 million workers who are today classified as exempt to become non-exempt, despite the fact they would have exactly the same job duties on December 1. He said that Congress never authorized the DOL to classify white collar workers based on salary alone, and the DOL ignored Congress’s intent by attempting to raise the minimum salary as it did. “If Congress intended the salary requirement to supplant the duties test,” he said, “then Congress, and not the DOL, should make that change.”
The judge recognized that, for 75 years, the salary levels that served as part of the DOL’s overtime exemption test acted as a floor and not a ceiling. He said during last week’s oral argument the new rule’s proposed salary jump was “a much more drastic change.” During that argument, in fact, he pointed out that the proposed substantial increase in the salary threshold could lead to inconsistent treatment of workers who each fulfill white collar duties but are paid differently. An example is a convenience store manager who clearly acts as an executive and who is paid a salary annualizing to only $47,000 a year, for example, would be treated differently than a similarly situated manager who is paid a salary equating to $47,500 a year.
How Does Trump’s Election Impact The Future Of The Rules?
President Trump will be inaugurated on January 20, 2017 – less than two months from today. It is possible that Judge Mazzant might be swayed by DOL arguments in the coming weeks, or that an appeals court could step into reverse Judge Mazzant’s ruling before President Trump takes office. As the judge said in his opinion, it could be that this ruling “only delay[s] the regulation’s implementation.”
Assuming that the injunction survives the remainder of President Obama’s term, it is difficult to predict what President Trump will do with the rules once in the White House. Perhaps President Trump will direct his DOL to commence a new rulemaking process, subject to notice and comment, with the goals of setting lower thresholds for the salary requirement and eliminating the three-year update, among other changes. How long and what form such a process would take, and what could or would be done in the meantime, are currently unpredictable.
At the same time, a series of measures have been introduced in Congress hoping to prevent or stall the rules changes. While one of the proposed legislative changes would scrap the increases altogether, another proposed change would delay implementation for a period of time to provide a longer period of preparation. Still, another would push the date that the full increase would take effect to 2019, introducing more forgiving gradual increases on an annual basis for the next three years.
The fate of these measures is similarly uncertain at present. Even if any of these measures were fast-tracked, approved by Congress, and signed by President Obama before he leaves office, it is unclear whether they would ever take effect given the nature of the current litigation.
What Should Employers Do Now?
Some employers might find themselves in a difficult spot. If you have already made alterations to your compensation plans or to your employees’ exemption status, it might be unpopular to reverse course now. Although you may have the legal right to revert to the status quo depending on your circumstances, you might consider waiting until a final decision is reached in court, Congress, and the White House before doing anything further.
If you had been waiting until December 1 to implement the changes, you have the option of putting any alterations on ice and awaiting a final determination on the fate of the rules. If you do so, you might consider communicating to your workforce that the expected changes are going to be delayed given today’s court ruling, and let them know that you will continue to monitor the situation and make adjustments when and if appropriate.
We will track these developments and provide updates as issued.
Early Holiday Gift from the IRS – Due Date Extension for Furnishing Forms 1095 and Related Relief
In IRS Notice 2016-70, the IRS announced a 30-day automatic extension for the furnishing of 2016 IRS Forms 1095-B (Health Coverage) and 1095-C (Employer-Provided Health Insurance Offer and Coverage), from January 31, 2017 to March 2, 2017. This extension was made in response to requests by employers, insurers, and other providers of health insurance coverage that additional time be provided to gather and analyze the information required to complete the Forms. Notwithstanding the extension, the IRS encourages employers and other coverage providers to furnish the Forms as soon as possible.
Notice 2016-70 does not extend the due date for employers, insurers, and other providers of minimum essential coverage to file 2016 Forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS. The filing due date for these forms remains February 28, 2017 (March 31, 2017, if filing electronically), unless the due dates are extended pursuant to other available relief.
The IRS also indicates that, while failure to furnish and file the Forms on a timely basis may subject employers and other coverage providers to penalties, such entities should still attempt to furnish and file even after the applicable due date as the IRS will take such action into consideration when determining penalties.
Additionally, guidance provides that good faith reporting standards will apply for 2016 reporting. This means that reporting entities will not be subject to reporting penalties for incorrect or incomplete information if they can show that they have made good faith efforts to comply with the 2016 Form 1094 and 1095 information-reporting requirements. This relief applies to missing and incorrect taxpayer identification numbers and dates of birth, and other required return information. However, no relief is provided where there has not been a good faith effort to comply with the reporting requirements or where there has been a failure to file an information return or furnish a statement by the applicable due date (as extended).
Finally, an individual taxpayer who files his or her tax return before receiving a 2016 Form 1095-B or 1095-C, as applicable, may rely on other information received from his or her employer or coverage provider for purposes of filing his or her return. Thus, if employers take advantage of the extension in Notice 2016-70 and receive employee requests for 2016 Forms 1095-C before the extended due date, they should refer their employees to the guidance in Notice 2016-70.
