ACA Tax Reporting

Requirements

AUMCPBO Annual Meeting

October 2014

Disclaimer

The material in this update is provided

as general information and education.

It should not be construed as, and does not

constitute, legal advice nor accounting, tax,

or other professional advice or services on

any specific matter, nor does this message

create an attorney-client relationship.

Readers should consult with their counsel or

other professional advisor before acting on any

information contained in this presentation.

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Agenda

• ACA*—New Regime of Reporting Requirements

• Minimum Essential Coverage

• Individual Shared Responsibility

• W-2 Reporting

• Employer Shared Responsibility Rule

• Premium Tax Credits (PTC)

• Church Plan Sponsor/Employer Concerns

* ACA: Affordable Care Act 3

ACA Reporting and Tax Forms

Individual Tax Returns

Form 1040

• Line 61 (New):

Individual Mandate

• Line 69 (New):

Net Premium Tax Credit

Form 8962 Premium Tax Credit

Form 8965 Health Coverage Exemption

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Information Returns

Form 1095

• 1095-A: Marketplace Coverage

• 1095-B: Plan Coverage

(insured or self-funded

employer plans)

• 1095-C: Employer-Provided

Coverage

Form W-2

• Box 12, Code DD:

Cost of employer-sponsored

health coverage

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IRS Databases

Coverage Data Repository (CDR)

• Forms 1095-A

• Marketplace Coverage

• Advanced Premium Tax Credits

• Form 14950—

Premium Tax Credit Verification

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Minimum Essential Coverage

Plan Coverage Reporting 2016 Deadlines

Minimum essential coverage (MEC) reporting

(Code §6055) beginning with 2015 calendar year

This reporting is a Plan Sponsor responsibility.

February 1 Reporting Entity issues statements

(copies of Form 1095-B) to all covered lives

March 31

Reporting Entity submits Form 1095-B

to IRS for each covered individual in the Plan

Reporting Entity submits Form 1094-B

(transmittal cover) to IRS • February 28 deadline for hardcopy paper forms

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Who Is Reporting Entity?

Fully-Insured Plans

Self-Insured Plans

Insurance Company

Plan Sponsor

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Who Is the Plan Sponsor?

Other Cases

• Local church self-insured medical plan Local church (rare)

• Local church-provided health reimbursement arrangement (HRA)

or employer payment plan (EPP) Local church

* CBOP: Conference Board of Pensions (if it so chooses)

HealthFlex GBPHB

Self-Insured Conference Plan

CBOP*

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Small Plans Must Report

Unlike the reporting requirement for ACA

applicable large employers (ALEs) [§ 6056 reporting],

§ 6055 reporting applies to self-insured plans of

small employers (fewer than 50 FTEEs*)

* FTEE: Full-time equivalent employees

Smaller self-insured annual

conference plans

Local church-provided HRAs

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Plan Coverage Reporting

Section 6055 Report must include:

Name of each person with MEC

Name of “responsible person” (primary participant)

TIN* (SSN*) of each covered person

Calendar months each person was covered

Name, address, EIN* of reporting entity

* EIN: Employer identification number; TIN: tax identification number;

SSN: Social Security number

Form 1095-B—Draft

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TIN Safe Harbor—Section 6055

• Reporting entities must use TIN

• DOB* may be used instead of TIN,

if TIN is not available after reasonable effort:

— Plan solicits TIN for covered dependents at annual

enrollment or initial enrollment for new hires, and

— Follows up at least one additional time during

calendar year

• Reporting entities may use truncated TINs

on statements to the employee

* DOB: Date of birth

Penalties—Section 6055

2015 Penalties not assessed if Reporting Entity

makes “good faith effort to comply”

2016

Penalties similar to § 6056 Reporting

• $100 per covered life

• Maximum $1.5 million per calendar year

[for both IRS Form and participant statement]

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Individual Shared Responsibility

Minimum Essential Coverage

• Government coverage — Medicare, Medicaid, CHIP*, TRICARE and veterans’ coverage

• Employer-sponsored coverage — Church health plans are minimum essential coverage

• Individual market plans — Exchange plans, private market plans, grandfathered plans

• Other health benefit plans recognized by HHS**—examples: — Student health plans and state high-risk pools (2014 only)

— Medicare Advantage plans

— AmeriCorps coverage

— Foreign health services (if approved)

* CHIP: Children’s Health Insurance Program

** HHS: U.S. Department of Health and Human Services 18

Tax Return Verification

Individual Responsibility (Mandate)

on Form 1040: Line 61

• 2014: “Honor system”

• 2015: Reported on Form 1095-A or 1095-B

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Penalty Tax

Code §5000A Have “minimum essential coverage (MEC) or pay excise tax—April 2015 tax return*

Individual Penalty (Adults)

2014 2015 2016 Maximum

Greater of $95

or 1% of income

Greater of $325

or 2% of income

Greater of $695 or

2.5% of income

National average**

“bronze plan” premium

Family penalty: Limited to 3x (300%) individual penalty

Child penalty: 50% of individual adult penalty

* Line 61 Form 1040 2014

** $2,448 per individual in 2014 20

Penalty Tax Exemptions—Examples

• No affordable coverage — Costs > 8% of MAGI*

— Hardship

— Low income (less than tax

filing threshold)

• Undocumented aliens

• Incarcerated

• Religious objectors (Amish),

health care sharing

ministries

• Native Americans

* MAGI: Modified adjusted gross income

Form 8965

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W-2 Reporting

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W-2 Reporting

Employers (e.g., local churches) required to report

“cost” of health coverage on employees’ W-2s

January 2013 on secular, large employer W-2s

Temporary exemptions remain for:

• Employers in church plans

(unless church plan is subject to ERISA)

• Small employers (fewer than 250 W-2s)

• Union plans

• HRAs

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W-2 Reporting

• Cost of Health Coverage

— For self-insured plans: §4980B(f)(4) “COBRA Rate”

• Church Plans exempt from COBRA

— Blended rates, percentage of compensation,

part of apportionment

• Church Alliance Comment Letter

IRS may end exemption upon 6 months’ notice

• No earlier than 2014 Tax Year

– 2017 Tax Year more likely (ahead of Cadillac Tax)

Employer Shared Responsibility

Employer Coverage Reporting

Applicable large employers* must report to IRS:

covered full-time employees (FTEs)—Code §6056

* Applicable large employer: 50+ full-time equivalent employees

** January 31 most years

This reporting is an employer responsibility.

GBPHB/CBOP will likely not perform this reporting for churches.

Required for 2015 calendar year

• Even if not subject to Employer Mandate until 2016

Penalty for failures: $100 per FTE; maximum $1.5 million per

calendar year [for both IRS Form and participant statement]

Submit Form 1095-C for each covered FTE

(with single Form 1094-C) by March 31, 2016

Provide statement to covered FTEs by February 1, 2016**

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Employer Certification (2015)

Related to new delay for mid-sized employers (50-99 FTEEs)

Certification required for 2015

(with 2015 reporting of covered FTEs)

Employer has 50–99 FTEEs in 2014

Has not cut staff to have fewer than 100 FTEEs

(February 9 — December 31, 2014)

Has not/will not drop or “reduce” health coverage

(February 9, 2014 — December 31, 2015)

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Employer Coverage Reporting

§6056 Report must include:

Name, address, EIN* of employer

Contact person at employer

Certification that employer offered coverage

to FTEs and dependent children

FTEs for each month

FTEs’ share of premium of lowest-cost plan

Name, address, TIN* (SSN*) of each FTE

* EIN: Employer identification number; TIN: taxpayer identification

number; SSN: Social Security number

Form 1095-C—Draft

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Who Must Report?

• Applicable Large Employer (ALE)

— 50 or more FTEEs

— No extension for medium employers

50–100 FTEEs

• Third-party vendor can assist

or do reporting—but penalties

for failures accrue to ALE

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Affordability Safe Harbors

• ALEs can report the ACA “Affordability”

safe harbor used to avoid Shared

Responsibility penalties

Part II of Form 1095-C

• Safe Harbor reporting for FTEs, may

reduce likelihood of assessed penalties

when an employee receives a PTC

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PTC Verification

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Reporting APTC*

Form 1095-A from Marketplace to

taxpayer reports month-by-month:

• Premium

• Second-lowest-cost

Silver plan premium

• Advanced premium tax credit

* APTC: Advanced premium tax credit

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Form 8962—Premium Tax Credit

Form 8962

• PTC calculation

• Advanced PTC

reconciliation

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Reconciliation

Form 1040: Line 69

“Net premium tax credit”

• From Form 8962

Church Plan/Employer Concerns

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Plan Sponsor Ambiguity

• Who is “plan sponsor” in a multiple

employer church plan?

Who submits Form 1095-B?

• Default each separate employer

Plan document may assign

“plan sponsor” duty under Section 6055

to plan administrator or trustee

Preliminary HealthFlex approach

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Duplication

• If GBPHB or CBOP submits Forms 1095-B

for all covered lives;

• Must participating ALEs (large local

churches, conference offices, etc.)

report covered lives in Forms 1095-C

(Part III)?

May be duplicative

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www.gbobphb.org