ACA 6055 & 6056 Reporting for COBRA & HRA Participants
The Affordable Care Act (ACA) imposes demanding information reporting responsibilities on employers starting with the 2015 calendar year. The reporting stipulation states that an information return must be prepared for each applicable employee, and these returns must be filed with the IRS using a single transmittal form (Form 1094-B & 1095-B or Form 1094-C & 1095-C). These filing requirements are based on an employer’s health plan and number of employees, including some COBRA beneficiaries and HRA participants.
The ACA & COBRA
The Affordable Care Act (ACA) requires employers to consider COBRA coverage in the new required reporting under Internal Revenue Code sections 6055 and 6056 which begin in the first quarter of 2016. The 6055 reporting is satisfied using the “B” forms (the 1094-B and the 1095-B). The 6056 reporting is satisfied using the “C” forms (the 1094-C and the 1095-C). The 6055 reporting applies to all employers offering group health coverage. However, if the employer’s plan is fully-insured, the insurance carrier is required to report on the employer’s behalf. The 6056 reporting only applies to large employers (with 50 or more full-time employees and full-time employee equivalents). And, if the large employer’s group health plan is self-funded, it can satisfy its 6055 reporting on a combined basis with the 6056 reporting by completing part III of the 1095-C.
IF I AM A SMALL EMPLOYER MUST I REPORT THE COBRA QUALIFIED BENEFICIARIES ENROLLED IN MY GROUP HEALTH PLAN?
Yes, in some circumstances. A small employer (with fewer than 50 full-time employees and full-time employee equivalents) is only obligated to report under 6055 (and not 6056). If the small employer’s plan is fully-insured, the insurer will report the COBRA qualified beneficiaries who are enrolled and the small employer has no further reporting obligations. If the small employer’s plan is self-funded, the employer must report the COBRA qualified beneficiaries (as well as the employees) who are enrolled in its group health plan under 6055 using the 1094-B and 1095-B forms. The information which must be reported includes the name and SSN of each enrolled COBRA qualified beneficiary and the names and SSNs of any other family members who are enrolled, along with which months of the calendar year they are enrolled. For this purpose a COBRA qualified beneficiary may include a former employee, an employee with reduced hours or who takes a leave or a dependent who elects COBRA due to the employee’s death, or due to divorce or reaching the limiting age.
IF I AM A LARGE EMPLOYER MUST I REPORT THE COBRA QUALIFIED BENEFICIARIES ENROLLED IN MY GROUP HEALTH PLAN?
Yes. The reporting obligations of a large employer (with 50 or more full-time employees and full-time employee equivalents) are similar to the requirements for a small employer. However, there are some additional requirements which also apply. First, if the large employer’s plan is fully-insured, like the small employer, the insurer will report the COBRA qualified beneficiaries who are enrolled under 6055. If the large employer’s plan is self-funded, the employer must report the names and SSNs of the COBRA qualified beneficiaries and their family members who are enrolled under part III of the 1095-C, along with which months of the calendar year they are enrolled. Again, this includes all individuals (including dependents) who elect COBRA.
In addition, COBRA coverage must be considered when completing part II of the 1095-C with respect to the large employer’s full-time employees. This is the case regardless of whether the employer’s plan is self-funded or fully-insured. (Other COBRA qualified beneficiaries such as ex-spouses and older children are not considered in part II of the 1095-C.) If a full-time employee terminates employment and is offered COBRA the reporting is now straight forward under new IRS guidance. Regardless whether the full-time employee elects COBRA, a COBRA offer after termination of employment is considered “no offer of coverage” (indicator code 1H on line 14 of part II of the 1095-C) and the person should be reported as a non-employee (indicator code 2A on line 16 of part II of the 1095-C). On the other hand, if a full-time employee has a reduction in hours or takes a leave and is offered COBRA, the COBRA must reported as an offer of coverage using the appropriate indicator code on line 14 (such as 1A or 1E) and the COBRA premium must be reported on line 15, rather than the cost of coverage for an active employee. If the employee enrolls in COBRA part II of line 16 will be completed using indicator code 2C. However, if the employee does not enroll, since the COBRA premium will likely be unaffordable, line 16 will be left blank. As a result, if such an employee would go to the exchange and obtain a premium credit it may trigger a pay or play penalty (typically the $3,000 penalty with respect to that employee). So for part II of the 1095-C it will be necessary to know whether any full-time employees who are offered COBRA as a result of a reduction in hours of leave of absence elected COBRA and for which months.
Finally, with respect to any full-time employees who have a reduction in hours or take a leave of absence who are offered COBRA, the offer of COBRA is considered an offer of coverage in reporting whether the large employer offered fully-insured or self-funded coverage to at least 70% of its full-time employee’s coverage. This is reported on page 2 of the 1094-C (column a). After this year the 70% threshold increases to 95%.
The ACA and HRA
Health reimbursement arrangements (“HRAs”) are generally considered “minimum essential coverage” for which reporting is required under the new ACA reporting under Internal Revenue Code sections 6055 and 6056 beginning in the first quarter of 2016. However, certain HRAs are exempt from reporting under the most recent instructions to the reporting forms. There are two sets of reporting forms. The reporting forms for Section 6055 are the “B” forms (1094-B and 1095-B). The reporting forms for Section 6056 are the “C” forms (1094-C and 1095-C).
The issue with the HRA is whether the employer must report the employees who are enrolled in its HRA in addition to the employees who are enrolled in its primary group health plan. For employers with fully-insured primary group health plans and small employers (with fewer than 50 full-time employees and full-time employee equivalents) with self-funded primary group health plans, this reporting occurs under 6055(the 1094-B and 1095-B). For large employers (with 50 or more full-time employees and full-time employee equivalents) this reporting occurs on a consolidated basis with the 6056 reporting. Specifically, the large self-funded employer completes part III of the 1095-C in addition to the remaining portions of that form.
IF I OFFER A FULLY-INSURED GROUP HEALTH PLAN AND AN HRA ONLY TO MY EMPLOYEES WHO ARE ENROLLED IN THE FULLY-INSURED GROUP HEALTH PLAN, WHAT ARE MY REPORTING RESPONSIBILITIES?
The insurer is obligated to report under 6055 with respect to your fully-insured group health plan. If you are a small employer (under 50 full-time employees and full-time employee equivalents) you have no obligation to report the HRA nor do you have any further obligation to report. If you are a large employer (with 50 or more full-time employees and full-time employee equivalents) you have no obligation to report the HRA coverage but of course you still are required to complete the 6056 reporting (the 1094-C and the 1095-C). Because you won’t have to separately report the HRA you will leave part III of the 1095-C blank.
IF I OFFER A SELF-FUNDED GROUP HEALTH PLAN AND AN HRA ONLY TO MY EMPLOYEES WHO ARE ENROLLED IN THE FULLY-INSURED GROUP HEALTH PLAN, WHAT ARE MY REPORTING RESPONSIBILITIES?
If you are a small employer you are required to report the employees enrolled in the primary self-funded group health plan under 6055 (the 1094-B and 1095-B), but you are not required to report under 6056. If you are a large employer you are required to report under 6056 (the 1094-C and 1095-C) and you will complete part III of the 1095-C regarding the employees enrolled in the primary self-funded group health plan. In either case you do not need to separately report the HRA (because it is bundled with the primary self-funded coverage).
IF I OFFER AN HRA TO EMPLOYEES WHO WAIVE MY GROUP HEALTH COVERAGE AND WHO ENROLL IN GROUP HEALTH COVERAGE THROUGH ANOTHER SOURCE SUCH AS A SPOUSE’S EMPLOYER, WHAT ARE MY REPORTING RESPONSIBILITIES?
In this situation you must report the employees who are enrolled in the HRA. There is no exemption. If you are a small employer you will report the employees enrolled in the HRA under 6055 (the 1094-B and 1095-B). If you are a large employer you will report the employees enrolled in the HRA under 6056 (specifically, part III of the 1095-C).
IF I OFFER AN HRA TO RETIREES, WHAT ARE MY REPORTING OBLIGATIONS?
For a retiree HRA that is provided to retirees who are eligible for Medicare (e.g., age 65 or older), the HRA is considered to be a supplement to Medicare and as a result, you are not required to report the retiree HRA under 6055 or 6056.
For a retiree HRA that is provided to retirees who are not yet eligible for Medicare, reporting is required. If you are a small employer, you will report the retirees enrolled in the HRA under 6055(the 1094-B and 1095-B). If you are a large employer, in the year the employee retires you will report the retiree HRA coverage under 6056 (part III of the 1095-C). For the year(s) after the employee retires, a large employer has the option to report the retiree coverage either under 6055(the 1094-B and 1095-B) or under 6056.
IF I OFFER AN HRA WHICH ONLY REIMBURSES UNINSURED DENTAL AND VISION EXPENSES, WHAT ARE MY REPORTING OBLIGATIONS?
Good news for you. Dental/vision-only HRAs are not subject to reporting under 6055 and 6056.
Don’t Go at it Alone
The rules governing ACA compliance are complicated and will continue to see additional modifications. Given the complexity of ACA compliance and the potential cost for missing the mark, it is wise to seek professional guidance. Consult with your payroll, benefits and tax professionals for more information about the law or for assistance with filing Forms 1094-B, 1095-B, 1094-C and 1095-C.
For more information on the ACA and 6055 & 6056 Reporting requirements, click on the link below:
