PT Benefits Explains Employer Shared Responsibility Reporting Requirements Under PPACA: Code Sections 6055 & 6056

PT Benefits wants our clients and potential clients to understand that there are two types of employer shared responsibility payments, also known as pay or play penalties, under the Affordable Care Act (ACA). The first penalty under Internal Revenue Code (Code) Section 4980H(a) is the penalty for failure to offer health coverage.  Effective for plan years that began on or after January 1, 2015, a $2,000 annual penalty applies to a large employer that fails to offer at least 70 percent of its full-time employees (FTEs) health coverage. Employer Shared Responsibility Reporting Requirements mean serious business.

Penalties & Employer Shared Responsibility Reporting Requirements

Employer Shared Responsibility Reporting Requirements, PPACA

Employer Shared Responsibility Reporting Requirements

The second penalty under §4980H(b) is for the failure to offer coverage that is of minimum value and affordable. The Section 4980H(b) penalty is a $3,000 annual penalty assessed on a monthly basis, and applies to each FTE who is not offered minimum value affordable coverage by the large employer, goes to the Marketplace Exchange and receives an exchange subsidy for insurance he or she purchases through the Marketplace Exchange.  It is important to note that even if an employer offers coverage to 70 percent of its FTEs for 2015 and 95 percent of its FTEs for 2016 and beyond, the employer could still be subject to penalties under Section 4980H(b) if the coverage is unaffordable or does not provide minimum value.

What is even more troubling when it comes to Employer Shared Responsibility Reporting Requirements is that even if an employer meets the 70/95 percent threshold, it still faces the potential for the $3,000 Section 4980H(b) penalty for every FTE who is not offered coverage (i.e., the 30/5 percent safe harbor employees) if that employee receives an exchange subsidy for insurance he/she purchases through the Marketplace Exchange.

Code Section 6055 requires health insurance issuers and employers that sponsor self-insured health plans to report information concerning the type and period of coverage to the IRS and to the covered individuals.  Section 6055 reporting is intended to serve as verification that the individual has MEC for purposes of enforcing the ACA’s individual responsibility requirements.  Code Section 6056 requires large employers to provide information to the Internal Revenue Service (IRS) about whether MEC is offered to their FTEs and their dependents. The IRS will determine whether an employer owes a shared responsibility payment under Code Section 4980H and whether an employee is eligible for a premium tax credit on a Marketplace Exchange will use this information.

Employer Shared Responsibility Reporting Requirements – 6055 & 6056

Employers with 50 or more FTEs use Forms 1094-C and 1095-C to report the information required under Code Sections 6055 and 6056.  Form 1094-C is used to report to the IRS summary information for the employer and to transmit the Forms 1095-C to the IRS.  Form 1095-C is used to report information about each applicable employee. If an employer provides coverage through an insured plan, part of Form 1095-C will be left blank.  The insurance company will separately report on MEC for those individuals enrolled in fully insured plan options.

Recognizing the burden of these Employer Shared Responsibility Reporting Requirements imposed on employers, the IRS has provided a simplified reporting method for large employers that make qualifying offers of coverage to FTEs, their spouse and their dependents for all 12 calendar months of the reporting year. A simplified alternative that allows the employer to report without identifying or specifying the number of FTEs is also available for employers that offered, for all 12 months of the calendar year, affordable health coverage under IRS safe harbors.

Help With Employer Shared Responsibility Reporting Requirements

PT Benefits believe that employers should review the draft reporting forms and instructions to familiarize themselves with the types of information that must be provided under these Employer Shared Responsibility Reporting Requirements.  If such forms and instructions are too complicated, PT Benefits will help our clients navigate this maze of PPACA bureaucracy. To learn more about how PT Benefits can help your company with Employer Shared Responsibility Reporting Requirements and whether your company qualifies for an IRS safe harbor, please call 626-795-4138 today.

Chris Pontrelli

About 

Principal at Pontrelli, Timour & Associates, Inc.

A California native of Pasadena, Chris Pontrelli received his Health & Insurance License from the California Department of Insurance in 1993. After working at Banker’s Trust in their 401k administration division, Chris Pontrelli set-up a desk in his father’s insurance office and built his group insurance business from the ground up. Chris Pontrelli teamed-up with childhood friend Raphy Timour to form Pontrelli, Timour & Associates, Inc. in 2003.

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