Because the IRS needs data to verify subsidy eligibility and to enforce the individual and employer mandates, the ACA added § § 6055 and 6056 to the Internal Revenue Code, requiring insurers and large employers to report that data to the IRS and to beneficiaries. The IRS published final rules in March 2014 and released early draft Forms in August. The final Forms for (voluntary) 2014 reporting were published February 9, 2015. Mandated reporting begins in early 2016, for 2015 coverage months.

The preamble to the Code § 6055 rules explains more clearly than the regulations, Forms or Instructions the relationship between insurer reporting (Forms 1094-B, 1095-B) under Code § 6055 and large employer (Forms 1094-C, 1095-C) reporting under Code § 6056:

An applicable large employer member that sponsors a self-insured plan will report on Form 1095–C, completing both sections to report the information required under sections 6055 and 6056. An applicable large employer member that provides insured coverage also will report on Form 1095–C, but will complete only the section of Form 1095–C that reports the information required under section 6056. Section 6055 reporting entities that are not applicable large employer members or are not reporting as employers, such as health insurance issuers, sponsors of multiemployer plans, and providers of government-sponsored coverage, will report under section 6055 on Form 1095–B.

 79 Fed. Reg. 13,225 (March 10, 2014) (preamble to 26 CFR § § 1.6055-1, 1.6055-2).   An accompanying e-flyer, IRS Pub. 5196, provides a helpful overview, especially the bullet-point lists of the data needed to complete each “C” form.   Note: Employers, regardless of size, offering self-insured group health coverage will have basically the same obligations under Code § 6055 that large employers have under § 6056. The only employers getting a complete pass are small employers with fully-insured group health plans or no group health plans.

Form 1094-C, 1095-C and their instructions are complex. Form 1094-B, Form 1095-B and the Instructions for Forms 1094-B and 1095-B are relatively simple. For that reason, and because the “B” Forms have changed little, we highlight below just a few “C” Form and Instruction changes since August 28, 2014.

Forms 1094-C and 1095-C

The Forms appear to be approved for use.  The first “early release drafts” came with sheets headed, “Caution: DRAFT – NOT FOR FILING,” and bore watermarks reading, “DRAFT AS OF August 28, 2014 DO NOT FILE.”  The new releases lack watermarks.  They are titled, “Form 1094-C (2014),” and “Form 1095-C (2014).”  Form 1094-C is otherwise substantially unchanged.

Form 1095-C Part I (employee and employer identification data), takes up slightly less vertical space and Part II, “Employee Offer and Coverage,” has the same data cells but they too are shorter.  Part III, where large self-insurers identify each covered individual, gets the vertical space that Parts I and II surrendered.  Maybe IRS anticipates that many self-insurers will complete the Form manually. We hope that our readers have selected software solutions.

The Instructions for Recipient on the back of Form 1095-C add only two pieces of new information that employees might use. The opening sentence now tells the employee that his or her employer had to deliver the Form because it is an Applicable Large Employer subject to the ACA’s employer mandate.   The paragraph closes by explaining that an employee of more than one large employer should expect to a Form 1095-C from each of them.

Instructions for Forms 1094-C and 1095-C

Here we see the same indicators that the Forms are no longer in preliminary draft status, and we see many more substantive modifications and additions.  About 15% of the February 9 text seems to be new or modified, compared to the August 28 text.  These fourteen, two-column, single-spaces pages are where the action is.  We lacking room and you lacking tolerance for a page-by page analysis, we’ll briefly and too simply flag just four change areas – Designated Government Entity (DGE) reporting (pages 2-3, 9), self-insurer reporting (pages 2, 4, 10), Minimum Value definition (page 11) and multiemployer plan reporting (pages 5, 7-8, 10-11).

DGE Reporting:  DGE’s were referenced in the first draft instructions but their coverage bulked-up in the final release. A DGE is, “a person or persons that are part of or related to the Governmental Unit that is the ALE Member and that is appropriately designated for purposes of these reporting requirements.”  Nevertheless, “the Governmental Unit must ensure that among the multiple Forms 1094-C filed by or on behalf of the Governmental Unit transmitting Forms 1095-C for the Governmental Unit’s employees, one of the filed Forms 1094-C is designated as the Authoritative Transmittal and reports aggregate employer-level data for the Governmental Unit, as required in Parts II, III, and IV of Form 1094-C.”  Here’s the given example:

County is an ALE made up of ALE Members School District, Police District, and County General Office.  School District designates the state to report on behalf of the teachers and reports for itself for its remaining full-time employees. In this case, either the School District or the state must file an Authoritative Transmittal reporting aggregate employer-level data for all full-time employees of the School District.

Self-Insurer Reporting:  The instructions direct self-insured employers to review and use Forms 1094-B and 1095-B and specify when Form 1095-C is a permitted or required alternative.  For example, small, self-insured employers use the “B” Forms, because the “C” Forms are for “Applicable Large Employers.”  Large employers with fully-insured plans need not complete, file and deliver a Form 1095-C for an employee who was, in the relevant year, only employed in a “limited non-assessment” status (even though the employee is included in the census reported on Form 1094-C), but employees enrolled in a large employer’s self-insured plan despite that status must have a Form 1095-C (listing all covered individuals in Part III). Although it’s not clear on first reading, it appears to us that large employers offering self-insured coverage to non-employees (for example, corporate directors) may report “covered individuals” data on Form 1095-C Part III, but must report their self-insurer status on Form 1095-B.

Minimum Value Definition:  The instructions add these italicized words to the Minimum Value definition – “A plan provides minimum value if the plan pays at least 60 percent of the costs of benefits for a standard population.”  Reading “for a standard population,” in light of IRS Notice 2014-69 and the January 15, 2015 HHS release of the 2016 Minimum Value Calculator, we interpret this as reiterated hostility toward Minimum Essential Coverage (MEC) plans lacking hospitalization coverage.

Multiemployer Plan Reporting:  We have worried aloud that the IRS and DOL might treat leased employee coverage arrangements as multiemployer plans, perhaps even applying punitive MEWA rules not written for that purpose.  The reason for severe MEWA penalties is put simply on the DOL/EBSA web site:

Through MEWAs, unrelated employers, typically small businesses, seek to provide health care and other benefits to their workers at what is represented to be a lower cost than other traditional forms of coverage.

The promoters, marketers and operators of MEWAs often have taken advantage of gaps in the law to avoid state insurance regulations, such as a requirement to maintain sufficient funding and adequate reserves to pay the health care claims of workers and their families. In the worst situations, operators of MEWAs have drained their assets through excessive administrative fees or outright embezzlement, resulting in harm to participants and their families. In some cases, individuals incur significant medical bills before they learn that claims are not being paid – and that they are liable and need to pay their medical bills themselves. The Affordable Care Act includes provisions designed to remedy these gaps.

This is a real problem justifying regulatory reaction. Worrying about over-reaction, we scoured these instruction changes for clues that leased employer coverage might be treated as a MEWA.

Under the employer mandate rules, 26 CFR § 54.4980H-4, employers of certain leased employees, under certain circumstances, may claim credit for qualifying coverage offers made to those workers by their staffing company employer.  This accommodating language survived from the original draft of these instructions:

An employer offers health coverage to an employee if it, or another employer in the Aggregated ALE Group, or a third party such as a multiemployer or single employer Taft-Hartley plan, a multiple employer welfare arrangement (MEWA), or, in certain cases, a staffing firm, offers health coverage on behalf of the employer.

The “employee” definition properly was changed to match the § 54.4980H-1 employee definition, which excludes, “a leased employee within the meaning of section 414(n) of the Code . . ….”  Code § 414(n) describes people leased in full-time status for a year or more.  Discussing how an employer reports on Form 1095-C an offer of credit made by another, the instructions say –

The information related to whether the full-time employee was offered coverage (generally meaning the employee was eligible for coverage under the plan) must be accurate to facilitate administration of the premium tax credit, including in the case of coverage offered by a plan such as a multiemployer plan or a plan sponsored by a staffing firm or similar entity for which the client employer pays an additional amount for enrolled employees. The alternative reporting methods may be applied to the offer of coverage to the extent the employer is otherwise eligible to use these methods. For example, if a multiemployer plan represents to a contributing employer that the full-time employee on behalf of whom the employer contributed was eligible for coverage that is a Qualifying Offer for all 12 months, the contributing employer may use the alternative reporting method related to such a Qualifying Offer. See the sections of these instructions related to the Qualifying Offer Method, including the 2015 Qualifying Offer Method Transition Relief.

Emphasis ours.  The closest “relief” code is Code 2E, “multiemployer interim rule relief.”  Other sorts of relief get detailed treatment on page 13 of the instructions, but “multiemployer arrangements” guidance consists of a reference back to the definition of “offer of health coverage.” There (page 11, right column), we read this:

An employer offers health coverage to an employee if it, or another employer in the Aggregated ALE Group, or a third party such as a multiemployer or single employer Taft-Hartley plan, a multiple employer welfare arrangement (MEWA), or, in certain cases, a staffing firm, offers health coverage on behalf of the employer.

Emphasis ours.   IRS seems to be saying that staffing firm offers are one type of arrangement entitled to “multiemployer interim rule relief.”  Consistently, the preamble to the employer mandate final rules describes staffing firm offers as a “similar arrangement” to a MEWA or other multiemployer plan.  79 Fed. Reg. 8,566 (Feb. 12, 2014).  Though staffing company plans are omitted from the preamble’s “Interim Guidance With Respect to Multiemployer Arrangements,” 79 Fed. Reg. 8,576, the rule text, 26 C.F.R. § 54.4980H-4(b)(2), discusses them in abutting sentences, adding that –

For an offer of coverage to an employee performing services for an employer that is a client of a staffing firm, in cases in which the staffing firm is not the common law employer of the individual and the staffing firm makes an offer of coverage to the employee on behalf of the client employer under a plan established or maintained by the staffing firm, the offer is treated as made by the client employer for purposes of section 4980H only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay the staffing firm for the same employee if that employee did not enroll in health coverage under the plan.

Subsection (b) is headed, “Offer of coverage.”  We hope that IRS is not saying that claiming credit for a staffing company’s coverage offer exposes an employer to MEWA rules, but it’s a bit close for comfort. Because DOL has MEWA enforcement authority, it could provide sub-regulatory assurance that claiming Form 1095-C, Code 2E, multiemployer interim rule relief, based on coverage offers made to leased workers by staffing firms, will not expose those plans and employers to ERISA regulation of Multiple Employer Welfare Arrangements.  Let’s hope DOL reads this and responds helpfully.