And if you are an ACA “Applicable Large Employer” (ALE), it was.

The American Health Care Act, H.R. 1628, with last minute amendments noted in H. Rep. 115-109, passed the House of Representatives on Thursday afternoon, May 4.  Here is a very brief summary of the 131 pages of combined text, focused on changes for Applicable Large Employers.

The employer mandate tax isn’t repealed, but AHCA § 206 reduces the tax to $0 for 2016 and beyond.  This leaves the IRS free to assess and collect 2015 employer mandate taxes from Applicable Large Employers, so don’t ignore notices you may receive soon.  But if the employer mandate goes away, so do severe complications for collective bargaining and employee leasing arrangements.

AHCA § 207 suspends the Cadillac Plan tax until 2025, by which time we’ll all have Cadillacs, very probably.

Employer coverage reporting requirements and associated penalties are untouched by the AHCA.  If you like filing your Forms 1095-C, you can keep filing your Forms 1095-C … or even if you don’t.

While the ACA’s anti-retaliation provision (29 U.S.C. § 218c) survives, its danger should subside, practically speaking.  Employee subsidies to buy Exchange insurance present the biggest employer retaliation exposure, it seems to us, and AHCA § 203 ends those subsidies after 2019.  AHCA § 205 sets the individual mandate tax to $0 after 2015, which should reduce the pressure on low wage employees to seek Exchange coverage and related subsidies in 2018 and 2019.

Of course, none of this matters unless the Senate goes along.  There must be a parliamentary ruling that the AHCA may be considered under budget reconciliation rules, so that only 51 votes are needed.  Then, with whatever changes are made, it must find at least 50 votes, plus the Vice President.  Senate changes would require House approval thereafter.  We’re still in Act II.  It’s still messy, but it’s moving.

Watching from afar the Scouts attempting to earn their orienteering merit badges, we could see it on the boys’ faces.  They were lost; they were scared.  They should have reached their destination an hour ago.  Soon, these woods would be dark.   The compass holder, the map marker and the step counter resumed their running argument. We wondered whether to intervene.  Then, the class clown smiled . . . and pointed . . . at a rusted, single-wide trailer they had seen before, very near their departure point.  In five hours, they had come full circle.  They had done a lot wrong and were glad just to know how to get back to our campfire. Success could wait.

And so it is with ACA repeal.  A better-planned, better-executed effort may be mounted, but probably not soon.  Between now and then, 2015 employer mandate taxes will be assessed and collected, and perhaps 2016 taxes, too.  OSHA will investigate the retaliation complaints of employees discharged after triggering those tax assessments by seeking ACA Marketplace subsidies.  Form 1094-C / Form 1095-C reporting penalties will be imposed.  Group health plans will be audited for ACA compliance.  Temp staffing and employee leasing arrangements will be disrupted by those developments.  Consequently, we now return you to our regularly scheduled program.  If ACA compliance has been sidelined or forgotten in your organization, now would be a good time to tune-in.

Screenplays, new business ventures and major legislation typically have problems in Act II.  Hopes were raised so high in Act I.  Now, things seem to drag on and on, pointlessly.   Friends tell you to give up or start over and enemies . . . well.

Last week, two House committees – Energy and Commerce, Ways and Means – produced the budget reconciliation bill drafts, sub nom the American Health Care Act – that were scheduled to have been delivered to the House Budget Committee by January 27.  The Budget Committee (remember, this is budget reconciliation) now will seek to deliver to the House floor an AHCA draft that can get 218 votes despite a feared CBO analysis that may be published today.  Here are highlights of the current bills.

Individual mandate taxes and employer mandate taxes are repealed, sort of.  Technically, the employer mandate tax (26 U.S.C. § 4980H) is set at $0 for tax years beginning after December 31, 2015.  Puzzlingly, however, ACA coverage reporting mandates and penalties are untouched.    So, if you were hoping to avoid dealing with the IRS about 2015 tax assessments, or Form 1095-C reporting issues, you’ll need Budget Committee or House floor amendments.  And, while the individual mandate dies, the AHCA authorizes insurers to charge a 30% premium for people who want to buy coverage after they become ill or injured.  That’s the trade-off for keeping the ACA mandate to sell coverage to people with pre-existing conditions.

Medicaid expansion, which the ACA promised to fund only to 2019, is repealed after 2019.  Further, states will be paid a capped amount per individual enrolled in Medicaid.  However, the AHCA restores DSH payments that hospitals lost under the ACA and gives states much more authority to police Medicaid eligibility and ferret-out fraud.

ACA premium and cost sharing subsidies are repealed and replaced with tax credits based on age and family size.

Almost all the ACA’s new taxes are repealed, along with the ACA’s FSA limits.  The big exception is the Cadillac Plan tax, which gets buried and then rises from the grave, zombie-like, in 2025.

We don’t plan to get too excited about anything until we see (a) what the House sends the Senate and (b) what HHS Secretary Tom Price does to reform, by administrative rule and sub-regulatory guidance, what cannot be changed by budget reconciliation legislation.  For example, in a March 10 news release, the Secretary promised to do, “everything within our authority to provide our nation’s governors and state legislatures with greater flexibility on how they utilize Medicaid resources in caring for those in need.  This will include a review of existing waiver procedures to provide states the impetus and freedom to innovate and test new ideas to improve access to care and health outcomes.”  We suspect that new HHS rules (and, later, IRS and DOL rules) will become bargaining chips in negotiations over legislation that will need 60 Senate votes.

We’re in the middle Act.  It’s messy and we’ll need a while to see where we’re going.  As Quasimodo would have said, “The bills . . . the bills!”

Update:  On March 16, 2017, the House Budget Committee approved (19-17) the AHCA without amendment.

In the ACA realm, change is the only constant, so don’t take this to the bank.  We’re telling you what we see for the first time, on a first reading of the draft 2016 Forms and Instructions that the IRS has released since July 7.  “Applicable Large Employers,” their contractors and consultants will use these Forms in early 2017 to report to the IRS coverage offers (and self-insured coverage) extended during 2016. We apologize for the unusual length of this article, but reading it all yourself would take far longer.  Believe us.

Form 1094-C

As for 2015 coverage reporting, each ALE Member will file this to summarize data about its accompanying Forms 1095-C. There’s only one substantive difference for 2016 coverage reporting – Line 22, Box “B,” “Qualifying Offer Method Transition Relief,” which was available only for 2015 coverage, is gone, and Box “B” is now “Reserved.”

In part III, “Section 4980H” was inserted before “Full-Time Employee Count for ALE Member.”  We infer that many 2015 filers were unaware of the important differences between the § 4980H term “full-time” and the term as defined in their policies and plans.  See also page 9 of the Instructions.

Form 1095-C

Just beneath the Form’s title, the IRS has added this instruction to the recipient employee: “Do not attach to your tax return. Keep for your records.”  Sounds like the IRS was deluged this filing season.

The Line 15 title, “Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage,” was abbreviated.  It’s now, “Employee Required Contribution (see instructions).” Part III references to “SSN” now say “”SSN or other TIN.”

The Instructions for Recipient note that the 9.5% affordability figure is inflation-adjusted.  See also page 13 – 9.56% for plans beginning in 2015 and 9.66% for plans beginning in 2016.  There are short explanations of three, Form 1095-C, Line 14, Series 1 Code changes.  Code 1I, “Qualifying Offer Transition Relief,” is gone, replaced by “Reserved,” as on Form 1094-C, Line 22.  New Code 1J reports, “Minimum essential coverage providing minimum value offered to you; minimum essential coverage conditionally offered to your spouse; and minimum essential coverage NOT offered to your dependent(s).”  New Code 1K indicates, “Minimum essential coverage providing minimum value offered to you; minimum essential coverage conditionally offered to your spouse; and minimum essential coverage offered to your dependent(s).”

2016 Instructions for Forms 1094-C and 1095-C

Do government forms ever get shorter from year to year?  Seventeen pages of 2015 instructions have expanded to 19, and the font is no bigger.

The revisions recited above appear on page 1, under the heading “What’s New.” Immediately thereafter, the IRS advises close attention to the disappearance in 2016, for calendar year plans, of transitional relief that was offered only for 2015.  And, there’s a link to the IRS page that details technical aspects of filing through the IRS AIR system –

On page 1 and throughout, references to filing by “employers” have been changed to speak of filing by “ALE Members.” The “Who Must File” section expanded to emphasize that each EIN within a controlled group must file if the group as a whole is an Applicable Large Employer, based, most commonly, on the prior year’s employment data.  That’s nothing new, but maybe some missed that point in 2015.

The explanation of self-insurer reporting on page 2 is longer than last year, and perhaps clearer, but not substantively new.

Specific Instructions for Form 1094-C

The first substantial re-write begins on page 2, providing much-needed clarification of when and how an ALE Member may file multiple Forms 1094-C.  Here it is.

A Form 1094-C must be filed when an ALE Member files one or more Forms 1095-C. An ALE Member may choose to file multiple Forms 1094-C, each accompanied by Forms 1095-C for a portion of its employees, provided that a Form 1095-C is filed for each employee for whom the ALE Member is required to file. If an ALE Member files more than one Form 1094-C, one (and only one) Form 1094-C filed by the ALE Member must be identified on line 19, Part I as the Authoritative Transmittal, and, on the Authoritative Transmittal, the ALE Member must report certain aggregate data for all full-time employees and all employees, as applicable, of the ALE Member.

Example 1. Employer A, an ALE Member, files a single Form 1094-C, attaching Forms 1095-C for each of its 100 full-time employees. This Form 1094-C should be identified as the Authoritative Transmittal on line 19, and the remainder of the form completed as indicated in the instructions for line 19, later.

Example 2. Employer B, an ALE Member, files two Forms 1094-C, one for each of its two operating divisions, Division X and Division Y. (Division X and Division Y are units of the same ALE Member, and thus both report under the same EIN; they are not members of an Aggregated ALE Group.) Attached to one Form 1094-C are Forms 1095-C for the 200 full-time employees of Division X, and attached to the other Form 1094-C are Forms 1095-C for the 1,000 full-time employees of Division Y. One of these Forms 1094-C should be identified as the Authoritative Transmittal on line 19, and should include aggregate employer-level data for all 1,200 full-time employees of Employer B as well as the total number of employees of Employer B, as applicable, as required in Parts II, III, and IV of Form 1094-C. The other Form 1094-C should not be identified as the Authoritative Transmittal on line 19, should report on line 18 only the number of Forms 1095-C that are attached to that Form 1094-C, and should leave the remaining sections of the form blank as indicated in the instructions for line 19, later.

Note. Each ALE Member must file its own Forms 1094-C and 1095-C under its own separate EIN, even if the ALE Member is part of an Aggregated ALE Group. No Authoritative Transmittal should be filed for an Aggregated ALE Group.

Example 3. Assume that Employer A from Example 1 is a member of the same Aggregated ALE Group as Employer B from Example 2. Accordingly, Employer A and Employer B are separate ALE Members filing under separate EINs. Forms 1094-C should be filed in the same manner indicated in Examples 1 and 2. Employer A should include only information about employees of Employer A in its Authoritative Transmittal, and Employer B should include only information about employees of Employer B in its Authoritative Transmittal. No Authoritative Transmittal should be filed for the Aggregated ALE Group reporting combined data for employees of both Employer A and Employer B.

Similar rules apply for a Governmental Unit that has delegated its reporting responsibilities for some of its employees to another Governmental Unit—see Designated Governmental Entity (DGE) in the Definitions section of these instructions for more information. In the case of a Governmental Unit that has delegated its reporting responsibilities for some of its employees, 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.

Example. County is an Aggregated ALE Group 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 the School District.

Page 3 does the same to explain when one employee may be reportable by multiple ALE Members.

[A] full-time employee who works for more than one ALE Member that is a member of the same Aggregated ALE Group must receive a separate Form 1095-C from each ALE Member. For any calendar month in which a full-time employee works for more than one ALE Member of an Aggregated ALE Group, only one ALE Member is treated as the employer of that employee for reporting purposes (generally, the ALE Member for whom the employee worked the greatest number of hours of service), and only that ALE Member reports for that employee for that calendar month. The other ALE Member is not required to report for that employee for that calendar month, unless the other ALE Member is otherwise required to file Form 1095-C for that employee because the individual was a full-time employee of that ALE Member for a different month of the same calendar year. In that case, the individual may be treated as not employed for that calendar month. If under these rules, an ALE Member is not required to report for an employee for any month in the calendar year, the ALE Member is not required to report for that full-time employee for that calendar year. For a description of the rules related to determining which ALE Member in an Aggregated ALE Group is treated as the employer for a month in this situation, see the definition of Employee.

Example. Employer A and Employer B are separate ALE Members that belong to the same Aggregated ALE Group. Both Employer A and Employer B offer coverage through the AB health plan, which is an insured plan. In January and February, Employee has 130 hours of service for Employer A and no hours of service for Employer B. In March, Employee has 100 hours of service for Employer A and 30 hours of service for Employer B. In April through December, Employee has 130 hours of service for Employer B and no hours of service for Employer A. Employer A is the employer of Employee for filing purposes for January, February, and March. Employer A should file Form 1095-C for Employee reporting offers of coverage using the appropriate code on line 14 for January, February, and March, should complete lines 15 and 16 per the instructions, and should include Employee in the count of total employees and full-time employees reported for those months on Form 1094-C. For the months April through December, on Form 1095-C, Employer A should enter code 1H (no offer of coverage) on line 14, leave line 15 blank, and enter code 2A (not an employee) on line 16 (since Employee is treated as an employee of Employer B and not as an employee of Employer A in those months), and should exclude Employee from the count of total employees and full-time employees reported for those months on Form 1094-C.

It’s hard to read, but we’re glad it’s there.  Also on page 3, the IRS notes that the paper filing date will be February 28, 2017 and the e-filing date will be March 31, 2017.  This year, extensions will be available only by request, and page 3 includes instructions about where to get and how to use Form 8809 for that purpose.

Page 4 discusses e-filing rules at greater length than last year and notes the penalty increase from $250 to $260 per Form.  See also page 6.  But it’s not all gloom and doom.

If you are required to file electronically but fail to do so, and you do not have an approved waiver, you may be subject to a penalty of $260 per return for failure to file electronically unless you establish reasonable cause. However, you can file up to 250 returns on paper; those returns will not be subject to a penalty for failure to file electronically. The penalty applies separately to original returns and corrected returns.

The correction “how to” chart on page 5 adds the requirement to correct a Form 1094-C Authoritative Transmittal if the original filing incorrectly reported the other members of the ALE Group.

Page 6 notes that Forms 1095-C are to be delivered to the employee recipients by January 31, not February 1, as last year.

Page 7 clarifies that Code 1A, “Qualifying Offer Method,” properly entered on Line 14 of Form 1095-C relieves the ALE Member from any obligation to fill the related box on Line 15 or on Line 16.

Page 9 clarifies that employers sponsoring non-calendar year plans may have early 2016 months of 2015-only transition relief, because those months were part of the 2015-2016 plan year.  This includes the 50-99 “smaller large employer” relief and the 70% offer transitional relief that applied only for 2015.  Page 9 also notes that an employee who terminates during a 2016 stability period, having been measured full-time in the associated, prior measurement period, must be reported on Form 1094-C as a full-time employee, regardless of his or her average hours of service during 2016.

Specific Instructions for Form 1095-C

Page 10 notes that the ALE Member contact listed on Line 10 need not be the contact listed on Line 8 of Form 1094-C.  Also, filers are admonished never to leave Line 14 blank, even for months before and after employment.

Page 11 is almost entirely new text, explaining in helpful detail how to code on Line 14 COBRA coverage offers and retiree coverage offers.  Here’s the Example provided:

During the applicable open enrollment period for its health plan, Employer makes an offer of minimum essential coverage providing minimum value to Employee and to Employee’s spouse and dependents. Employee elects to enroll in employee-only coverage starting January 1. On June 1, Employee experiences a reduction in hours that results in loss of eligibility for coverage under the plan. As of June 1, Employer terminates Employee’s existing coverage and makes an offer of COBRA continuation coverage to Employee, but does not make an offer to Employee’s spouse and dependents. Employer should enter code 1E (Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse) on line 14 for months January – May, and should enter code 1B (Minimum essential coverage providing minimum value offered to employee only) on line 14 for months June – December.

Page 12 (see also page 17) reiterates that new Line 14 codes 1J and 1K are conditional offer variants of codes 1D and 1E, respectively, and defers Line 15 employee cost guidance to the “Employee Required Contribution” section of the Definitions on page 15.

On page 13, and in the “Tip” on page 17, the IRS continues its Delphic guidance about how Line 16, Code 2E applies when an employer seeks § 4980H credit for coverage offers made to its common law employees by their Form W-2 employer, e.g., a temp staffing firm.  Suppose that an employer seeking such credit sponsors a self-insured plan.  The 2016 Instructions read, “For this [Part III] purpose, employer-sponsored self-insured coverage does not include coverage under a multi-employer plan.”  Our initial guess is that the IRS means to say so only for purposes of reporting covered individuals in Part III.  We remain concerned about the lack of published IRS guidance regarding whether an employer will be assumed to participate in a MEWA if it enters Code 2E on Line 16 in order to claim credit for coverage offers made by a temp staffing firm.


Page 14 adds a link to the IRS page on § 4980H employer aggregation rules.

Page 15 adds this definition of “Employee Required Contribution” for Form 1095-C, Line 15 affordability determinations.

Employee Required Contribution. The Employee Required Contribution is the employee’s share of the monthly cost for the lowest-cost self-only minimum essential coverage providing minimum value that is offered to the employee by the ALE Member. The employee share is the portion of the monthly cost that would be paid by the employee for self-only coverage, whether paid through salary reduction or otherwise

For purposes of determining the amount of the employee’s share of the monthly cost, an ALE Member may divide the total cost to the employee for the plan year by the number of months in the plan year. This monthly amount of the employee’s share of the cost would then be reported for any months of that plan year that fall within the 2016 calendar year. For example, if the plan year begins January 1, the ALE Member may determine the amount to report for each month by taking the total annual employee cost for all 12 months and dividing by 12. If the plan year begins April 1, the ALE Member may determine the amount to report for January through March, 2016, by taking the total annual employee cost for the plan year ending March 31, 2016, and dividing by 12 (and reporting that amount for January, February, and March 2016). Then the ALE Member may determine the monthly amount for April through December, 2016 by taking the total annual employee cost for the plan year ending March 31, 2017, and dividing by 12 (and reporting that amount for April through December 2016).

The Employee Required Contribution may not be the amount the employee paid for coverage. For additional rules on determining the amount of the Employee Required Contribution, including for cases in which an ALE Member makes available certain HRA contributions, cafeteria plan contributions, wellness program incentives, and opt-out payments, see Regulations sections1.5000A-3(e)(3)(ii) and 1.36B-2(c)(3)(v)(A). Also see Notice 2015-87.

Also on page 15 begins a longer explanation of what “Full-Time Employee” means, apparently to correct common employer filing errors for 2015.  We noted this part especially:

Under the look-back measurement method, an employee is a full-time employee for each month of the stability period selected by the ALE Member if the employee was employed an average of least 30 hours of service per week with the ALE Member during the measurement period preceding that stability period. (The look-back measurement method for identifying full-time employees is available only for purposes of determining and computing liability under section 4980H, and not for purposes of determining if the employer is an Applicable Large Employer.)

Pages 18-19 describe in great detail the trailing effects for 2016 reporting of 2015-only transitional relief by employers with non-calendar year plans.

We close with this good news:  As in 2105, the IRS estimates that you will need just four hours to complete and file your Form 1094-C and just twelve minutes to complete and file each Form 1095-C.  If there’s an appropriate emoji here, suggest it, please.

Jed, employed by Drysdale LLC, a janitorial contractor, recently began working nights at the Commerce Bank, supervised by the Bank’s Chief of Security.  Jed’s family had health insurance until his wife lost her job early this year.  Drysdale didn’t offer insurance, so Jed bought a policy through  With the federal subsidy, his premium is less than $50 monthly.

About six weeks ago, Drysdale got a Marketplace notice of the subsidy granted to Jed.  After consulting its lawyer, Drysdale amended its standard contract to negate any indemnity obligation to customers for ACA taxes and penalties imposed on the customer with respect to Drysdale employees.  The Bank noticed the change and inquired.  Drysdale explained, using Jed’s example, that the Bank could have ACA obligations to Jed independent of Drysdale’s obligations to Jed.

On July 5, the Bank asked for a replacement after Jed was found asleep in a computer closet.  Drysdale removed Jed from the Bank and has not reassigned him.

Today, Drysdale and the Bank received OSHA notices that Jed (represented by a labor union) had charged them with retaliation in violation of FLSA § 218c, which reads, in relevant part:

218c. Protections for employees

(a) Prohibition

No employer shall discharge or in any manner discriminate against any employee with respect to his or her compensation, terms, conditions, or other privileges of employment because the employee (or an individual acting at the request of the employee) has—

(1) received a credit under section 36B of title 26 or a subsidy under section 18071 of title 42;


(b) Complaint procedure

(1) In general

An employee who believes that he or she has been discharged or otherwise discriminated against by any employer in violation of this section may seek relief in accordance with the procedures, notifications, burdens of proof, remedies, and statutes of limitation set forth in section 2087(b) of title 15.

(Emphasis ours.)  When Jed applied for his subsidy, he was given three notices of this retaliation protection.  Much to the employers’ surprise, they have only a few weeks to prove that Jed would have suffered the same fate even if they had been ignorant of his subsidy.  But Jed says that he and the Security Chief had a deal: If Jed finished his work an hour early, he could nap before leaving for his day job.  And OSHA’s rules say that Jed’s proof “burden may be satisfied, for example, if the complaint shows that the adverse action took place shortly after the protected activity, giving rise to the inference that it was a contributing factor in the adverse action.” 29 CFR § 1984(e)(3).  Very probably, OSHA will issue a preliminary order reinstating Jed who, by the way, is now a union organizer.  A damages trial will follow some months later.

Why is this the Bank’s problem?  Because DOL enforces this law, and DOL’s “employee” definition is even broader than the definition used by the IRS.  You may “employ,” for this purpose, a worker whom the IRS would recognize as an independent contractor.  Jed’s supervision by the Bank’s Chief of Security goes a long way toward proving that the Bank was Jed’s joint employer.

Why is this Drysdale’s problem?  Because it opened the Marketplace subsidy notice envelope.  As we explained in several prior articles, there are ways to appeal subsidy errors without acquiring notice of the identities of subsidy recipients who might be among your employees.  If you have not established those procedures yet, now would be a very good time to do so.


Nearly three years ago, having spent hundreds of hours immersed in ACA minutiae, we anticipated that clients would not react well to fees for services that consisted principally of telling them that they had asked the wrong question. So we decided, against tradition and much conventional wisdom, to sink lots of unpaid partner time into this education project. A casual reader of this blog should learn basic ACA terms and concepts, so that he or she can converse effectively with advisors. A regular reader should be able to identify, during such a conversation, a purported ACA expert who’s a poseur. Sadly, they abound. A colleague should find this a thought-provoking reference to ACA rules and guidance documents. Those are our goals.

Substitute nothing you read here for legal or other professional advice about any specific situation. ACA rules and sub-regulatory guidance change frequently and whimsically. Occasionally, the three main enforcement agencies (DOL, HHS, IRS) disagree. Sometimes, they publish a new rule unaware of a related, existing rule. Part of our service to you is to alert you to what we see coming. We usually have guessed right, but we often are guessing. And of course, apparently insignificant factual details can turn out to be determinative. If you regard this blog as cheap – i.e., free – legal advice, you’re rolling the dice at your own risk and the risk might be far bigger than you realize.

Finally, we invite constructive comments, including reasoned criticism, but not rants. We delete hissy-fits and block commenters who seem to be unable to comment otherwise. That goes triple for political hyperbole. Sometimes, we must explain political realities in order to explain a regulatory reality, but we try to be objective. You should, too.

On December 28, 2015, the IRS released its Notice 2016-4, granting much needed time for employers and their filing services to catch up to Affordable Care Act Information Return (AIR) Program developments. Here (nearly verbatim) are the extensions:

  • The deadline for furnishing to individuals the 2015 Form 1095-B, Health Coverage, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, is pushed from February 1, 2016, to March 31, 2016;
  • The deadline for filing the 2015 Form 1094-B, Transmittal of Health Coverage Information Returns, the 2015 Form 1095-B, Health Coverage, the 2015 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, is extended from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically.

That’s very welcome news. However, further extensions by request will not be available.  Says the IRS:

In view of these extensions, the provisions regarding automatic and permissive extensions of time for filing information returns and permissive extensions of time for furnishing statements will not apply to the extended due dates. Employers or other coverage providers that do not comply with these extended due dates are subject to penalties under section 6722 or 6721 for failure to timely furnish and file. However, employers and other coverage providers that do not meet the extended due dates are still encouraged to furnish and file, and the Service will take such furnishing and filing into consideration when determining whether to abate penalties for reasonable cause. The Service will also take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting the required information to the Service and furnishing it to employees and covered individuals, such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the Service, or testing its ability to transmit information to the Service. In addition, the Service will take into account the extent to which the employer or other coverage provider is taking steps to ensure that it is able to comply with the reporting requirements for 2016.

It’s the “silly season” on the Hill and a busy season for ACA regulators. This article gives you brief notes about Notice 2015-87, information reporting relief and the § 4980I delay buried in the omnibus spending bill.

IRS Notice 2015-87 first answers questions on the periphery of earlier guidance effectively killing stand-alone HRAs. Most notably, an HRA or employer payment plan may be used to reimburse (or to pay directly) premiums for individual policies that provide only excepted benefits – e.g., stand-alone dental or vision plans.

Notice 2015-87 also clarifies that plan-integrated employer HRA contributions that may be used to pay premiums or employee cost sharing obligations under the group health plan are counted to reduce the employee’s share of the premium for purposes of affordability determinations under Code § § 4980H and 5000A. The same is true of some, but not all, employer cafeteria plan flex contributions. IRS forecasts future regulations on related treatment of “opt-out” payments made to employees who decline group health plan coverage.

Which brings us to a federal contractor conundrum. The Service Contract Act and Davis-Bacon Act require certain federal contractors to pay prevailing wages and benefits. The benefit obligation may be satisfied either by benefits or by cash in lieu of those benefits. Until this Notice, employers paying cash in lieu of benefits were exposed to double burdens. Here’s the temporary relief offered a p. 16 of Notice 2015-87.

Treasury and IRS continue to consider how the requirements of the SCA, the DBRA, and the employer shared responsibility provisions under § 4980H may be coordinated. However, until the applicability date of any further guidance, and in any event for plan years beginning before January 1, 2017, employer fringe benefit payments (including flex credits or flex contributions) under the SCA or DBRA that are available to employees covered by the SCA or DBRA to pay for coverage under an eligible employer-sponsored plan (even if alternatively available to the employee in other benefits or cash) will be treated as reducing the employee’s required contribution for participation in that eligible employer-sponsored plan for purposes of § 4980H(b), but only to the extent the amount of the payment does not exceed the amount required to satisfy the requirement to provide fringe benefit payments under the SCA or DBRA. In addition, for these same periods an employer may treat these employer fringe benefit payments as reducing the employee’s required contribution for purposes of reporting under § 6056 (Form 1095-C), subject to the same limitations that apply for purposes of § 4980H(b). Employers are, however, encouraged to treat these fringe benefit payments as not reducing the employee’s required contribution for purposes of reporting under § 6056. If an employee’s required contribution is reported without reduction for the amount of the fringe benefit payment and the employer is contacted by the IRS concerning a potential assessable payment under § 4980H(b) relating to the employee’s receipt of a premium tax credit, the employer will have an opportunity to respond and show that it is entitled to the relief described in this Q&A-10 to the extent that the employee would not have been eligible for the premium tax credit if the required employee contribution had been reduced by the amount of the fringe benefit payment or to the extent that the employer would have qualified for an affordability safe harbor under § 54.4980H-(4)(e)(2) if the required employee contribution had been reduced by the amount of the fringe benefit payment. See also Q&A-26 for certain relief with respect to employer information reporting under § 6056.

Finally, we get a plain English answer to what had seemed for years a simple question – i.e., whether the employer mandate affordability safe harbor (9.5% of household income) is inflation-adjusted. The answer (p. 18, Q12) is “yes.” Thus, the 2015 number is 9.56% and the 2016 number will be 9.66%. Information reporting rules under Code section 6056 will be revised accordingly.

Similarly, the annual assessable payment amounts under Code sections 4980H are inflation-adjusted (p. 20, Q13), so that the $2,000 amount for 2015 is $2,080 and the $3,000 amount is $3,120. For 2016, those numbers will rise to $2,160 and $3,240.

IRS will revise its 4980H “hours of service” rules to clarify that employers need not count as “hours of service” payments made under workers’ compensation and disability plans to former employees. However, disability benefit payments, if funded in part by employee contributions, may count as hours of service if the employee is still on the payroll.

Staffing companies providing labor to educational organizations will face revised § 4980H rules that require them to observe the special employment break period rules that apply to the educational organization, unless the employee is offered full year employment. (P. 23, Q15.)

Bad news for state and local government agencies (p. 25, Q19): If you are deemed a separate employer under applicable state law and you are an ALE, you must have a separate EIN and must report separately on Form 1094-C. The rules about reporting through another Designated Government Entity do not change this. One DGE may report for ten ALEs, but it must file ten 1094-Cs.

It’s not new, but its repetition is welcome: IRS does not intend to penalize 2015 ALE reporting errors made in good faith by ALEs that tried to report correctly, timely in 2016. (That’s Q&A-26, p. 30.) Which brings us to §  202 of H.R. 2029, the omnibus spending bill, which directs IRS to treat information returns as completely correct if the errors involve small dollar amounts. It’s not perfectly clear whether this applies to Form 1095-C, line 15 affordability reporting. Let’s hope.

And, to gift-wrap this, § 101 of the omnibus spending bill delays Cadillac tax (Code § 4980I) accrual from 2018 to 2020 and directs the IRS to re-examine the applicable inflation adjustment formula. Merry Christmas; happy holidays; may the Schwarz be with you.

We work closely with employers (mostly ALEs) and an array of service providers – payroll processors, benefit plan consultants and administrators, software developers and transmitters, employee leasing firms, insurance brokers and insurers. We’re hearing from them and from others pretty consistent impressions of the state of employer readiness to furnish (by February 1, 2016) and to file (by March 31, if electronically) 2015 Forms 1094-C and 1095-C.

The service providers are astonished that it has taken so long to get employers’ attention and that so many employers remain uninformed about and uninvested in this substantial effort. Some providers, having dedicated the limits of their resources for this filing season, are turning away business.

Employers say that everyone just seems to be trying to sell them something, and that they don’t know enough to judge between offerings, except by price or guarantees. Few have planned or budgeted adequately for what they are discovering to be a substantial burden and expense. Occasionally, we hear about a price or a guarantee that’s too good to be true. Upon investigation, it was.

If you are on either side of this divide, and if you are willing to be interviewed about your experience for publication here, please let us hear from you. We’re particularly interested in these sub-topics.


  • Have you read the 2015 Instructions for Forms 1094-C and 1095-C?
  • Have you educated yourself about the magnitude of this IT project? For example, have you read IRS (Early Look) Publications 5164 and 5165 for AIR (ACA Information Return) system software developers and transmitters?
  • Have you selected an IT solution that requires the employer to generate and submit Forms 1094-C and 1095-C to an AIR transmitter for IRS uploading? Or is the transmitter importing employer or third party data to generate the Forms, subject to employer review and filing approval? Will your provider furnish Form 1095-C to your employees, or will you?
  • Have you been unable to reach an agreement with an IT solution provider? What have been the major obstacles? Are you still looking?

Employers and Service Providers:

  • What arrangements have been made to claim § 4980H credit for leasing company coverage offers made to full-time leased workers employed longer than the applicable waiting period but less than one year? Do you know how Form 1095-C will be generated, furnished and filed for each of those leased workers?
  • Will your IT solution auto-fill Form 1095-C, Lines 14, 15 and 16, or must those cells be populated manually?

If you want to comment without attribution, please e-mail, stating expressly that your identity is not to be disclosed.

This morning, the Supreme Court of the United States, by a 6-3 margin, removed the last legal obstacle to employer mandate tax enforcement. Because the HHS had authority under Code § 36B to subsidize insurance plans bought through (according to an IRS rule), those subsidies properly will trigger Code § 4980H employer mandate tax assessments by the IRS starting in early 2016.   If you are accruing liabilities, you need to determine how you’ll pay those assessments and how you might minimize them. You’ll probably need outside help to do both.

We predicted this opinion but we’re not celebrating. We’re especially concerned for state agencies, local governments, smaller large employers and employers that rely on employees leased in full-time status for less than one year. Here’s a simplified comparison of potential § 4980H(a) assessments based on the same payroll numbers for 2014 (ALE in 2015, assessed in 2016) and 2015 (ALE in 2016, assessed in 2017).

200 Full-time W-2 Employees, all offered coverage (90.1%)

20 Full-time Leased Employees, none offered coverage (9.9%)

2016 § 4980H(a) assessment:         $0                     (70% offer transitional relief)

2017 § 4980H(a) assessment:         $360,000+     (95% offer required)

Should this employer fail to file and deliver its required 2015 Forms 1094-C and 1095-C in early 2016, a $44,000 penalty could be assessed for that default, even though no employer mandate tax was owed for 2015.

Many more traps have been laid and few are sufficiently wary.  As Justice Roberts understated it in his majority opinion, “[The ACA] does not reflect the type of care and deliberation that one might expect of such significant legislation.”  Boy, howdy.  Get help.

Update (in response to inquiries):  Some had speculated that the Court might delay the effective date of its decision if it invalidated subsidies.  This decision in favor of the subsidies, and therefore in favor of the employer mandate, is effective retroactively.  The mandate was effective for most “Applicable Large Employers” (on a controlled group basis) beginning January 1, 2015.

Update: We’re getting questions and comments that reflect fundamental misconceptions about the employer mandate. We’ll correct two here and save others for a separate article.

State and local government employers are covered, and most will be “large” due to aggregation rules. The IRS “controlled group” and “affiliated service group” rules don’t fit government employers exactly, but similar aggregation principles will apply.

It’s too late to “get small” for 2015. You are “large” or not in 2015 based on your 2014 employment levels (assuming that you existed in 2014). Your exposure to 2016 § 4980H assessments is based on your “Applicable Large Employer” status in 2015 (which is based, in turn, on your 2014 employment) but your “assessable payment amounts” will be based on 2015 employment levels.