The Internal Revenue Service (IRS) has released drafts of the 1095-C and 1094-C forms and instructions for reporting on calendar year 2016. Applicable large employers (employers with an average of 50 or more full-time equivalent (FTE) employees in the preceding calendar year, calculated on a controlled group basis) will need to provide full-time employees with a Form 1095-C by the end of January 2017 and file the Form 1094-C with copies of the 1095-Cs with the IRS by the end of March 2017 (February if filing paper; however employers filing 250 or more forms must file electronically). A 30-day extension is available for the Form 1094-C.
Note that even employers that do not provide health benefits must provide these forms if they have 50 or more FTEs.
Plans known as “excepted benefits” are not subject to these reporting requirements. Excepted benefits include stand-alone dental and vision plans and flexible spending accounts.
For the first year of reporting, the IRS said that employers that made a good faith effort to comply with the reporting requirements and that filed on a timely basis (with the delayed reporting deadline) would not be penalized. No forgiveness applies for the next round of reporting, unless the employer can show reasonable cause for the failure. The penalty for failing to file a correct return is $260 for each return. Since the 1095-C must be provided to both the employee and the IRS, making a mistake on, or failing to file, the Form 1095-C means a penalty of twice that amount ($520).
Some codes have been eliminated and others added. Some clarifications have been provided. Some transition relief that applied for 2015 no longer applies. Multiemployer plan interim guidance continues to apply. This means that if an employer contributes to a union trust fund on behalf of the employee the employer will report that the multiemployer plan relief applies and will not be subject to penalties, even if the employee does not qualify for benefits based on the trust fund’s eligibility rules.
The instructions emphasize that each entity with an employer identification number and at least one full-time employee at any time during the year must file a 1094-C, if the entity is part of a controlled group with an average of 50 or more FTEs.
In general, the changes to the forms are not large. It will be more important than ever to make sure the forms are completed accurately.