IRS Releases Draft 2016 Forms 1095 and 1094

The Internal Revenue Service (IRS) recently released draft versions of the 2016 Forms 1094-C and 1095-C to report medical plan coverage and offers of coverage for purposes of the Affordable Care Act (ACA).  The draft forms slightly revise the forms used to report on health coverage information for 2015.  For additional background information on the employer mandate, please see our prior HRBenefitsAuthority from January 15, 2016 and March 31, 2014.

Background.  Under the ACA, Applicable Large Employer Members (ALEMs) are required to report on the health coverage offered to full-time employees using Forms 1094-C and 1095-C.  A copy of Form 1095-C must be provided to employees, and Forms 1094-C and 1095-C must be filed with the IRS.  ALEMs who complete the forms late or incorrectly may be subject to penalties.

“Good Faith Effort” Standard for 2015 Only.  For 2015 reporting, which was completed during the first half of 2016, the IRS extended reporting deadlines and indicated that ALEMs will not be subject to penalties for incorrectly completed forms as long as the ALEM made a “good faith effort” to comply with its reporting requirements.  The IRS has recently clarified that an ALEM will not qualify for the “good faith effort” standard unless it corrects known errors on its 2015 forms.

Revisions to Draft Forms 1094-C and 1095-C.  The IRS slightly revised the forms as follows:

• Draft Form 1094-C:  The only change is the removal of a form of transition relief on Line 22 that was only available for 2015 reporting.
• Draft Form 1095-C: The form layout is unchanged.  However, the instructions to the recipient section indicates that 2 new indicator codes will be available to report on conditional offers of coverage to an employee’s spouse in Line 14.

The 2016 draft forms, which can be found at https://www.irs.gov/pub/irs-dft/f1094c--dft.pdf and https://www.irs.gov/pub/irs-dft/f1095c--dft.pdf, were not accompanied by instructions for employers completing the forms.  The IRS stressed that these drafts are not final, and additional changes may be made during the final approval process.

Next Steps.  We have seen numerous errors on the Forms 1095-C produced by many of the vendors, payroll systems, and HRIS systems, which provided 2015 Forms 1094-C and 1095-C preparation services.  Not only did many of the vendors’ systems complete the forms incorrectly, but they also experienced difficulty completing the forms by the extended deadlines.  While the “good faith effort” standard may limit the impact of these errors for 2015 forms, the good faith effort standard and extended deadlines will not apply for 2016 forms.

Now that the 2016 draft forms have been released, it may be time to begin validating payroll, HRIS and vendor systems to ensure that they will be ready to accurately report on the health coverage offered to full-time employees.

Contact Information.  For more information from Mazursky Constantine, please contact Don Mazursky (404.888.8840), Kelly Meyers (404.888.8838), Angela Roberts (404.888.8822), or Alex Smith (404.888.8839).  For more information from VCG Consultants, please contact Leslie Schneider (770.863.3617).

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