Final Regulations for Providers of Minimal Essential Coverage Adopted Some But Not All Suggestions Concerning Information Reporting Requirements

On April 30, 2014, the IRS released the final regulations providing guidance to providers of Minimal Essential Coverage (MEC) subject to information reporting requirements under the Affordable Care Act.  TD 9660 was published on March 10, 2014.

The bottom line of the regulations is that more information documents must be filed and the tax professional will need additional information to properly prepare the 2014 tax return.

Insurers will need additional information that they may not currently have in their files to meet the new reporting requirements. Additional due diligence may be required, along with additional e-file and programming changes that will need to be made to comply with the regulations.

Here are some of the highlights of the final regulations:

• Form 1094 Transmittal and Form 1095 information returns will be used to report health care information and are subject to the 250 e-file threshold requirements
• Reporting will be required for all individuals unless specifically excepted
  • No reporting required for onsite medical clinics or Medicare Part B – considered supplements to MEC
  • Wellness or self-insured employee provided retiree benefits - considered supplemental to MEC
• Controlled groups are allowed flexibility in information reporting to allow combined reporting, rather than each entity reporting
• For Statutory Employees the plan sponsor is responsible for the reporting
• Insurance purchased through the Market Place, the exchange ( Market Place)  must report this information
• SHOP reporting, an area where small business can purchase an employer plan through the exchange the insurers are required to report, rather than the Market Place
• Government Employees reporting hinges on the undefined “agency or instrumentality “term.  Until further guidance, use a reasonable cause standard to make that determination of whether to file
• The Medicare Advantage Program issuers are not considered MEC therefore they are not required to report this coverage
• Information that is not required to be reported includes:  data elements that are not necessary to prepare a tax return i.e.  Advance payments of the Premium Tax Credit, or cost sharing reductions of the amount of premium for employer coverage paid by the employer.  We  can only assume the advanced Premium Tax credit will be reported elsewhere
• Taxpayer Identification Number’s (TIN’s) must be provided for ALL individuals covered.  If the TIN is not available a date of birth is an alternate way to report but only after reasonable attempts to obtain the TIN (Due Diligence).  This enables IRS to match and avoid notices to verify coverage or erroneous issue of penalties.
• The final regulations clarify that reporting entities are permitted to use Truncated TIN’s on §6055 statements
• For Combined Reporting, coverage must be reported using the new 1095 information returns and transmittals rather than the Form W-2
• Reporting is required for a deceased participant
• Forms 1095 can be provided at the same time as the Form W-2 and in the same envelope without restrictions.
• The required forms must be mailed to the last known address or the address the reporting entity uses for requesting information about coverage
• The IRS TIN matching program is not permitted to verify TIN’s for the  §6055 reporting

Since the required reporting is months away, the final regulations left a few issues undefined, such as the government employee issue and tribal governments.  In addition, no drafts of Forms 1094 or 1095 have yet been seen, which places all businesses at a disadvantage to prepare for the change. 

In addition, tentative Form 8962, The Premium Tax Credit, and Form 8965, Reporting Exemption from Coverage, have yet to be released in draft form. 

Regardless, this will be a massive change for everyone across the nation, from the newborn infant who must have the social security number reported to the insurer, to the deceased individual whose family needs to file the final return.  One of the most important Forms for 2014 will be Form 1095.