At the end of 2015, two critical items happened that may impact you and your business. First, a two year delay was issued on the ACA Excise Tax (“Cadillac Plan Tax”) and then an extension was issued on Forms 1095-C and 1094-C.
On December 18, President Obama signed bipartisan legislation for a year-end spending and tax package. As part of the package, Congress enacted a two-year delay of the ACA Excise Tax (“Cadillac Plan Tax”) provision. As such, the tax now goes into effect after December 31, 2019 (and not after December 31, 2017 as currently scheduled). This is welcomed news for employers who are currently looking at mechanisms to mitigate this potential tax burden.
The Cadillac Plan tax is a 40 percent non-deductible excise tax on the value of health insurance coverage that exceeds $10,200 for self-only coverage and $27,500 for coverage other than self-only (e.g., family coverage).
The legislation made the following additional ACA-related changes:
- Permits a tax deduction of any Cadillac Plan tax assessment (whereas the original version of the law did not permit a tax deduction)
- Authorizes a study of the age and gender adjustment benchmarks related to the Cadillac Plan tax
- Suspends the medical device excise tax for two years and the annual fee on health insurance providers (the Health Insurer Tax) for one-year
- Extends parity between mass transit and parking benefits under Code section 132(f).
On December 28, 2015, the IRS issued Notice 2016-4 which provides an extension of the deadlines to provide Forms 1095-C to individuals and Forms 1095-C and 1094- C to the IRS and provides other related guidance. The following Q&As summarize the Notice.
- What are the new deadlines?
2015 Forms 1095-C must be furnished to individuals by March 31, 2016 (rather than February 1, 2016).
2015 Forms 1095-C and Form 1094-C must be furnished to the IRS by:
- May 31, 2016 (rather than February 29, 2016) if not filing electronically; and
- June 30, 2016 (rather than March 31, 2016) if filing electronically.
The deadlines have likewise been extended for carriers providing Forms 1095-B to individuals (and the IRS) for insured plans.
- Do I need to file for the extension?
No. The extension is automatic.
- Can I comply early?
- Employers are encouraged to furnish statements to individuals as soon as they are ready.
- The IRS is prepared to accept filings of the information returns beginning in January 2016.
- What if the submissions are still late?
Employers that do not comply with these extended due dates are subject to penalties. However, employers should still furnish and file the forms and the IRS will take such furnishing and filing into consideration when determining whether to abate penalties.
The IRS will also take into account whether an employer made reasonable efforts to prepare for reporting such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the IRS or testing its ability to transmit information to the IRS. In addition, the IRS will take into account the extent to which the employer is taking steps to ensure that it is able to comply with the reporting requirements for 2016.
- What if employees do not have Forms 1095-C (or Forms 1095-B from the carrier) before they file their tax returns?
For 2015 only, individuals who rely upon other information received from employers or carriers about their coverage need not amend their returns once they receive their Forms 1095-C or any corrected Forms 1095-C.
Individuals need not send this information to the IRS when filing their returns but should keep it with their tax records.
For the notice, visit: http://www.irs.gov/pub/irsdrop/n-16-4.pdf
By Patti Goldfarb, an employee benefits specialist, and owner of the Employee Benefits Advisors Group. She has written and spoken about healthcare reform since its passage in 2010. If your business would like a consultation, Patti can be reached at (201) 255-6239 or firstname.lastname@example.org.