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January 27, 2016

Employee Benefits-IRS Allows An LLC To Adopt An ESOP

In PLR 201538021, the IRS provided a private ruling which allowed an LLC to adopt an ESOP. The letter was issued in response to a request for a ruling, concerning whether the unit shares of Company A, a limited liability company or LLC, constitute employer securities within the meaning of section 409(l)(2) of the Internal Revenue Code ("Code"). If they do, the LLC could adopt an ESOP which holds the unit shares.

Here is what the IRS said in the PLR.

For federal tax purposes, Company A represented that it is classified as an association and has a valid S corporation election. Ownership interest in Company A is represented by unit shares ("Unit Shares"). Under its operating agreement (the "Operating Agreement"), all profits and losses of Company A, and any dividends to be paid by Company A, are to be allocated among the shareholders in proportion to the number of Unit Shares owned by them. The Operating Agreement further provides that all Unit Shares confer identical rights to voting distributions, dividends and liquidation proceeds, and otherwise meet the requirements of Code section 409(l)(2). In addition Company has no authorized, issued, or outstanding employer securities that are readily tradable on an established securities market within the meaning of Code section 409(l)(1).

Company A intends to adopt an employee stock ownership plan as described in Code section 4975(e)(7) ("ESOP"), in which its employees may participate. Section 4975(e)(7) defines an ESOP as a defined contribution plan which, among other things, is designed to invest primarily in qualifying employer securities. Code section 4975(e)(8) defines the term "qualifying employer security" as any employer security within the meaning of Code section 409(l). As applicable here, Code section 409(l)(2) states that the term "employer securities" means common stock issued by the employer-corporation having a combination of voting power and dividend rights equal to or in excess of:

(A) that class of common stock of the employer-corporation having the greatest voting power, and
(B) that class of common stock of the employer-corporation having the greatest dividend rights.

Further, under the Code, Company A is treated as a corporation, and the Unit Shares as shares of stock.

Based on the foregoing, the IRS concludes that the Unit Shares of Company A are employer securities as described in section 409(l)(2) for the purposes of section 4975(e)(7), so that Company A may maintain an ESOP which invests in the Unit Shares.

January 19, 2016

Employee Benefits-IRS Provides Eight Facts For ALEs About New Information Statements to be Filed in 2016

IRS Health Care Tax Tip 2015-85, December 29, 2015 says the following:

The Affordable Care Act requires applicable large employers to file:

Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

Here are eight basic facts for employers:

• The due date for furnishing these forms is extended.

o The due date for furnishing the 2015 Form 1095-B and the 2015 Form 1095-C to the insured and employees is extended from February 1, 2016, to March 31, 2016.
o The due date for health coverage providers and employers furnishing the 2015 Form 1094-B and the 2015 Form 1094-C to the IRS is extended from February 29, 2016, to May 31, 2016 if not filing electronically.
o The due date for health coverage providers and employers electronically filing the 2015 Form 1094-B and the 2015 Form 1094-C with the IRS is extended from March 31, 2016, to June 30, 2016.

While the IRS is prepared to accept information reporting returns beginning in January 2016 and employers and other coverage providers are encouraged to furnish statements and file the information returns as soon as they are ready.

• An ALE is required to file Form 1094-C with the IRS; however, an ALE is not required to furnish a copy of Form 1094-C to its full-time employees.
• Generally, an ALE must file Form 1095-C or a substitute form for each employee who was a full-time employee for any month of the calendar year.
• In addition, an ALE that sponsors a self-insured plan must file Form 1095-C for each employee who enrolls in the self-insured health coverage or enrolls a family member in the coverage, regardless of whether the employee is a full-time employee for any month of the calendar year.
• Form 1095-C is not required for the following employees, unless the employee or the employee's family member was enrolled in a self-insured plan sponsored by an ALE member:

o An employee who was not a full-time employee in any month of the year
o An employee who was in a limited non-assessment period for all 12 months of the year.

• If an ALE member sponsors a health plan that includes self-insured options and insured options, the ALE member should complete Part III of Form 1095-C only for employees and family members who enroll a self-insured option.
• An ALE member that offers coverage through an employer-sponsored insured health plan and does not sponsor a self-insured health plan should NOT complete Part III.
• An ALE may provide a substitute Form 1095-C; however, the substitute form must include the information on Form 1095-C and must comply with generally applicable requirements for substitute forms.

For more information, see the Instructions for Forms 1094-C and 1095-C and these additional Questions and Answers.

January 15, 2016

Employee Benefits-IRS Provides Five ACA Facts for Applicable Large Employers

In IRS Health Care Tax Tip 2016-05, January 13, 2016, the IRS says the following:

Some of the provisions of the Affordable Care Act only affect your organization if it's an applicable large employer. An ALE is generally one with 50 or more full-time employees, including full-time equivalent employees.

The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.
If you are an ALE, here are five things to know:

• Applicable large employers have annual reporting responsibilities. You will need to provide the IRS and employees information returns concerning whether and what health insurance you offered to your full-time employees.
• If you're an applicable large employer that provides self-insured health coverage to your employees, you must file an annual return reporting certain information for each employee you cover.
• ALEs must either offer minimum essential coverage that is affordable and that provides minimum value to their full-time employees and their dependents, or potentially make an employer shared responsibility payment to the IRS. Learn more about the employer shared responsibility provision.
• You may be required to report the value of the health insurance coverage you provided to each employee on their Form W-2.
• If you're an applicable large employer with exactly 50 employees, you can purchase affordable insurance through the Small Business Health Options Program (SHOP).

For more information, see the Affordable Care Act Tax Provisions for Employers page on IRS.gov/aca.

January 8, 2016

Employee Benefits-IRS Says To Plan Now to Use Health Flexible Spending Arrangements in 2016; Contribute up to $2,550; $500 Carryover Option Available to Many

In IR-2015-126, Nov. 12, 2015, the IRS suggests that now is the time to plan to use health flexible spending arrangement in 2016. Here is what the IRS said.

The Internal Revenue Service ("IRS") today reminded eligible employees that now is the time to begin planning to take full advantage of their employer's health flexible spending arrangement (FSA) during 2016.

FSAs provide employees a way to use tax-free dollars to pay medical expenses not covered by other health plans. Because eligible employees need to decide how much to contribute through payroll deductions before the plan year begins, many employers this fall are offering their employees the option to participate during the 2016 plan year.

Interested employees wishing to contribute during the new year must make this choice again for 2016, even if they contributed in 2015. Self-employed individuals are not eligible.

An employee who chooses to participate can contribute up to $2,550 during the 2016 plan year. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. If the plan allows, the employer may also contribute to an employee's FSA.

Throughout the year, employees can then use funds to pay qualified medical expenses not covered by their health plan, including co-pays, deductibles and a variety of medical products and services ranging from dental and vision care to eyeglasses and hearing aids. Interested employees should check with their employer for details on eligible expenses and claim procedures.

Under the use or lose provision, participating employees often must incur eligible expenses by the end of the plan year, or forfeit any unspent amounts. But under a special rule, employers may, if they choose, offer participating employees more time through either the carryover option or the grace period option.

Under the carryover option, an employee can carry over up to $500 of unused funds to the following plan year--for example, an employee with $500 of unspent funds at the end of 2016 would still have those funds available to use in 2017. Under the grace period option, an employee has until 2½ months after the end of the plan year to incur eligible expenses--for example, March 15, 2017, for a plan year ending on Dec. 31, 2016. Employers can offer either option, but not both, or none at all.

Employers are not required to offer FSAs. Accordingly, interested employees should check with their employer to see if they offer an FSA. More information about FSAs can be found in Publication 969, available on IRS.gov.

January 7, 2016

Employee Benefits-IRS Issues Revenue Procedure To Update Its Procedures For Issuing Determination Letters.

In Revenue Procedure 2016-6, the IRS updates it procedures for issuing determination letters on the qualified and tax exempt status of retirement plans and their trusts. One important topic of discussion is the curtailment of the IRS's practice of providing determination letters. Here is what the Rev. Proc. says on this topic:

Announcement 2015-19, 2015-32 I.R.B. 157, describes changes to the Employee Plans determination letter program for qualified plans. Effective January 1, 2017, the staggered 5-year determination letter remedial amendment cycles for individually designed plans, as described in Rev. Proc. 2007-44, will be eliminated (except that sponsors of Cycle A plans will be permitted to submit applications during the period beginning February 1, 2016, and ending January 31, 2017). The scope of the determination letter program for individually designed plans will be limited to initial plan qualification, qualification upon plan termination, and certain other limited circumstances. As of July 21, 2015, the Service ceased accepting off-cycle determination letter applications (as defined in section 14 of Rev. Proc. 2007-44), except with respect to new and terminating plans.

In anticipation of future changes to the Employee Plans determination letter program eliminating the 5-year remedial amendment cycles, this revenue procedure provides that, effective as of January 4, 2016, determination letters issued to individually designed plans will no longer contain an expiration date (currently required under section 13.02 of Rev. Proc. 2007-44). In response to comments submitted with respect to Ann. 2015-19, the Department of the Treasury and the Service intend to issue guidance with respect to the status of existing expiration dates on determination letters issued prior to January 4, 2016.

January 6, 2016

Employee Benefits-IRS Issues Notice Containing Revisions to the Employee Plans Determination Letter Program Regarding Cycle A Elections And Other Matters

According to Notice 2016-03 (the "Notice"), in anticipation of the elimination, effective January 1, 2017, of the 5-year remedial amendment cycle system for individually designed plans under the Employee Plans determination letter program, the IRS says the following:

Determination Letter Applications. Rev. Proc. 2007-44 will be modified to provide that controlled groups and affiliated service groups that maintain more than one plan are permitted to submit determination letter applications during the Cycle A submission period beginning February 1, 2016, and ending January 31, 2017, provided that a prior Cycle A election with respect to the controlled group or affiliated service group had been made by January 31, 2012 (the last day of the previous Cycle A submission period).

Expiration Date For Determination Letters. Rev. Proc. 2007-44 will be modified to provide that expiration dates included in determination letters issued prior to January 4, 2016, are no longer operative. Future guidance will clarify the extent to which an employer may rely on a determination letter after a subsequent change in law or plan amendment.

Adoption Of Pre-Approved Defined Contribution Plans. Rev. Proc. 2007-44 will be modified to provide that the deadline for an employer to adopt a current defined contribution pre-approved plan and to apply for a determination letter, if otherwise permissible, is extended from April 30, 2016, to April 30, 2017, with respect to any defined contribution pre-approved plan adopted on or after January 1, 2016 (other than a plan that is adopted as a modification and restatement of a defined contribution pre-approved plan that had been maintained by the employer prior to January 1, 2016). This extension will facilitate a plan sponsor's ability to convert an existing individually designed plan into a current defined contribution pre-approved plan.

For these purposes, a "current defined contribution pre-approved plan" is one that was approved based on the 2010 Cumulative List. An employer that had adopted a defined contribution pre-approved plan prior to January 1, 2016, continues to have until April 30, 2016, to adopt a modification and restatement of the defined contribution pre-approved plan within the current 6-year remedial amendment cycle for defined contribution plans and to apply for a determination letter, if permissible.

December 31, 2015

Employee Benefits-IRS Extends The Due Dates For 2015 Information Reporting Under Sections 6055 And 6056 Of the Code-More Discussion and Transition Rules

IN GENERAL

As reported in yesterday's blog, in Notice 2016-4 (the "Notice"), the Internal Revenue Service (the "IRS") extends the due dates for the 2015 information reporting requirements under sections 6055 and 6056 of the Internal Revenue Code (the "Code").

Specifically, the Notice extends the due date for 2015 Forms as follows:

(1) for furnishing to individuals the Forms 1095-B and 1095-C, from February 1, 2016, to March 31, 2016; and

(2) for filing with the IRS the Forms 1094-B, 1095-B, 1094-C, and 1095-C, from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically.

In so extending the due dates, the IRS discussed the reporting rules, and provided some transition rules. Here is what the IRS said.

BACKGROUND

Sections 6055 and 6056 were added to the Code by the Affordable Care Act (the "ACA") (section 6056 was later amended). Section 6055 requires health insurance issuers, self-insuring employers, government agencies, and other providers of minimum essential coverage to file and furnish annual information returns and statements regarding coverage provided. Section 6056 requires applicable large employers (generally those with 50 or more full-time employees, including full-time equivalents, in the previous year) to file and furnish annual information returns and statements relating to the health insurance that the employer offers (or does not offer) to its full-time employees.

The IRS has designated Form 1094-B and Form 1095-B to meet the requirements of section 6055. The IRS has designated Form 1094-C and Form 1095-C to meet the requirements of the section 6056.

ADDITIONAL DISCUSSION AND TRANSITIONAL RULES

No Automatic or Permissive Extensions of Time. In view of these due date extensions, there is no need for any automatic or permissive extensions of the due dates for filing or providing the required forms.

Penalties For Failures To File. Employers or other coverage providers that do not comply with these extended due dates for the required forms are subject to penalties under section 6722 or 6721 of the Code, 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 IRS will take such furnishing and filing into consideration when determining whether to abate penalties for reasonable cause. The IRS will also take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting the required information to the IRS 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 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 or other coverage provider is taking steps to ensure that it is able to comply with the reporting requirements for 2016.

The Premium Tax Credit. Some individual taxpayers may be affected by the extension of the due date for employers to furnish information under section 6056 on Form 1095-C. Under section 36B(c)(2)(C) of the Code, an employee is not eligible for the section 36B premium tax credit for any month for which the employee is eligible for (e.g., offered) coverage under an eligible employer sponsored plan that provides minimum value and is affordable (or for any month for which the employee enrolls in an eligible employer-sponsored plan, regardless of whether the plan is affordable or provides minimum value). The Form 1095-C generally includes information on the coverage (if any) offered by the applicable large employer to the full-time employee. The information reported will assist the employee in determining eligibility for the premium tax credit.

Most individuals offered employer provided coverage will not be affected by the due date extensions. This is partly because section 1.36B-2(c)(3)(v)(A)(3)) of the Income Tax Regulations provides that an offer of employer-sponsored coverage is generally treated as unaffordable for section 36B purposes if the individual enrolls in coverage through the Marketplace and receives the benefit of advance payments of the premium tax credit based on a determination from the Marketplace that the offer of employer-sponsored coverage is unaffordable. The Notice details individuals who would not be affected by the extended due dates.

Nonetheless, some employees (and related individuals) who enrolled in coverage through the Marketplace but did not receive a determination from the Marketplace that the offer of employer-sponsored coverage was not affordable could be affected by the extension if they do not receive their Forms 1095-C before they file their income tax returns. As a result, for 2015 only, individuals who rely upon other information received from employers about their offers of coverage for purposes of determining eligibility for the premium tax credit when filing their income tax returns 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.

Shared Responsibility Payment. Section 5000A of the Code, which was added to the Code by the ACA, generally provides that individuals must have minimum essential coverage, qualify for an exemption from the minimum essential coverage requirement, or make an individual shared responsibility payment when they file their federal income tax return.

Similar to the above, some individual taxpayers may be affected by the extension of the due date for providers of minimum essential coverage to furnish information under section 6055 on either Form 1095-B or Form 1095-C. Individuals generally use this information to confirm that they had minimum essential coverage for purposes of sections 36B and 5000A. Because, as a result of the extension, individuals may not have received this information before they file their income tax returns, for 2015 only, individuals who rely upon other information received from their coverage providers about their coverage for purposes of filing their returns need not amend their returns once they receive the Form 1095-B or Form 1095-C or any corrections. Individuals need not send this information to the IRS when filing their returns but should keep it with their tax records.

December 30, 2015

Employee Benefits-IRS Extends The Due Dates For 2015 Information Reporting Under Sections 6055 And 6056 Of the Code

In General. In Notice 2016-4 (the "Notice"), the Internal Revenue Service (the "IRS") extends the due dates for the 2015 information reporting requirements under sections 6055 and 6056 of the Internal Revenue Code (the "Code").

Specifically, the Notice extends the due date for 2015 Forms as follows:

(1) for furnishing to individuals the Forms 1095-B and 1095-C, from February 1, 2016, to March 31, 2016; and

(2) for filing with the IRS the Forms 1094-B, 1095-B, 1094-C, and 1095-C, from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically.

The Notice also provides guidance, in the form of transition relief, to individuals who might not receive a Form 1095-B or Form 1095-C by the time they file their 2015 tax returns.

Background. Sections 6055 and 6056 were added to the Code by the Affordable Care Act (the "ACA") (section 6056 was later amended). Section 6055 requires health insurance issuers, self-insuring employers, government agencies, and other providers of minimum essential coverage to file and furnish annual information returns and statements regarding coverage provided. Section 6056 requires applicable large employers (generally those with 50 or more full-time employees, including full-time equivalents, in the previous year) to file and furnish annual information returns and statements relating to the health insurance that the employer offers (or does not offer) to its full-time employees.

Previous Deadlines And Forms To File. Final regulations, published on March 10, 2014, relating to the reporting requirements under sections 6055 and 6056, specify the deadlines for information reporting required by those sections.

The regulations under section 6055 provide that every person that provides minimum essential coverage to an individual during a calendar year must file with the IRS an information return and a transmittal on or before the following February 28 (March 31 if filed electronically) and must furnish to the responsible individual identified on the return a written statement on or before January 31 following that calendar year. The IRS has designated Form 1094-B and Form 1095-B to meet the requirements of the section 6055 regulations.

The regulations under section 6056 require every applicable large employer or a member of an aggregated group that is determined to be an applicable large employer (ALE member) to file with the IRS an information return and a transmittal on or before February 28 (March 31 if filed electronically) of the year following the calendar year to which it relates and to furnish to full-time employees a written statement on or before January 31 following that calendar year. The IRS has designated Form 1094-C and Form 1095-C to meet the requirements of the section 6056 regulations.

Note: In 2016, since the January 31 and February 28 due dates described above fall on the weekend, these two due dates are February 1 and February 29, respectively. And, those due dates were extended by the Notice, as described above.

Transition Relief. To be discussed in an upcoming blog.

December 28, 2015

Employee Benefits-IRS Reminds Taxpayers That They Can Boost Their Retirement Savings With The New myRA

The IRS has issued a Press Release (12/16/2015) inviting taxpayers to give themselves a gift, during this holiday season, by resolving to set up and make contributions to the newly allowed myRA. The Press Release is here.

December 23, 2015

Employee Benefits-IRS Issues Frequently Asked Questions Regarding The IRS Compliance Questions On The 2015 Form 5500-Series Returns

Here are the F & Qs:

The IRS has introduced new compliance questions on the 2015 Form 5500-series returns. These IRS compliance questions will help the IRS to effectively focus on specific factors and issues of federal tax law compliance. Although responses to these new questions are optional for the 2015 plan year, we strongly encourage you to answer them. These FAQs clarify some of these new questions.

1. For the compliance question that asks how the 401(k) plan satisfies the nondiscrimination requirements for employee deferrals and employer matching contributions, which box should I select if the plan uses both the design-based safe harbor method and an ADP/ACP test?

Choose only the "ADP/ACP test" checkbox if the plan uses both the design-based safe harbor method and an ADP/ACP test. We expect to further clarify this question and the related instructions on the 2016 Form 5500-series returns.

2. For the compliance question that asks if the "current year testing method" for NHCEs is used in performing ADP/ACP testing for the plan year, which box should I select if the current year testing method is used for either the ADP or ACP test, and the prior year testing method is used for the other?

Select the "Yes" or "No" checkbox based on whether or not the current year method is used in performing the ADP test. We expect to further clarify this question and the related instructions on the 2016 Form 5500-series returns.

3. For the compliance question that asks how the plan satisfies the coverage requirements under section 410(b), how should I answer if the plan meets exceptions to the coverage rules?

Leave the response blank (don't choose any box) if the plan meets exceptions to coverage rules or if the plan is a non-qualified plan. The exceptions include any of the following:


1. The employer employs only highly-compensated employees (HCEs)
2. No HCEs benefited under the plan at any time during the plan year
3. The plan benefits only collectively-bargained employees
4. The plan benefits all non-excludable, non-highly compensated employees of the employer (defined in IRC Sections 414(b), (c), and (m)), including leased employees and self-employed individuals
5. The plan is treated as satisfying the minimum coverage requirements under IRC Section 410(b)(6)(C)

4. For the compliance question that asks whether the plan trust incurred unrelated business taxable income, when would I choose the "N/A" checkbox?

Check the "N/A" checkbox if the plan doesn't have a trust, such as 412(e)(3) fully-insured plans or certain 403(b) annuity plans. See Publication 598 for the definition of "unrelated business taxable income."

5. For the compliance question that asks whether in-service distributions were made during the plan year, what types of in-service distributions should be reported?

For the purpose of the 2015 Form 5500-series returns, only report:

• Hardship distributions from 401(k) plans; and
• Distributions from defined benefit or money purchase pension plans to employees who:
• have attained age 62, and
• weren't separated from service when the distributions were made.

Don't report any amounts from:

-- Corrective distributions (such as excess deferrals, excess contributions, and excess aggregate contributions)
-- Distributions under EPCRS
-- Deemed distributions
-- Direct rollovers of eligible rollover distributions

We expect to modify this question on the 2016 Form 5500-series returns.

6. Am I allowed to use the plan sponsor's EIN in place of getting a trust EIN to answer the question on trust information?

No. You should use the trust EIN to report the information on the Form 5500-series returns. If there is no trust EIN, the EIN used on Form 1099-R and Form 945 may be used for this purpose. We encourage trustees to get a trust EIN from the IRS. If a trust's EIN has been deactivated, the trustee can fax a request to the EP Entity Control Unit in Ogden, Utah at (801) 620-7116 to reactivate it.

7. For the compliance question that asks whether a plan has been timely amended for all required tax law changes, how should I answer this question if the plan sponsor has used the IRS Employee Plans Compliance Resolution System (EPCRS) to correct the failure to amend the plan for required law changes by the applicable deadlines?

Check "Yes" if the plan sponsor has used EPCRS to correct the failure to amend the plan for required law changes by the applicable deadline.

8. For the compliance question that asks for the date the last plan amendment/restatement for required tax law changes was adopted, which date should I enter for a plan that uses a pre-approved plan document and has adopted all required interim amendments but has not been restated for PPA by December 31, 2015?

Enter the most recent adoption date of the interim amendment (disregard any discretionary amendments) that complies with required law changes. A plan sponsor must adopt an interim amendment before the end of the plan's remedial amendment cycle for a plan provision.

9. A multiple-employer plan may file one Form 5500 to report information about the entire plan. Does the IRS require responses to the IRS compliance questions at the participating-employer level or at the plan level?

Unless specified in the instructions, a multiple-employer plan generally reports information at the plan level on Form 5500 and should respond to the IRS compliance questions at the plan level.

December 21, 2015

Employee Benefits-IRS Provides Guidance To Insurance Providers and Employers On Understanding Electronic Filing Requirements for ACA Information Returns

In IRS Health Care Tax Tip 2015-74, November 12, 2015, the IRS provides guidance to insurance providers and employers on complying with the electronic filing requirements for ACA information returns. Here is what the IRS said.

To support Affordable Care Act regulations that were effective on January 1, 2015, the IRS will receive and process information returns reporting on individual's health insurance coverage from insurance companies, self-insured companies, and large businesses and businesses that provide health insurance to their employees.

ACA information returns and transmittals are electronically filed through the ACA Information Returns system, also known as AIR. Non-ACA information returns can be electronically transmitted through the Filing Information Returns Electronically system, also known as FIRE.

ACA Forms 1094-B,1095-B,1094-C, and 1095-C are classified as information returns under the Internal Revenue Code which provides that any person, including a corporation, partnership, individual, estate, or trust, who is required to file 250 or more information returns, must file such returns electronically. The 250 or more information return requirement applies separately for each type of return and separately to each type of corrected return.

All filers are encouraged to file information returns electronically even if they file less than 250 information returns.

If a corporation with several branches or locations uses the same EIN, the corporation must aggregate the total volume of returns to be submitted for that EIN and apply the filing requirements to each type of return.

Issuers should retain a copy of information returns or have the ability to reconstruct the data for at least three years from the reporting due date.

AIR accepts the following information return transmittals and documents:
• Form 1094-B, Transmittal of Health Coverage Information Returns
• Form 1095-B, Health Coverage
• Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
• Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

AIR will process each submission and provide a status with detailed acknowledgement for the transmitter.

Generally, the Form 1095-B and 1095-C will be submitted with their associated Form 1094-B and Forms 1094-C transmittals. In certain circumstances, the Form 1094-C can be submitted alone.

The ACA Information Returns (AIR) Program webpage can be accessed by typing AIR in the IRS.gov search window.

Information about these and other tax provision can be found at IRS.gov/aca.

December 17, 2015

Employee Benefits-IRS Issues 2015 Cumulative List Of Changes In Plan Qualification Requirements

The IRS has issued Notice 2015-84 (the "Notice"), which contains the 2015 Cumulative List of Changes in Plan Qualification Requirements (the "2015 Cumulative List") described in section 4 of Rev. Proc. 2007- 44. Here is what the IRS said in this Notice.

The 2015 Cumulative List is to be used by plan sponsors and practitioners submitting determination letter applications for qualified retirement plans during the period beginning February 1, 2016 and ending January 31, 2017. Plans using this Cumulative List will primarily be single employer individually designed defined contribution plans and single employer individually designed defined benefit plans that are in Cycle A. Generally an individually designed plan is in Cycle A if the last digit of the employer identification number of the plan sponsor is 1 or 6. The list of changes in section IV of this Notice does not extend the deadline by which a plan must be amended to comply with any statutory, regulatory, or guidance changes. The general deadline for timely adoption of an interim or discretionary amendment can be found in section 5.05 of Rev. Proc. 2007-44.

In accordance with Rev. Proc. 2007-44, the IRS will start accepting determination letter applications for Cycle A individually designed plans beginning on February 1, 2016. The 12-month submission period for Cycle A plans will end on January 31, 2017. The 2015 Cumulative List, set forth in section IV of this Notice, informs plan sponsors of issues the IRS has specifically identified for review in determining whether a plan filing in Cycle A has been properly updated.

See the Notice for the new list of changes and other details.

December 16, 2015

Employee Benefits-IRS Provides Guidance On Application Of Obergefell To Qualified Retirement Plans And Welfare Plans

In Notice 2015-86 (the "Notice"), the IRS provides guidance on the application of the decision by the U.S. Supreme Court in Obergefell v. Hodges ("Obergefell") to qualified retirement plans and to health and welfare plans, including cafeteria plans under section 125 of the Code. This guidance relates solely to the application of federal tax law with respect to same-sex spouses. Here is what the IRS said.

HOLDING IN OBERGEFELL

On June 26, 2015, the Supreme Court held in Obergefell that the Fourteenth Amendment: (1) requires a state's civil marriage laws to apply to same-sex couples on the same terms and conditions as opposite-sex couples, and (2) prohibits a state from refusing to recognize a lawful same-sex marriage performed in another State on the ground of its same-sex character.

QUALIFIED RETIREMENT PLANS

Required Or Optional Changes. A qualified retirement plan is not required to make additional changes as a result of Obergefell. Q&A-8 of earlier issued Notice 2014-19 required these plans to be amended to reflect United States v. Windsor ("Windsor") (holding section 3 of DOMA unconstitutional) and the requirements of Notice 2014-19 itself by no later than December 31, 2014. Thus, under Windsor and Notice 2014-19, any plan amendments required to recognize same-sex spouses and their marriages with respect to the section 401(a) qualification requirements are already required to be adopted and effective. However, a plan sponsor may decide to amend its plan following Obergefell to make certain optional changes or clarifications, such as those described below.

New Rights Or Benefits. In response to Windsor, some plan sponsors may have amended their qualified retirement plans to provide new rights or benefits with respect to participants with same-sex spouses in order to make up for benefits or benefit options that had not previously been available to those participants. For example, such an amendment may have provided participants who commenced a single life annuity distribution prior to June 26, 2013 (the date of the Windsor decision) with an opportunity to elect a qualified joint and survivor annuity (a "QJSA") form of distribution as of a new annuity starting date. Following Obergefell, some plan sponsors might similarly decide to make discretionary plan amendments to provide new rights or benefits with respect to participants with same-sex spouses. Plan sponsors are permitted to make such amendments, so long as the amendments comply with the applicable qualification requirements (such as the nondiscrimination requirements of section 401(a)(4)).

Retroactive Recognition Of Same-Sex Marriage. In general, under Windsor and Notice 2014-19, a qualified retirement plan fails to meet the applicable section 401(a) qualification requirements (such as the qualified joint and survivor requirements of section 401(a)(11)) if it does not recognize the same-sex spouse of a participant as a spouse on and after June 26, 2013, the date of the Windsor decision.
However, a plan will not lose its qualified status if it applies Windsor prior to June 26, 2013. 5 A plan sponsor that has not yet made such a retroactive amendment in accordance with Notice 2014-19 may decide to make such an amendment after this Notice is issued. Such an amendment will not cause the plan to lose its qualified status, provided the amendment otherwise complies with Q&A-3 of Notice 2014-19 (for example, the amendment must comply with applicable qualification requirements, such as section 401(a)(4)).

Section 436(c). In general, under section 436(c), a discretionary amendment to a single-employer defined benefit plan that increases the liabilities of the plan cannot take effect unless the plan's adjusted funding target attainment percentage is sufficient or the plan sponsor makes the additional contribution specified under section 436(c)(2). Because an amendment that extends rights and benefits to a same-sex spouse in response to Obergefell or this Notice is a discretionary expansion of coverage, the amendment is subject to the requirements of section 436(c).

Amendment Deadlines. Amendments to a qualified retirement plan that are contemplated by this Notice are discretionary amendments. Thus, pursuant to section 5.05(2) of Rev. Proc. 2007-44, the deadline to adopt any such amendment is generally the end of the plan year in which the amendment is operationally effective.

HEALTH AND WELFARE PLANS

Required Changes. Federal tax law generally does not require health and welfare plans to offer any specific rights or benefits to the spouse of a participant. To the extent that a health or welfare plan does offer benefits to the spouse of a participant, the federal tax treatment of the benefits that are provided to a same-sex spouse has already been addressed in earlier issued Rev. Rul. 2013-17 and Notice 2014-1. Accordingly, no changes to the terms of a health or welfare plan are required due to Obergefell.
If a health or welfare plan does offer benefits to the spouse of a participant, however, Obergefell could require changes to the operation of the plan to the extent that the decision results in a change in the group of spouses eligible for coverage under the terms of the plan.

Note: ERISA requires that the terms of a plan be set forth in writing, so ERISA may require a plan amendment to reflect a change in plan operation, even if federal tax law does not.

Changing or Revoking A Cafeteria Plan Election. If, as of the beginning of a plan year, a health or welfare plan that is offered under a section 125 cafeteria plan does not permit coverage of same-sex spouses, and the terms or operation of the health or welfare plan change during the plan year so as to offer such coverage, then cafeteria plan may permit a participant to revoke an existing election and submit a new election, under the circumstances described in the Notice.

Further, the Notice permits a plan sponsor to amend the terms of its cafeteria plan to permit such election changes. This amendment must be adopted by no later than the last day of the plan year including the later of: (1) the date same-sex spouses first became eligible for coverage under the applicable health or welfare plan, or (2) December 9, 2015. Such an amendment may be retroactive to the date same-sex spouses first became eligible for coverage under the plan.

December 10, 2015

Employee Benefits: IRS DiscussesTax Considerations For Employers With Fewer Than 50 Employees

In IRS Health Care Tax Tip 2015-78, December 1, 2015, the IRS discusses tax considerations for employers that have less than 50 employees. Here is what the IRS said.

Some of the tax provisions of the Affordable Care Act apply only to employers with fewer than 50 full-time or full-time equivalent employees.

Employers with fewer than 50 employees should take note of these tax considerations:
• More than 95 percent of employers have fewer than 50 full-time employees or equivalents and are not subject to the employer shared responsibility provision.
• Calculating the number of employees is especially important for employers that have close to 50 employees or whose workforce fluctuates throughout the year.
• If an employer has 50 or fewer employees, it can purchase health insurance coverage for its employees through the Small Business Health Options Program.
• Employers that have fewer than 25 full-time equivalent employees with average annual wages of less than $50,000 may be eligible for the small business health care tax credit. These employers are eligible for this credit if they cover at least 50 percent of their full-time employees' premium costs, and the coverage is purchased through the SHOP.

All employers, regardless of size, that provide self-insured health coverage must annually file information returns for individuals they cover. The first returns are due to be filed in 2016 for the year 2015.

The cost of these health care benefits will be reported in box 12 of the Form W-2, with Code DD to identify the amount. In general, the amount reported should include both the portion paid by the employer and the portion paid by the employee. In the case of a health FSA, the amount reported should not include the amount of any salary reduction contributions.

For more information, see the Affordable Care Act Tax Provisions for Small Employers page on IRS.gov/aca.

December 2, 2015

Employee Benefits-IRS Discusses The Different Types Of 2015 Transition Relief Under The Employer Shared Responsibility Provisions

In IRS Health Care Tax Tip 2015-77, November 24, 2015, the IRS discusses transitional relief from the ACA employer share responsibility provisions for health care. Here is what the IRS said.

Under the Affordable Care Act, certain employers - called applicable large employers - are subject to the employer shared responsibility provisions. If you are an ALE, you may choose to offer affordable minimum essential coverage that provides minimum value to your full-time employees - and minimum essential coverage to your full-time employees' dependents - or, alternatively, to potentially owe an employer shared responsibility payment to the IRS. The vast majority of employers fall below the workforce size threshold on which ALE status is based and therefore are not subject to the employer shared responsibility provisions.

The employer shared responsibility provisions were first effective on January 1, 2015, but transition relief from certain requirements is available for 2015, including the following:

• ALEs with fewer than 100 full-time employees, including full-time equivalent employees, won't be assessed an employer shared responsibility payment for 2015, provided that certain conditions are met regarding the employer's maintenance of workforce and pre-existing health coverage. ALEs that are eligible for this relief must provide a certification of eligibility as part of the related information reporting that is required of all ALEs for 2015.

• ALEs are not required to offer coverage to full-time employees' dependents for the 2015 plan year, provided that they meet certain conditions, including that they take steps to arrange for such coverage to begin in the 2016 plan year and they do not drop current dependent coverage.

• In general, if an ALE does not offer minimum essential coverage to at least 95 percent of its full-time employees and their dependents, it may owe an employer shared responsibility payment based on its total number of full-time employees. For 2015, 70 percent is substituted for 95 percent. However, even if an employer offers minimum essential coverage to at least 70 percent of its full-time employees and their dependents for 2015, it may still owe the separate - generally smaller in the aggregate - employer shared responsibility payment that applies for each full-time employee who receives the premium tax credit for purchasing coverage through the Health Insurance Marketplace.

• If an ALE is subject to the employer shared responsibility payment because it doesn't offer minimum essential coverage to its full-time employees and their dependents, the annual payment is generally $2,000 for each full-time employee - adjusted for inflation - after excluding the first 30 full-time employees from the calculation. For 2015, if an ALE with 100 or more full-time employees, including full-time equivalent employees, is subject to this employer shared responsibility payment, the payment will be calculated by reducing the ALE's full-time employees by 80, rather than 30.

• Transition relief is available for certain employers sponsoring non-calendar year plans for the months in 2015 prior to the beginning of the 2015 plan year with respect to certain employees, if the employer and plan meet various conditions.

• Rather than being required to measure its ALE status based on the number of full-time employees, including full-time equivalent employees, for all twelve months of 2014, employers may instead base their 2015 ALE status on any consecutive six-month period - as chosen by the employer - during 2014.

For an employer with a non-calendar plan year, the first four types of transition relief listed above also apply for the months in 2016 that are part of the 2015 plan year.

For more information on transition relief see the transition relief Questions and Answers on IRS.gov/aca and the preamble to the ESRP regulations.