The recently enacted Trade Preferences Extension Act of 2015 (the “Act”) doubles the penalties for the failure to file or provide ACA information returns and statements.
Returns And Statements Required. The Affordable Care Act (the “ACA”) added section 6056 to the Internal Revenue Code (the “Code”). Under that section, an “Applicable Large Employer” or “ALE” which maintains a group health plan is required to file an information return relating to the plan with the IRS. This return provides information on the health coverage provided under the plan. The ALE must generally use Form 1095-C, with transmittal Form 1094-C, as the return. The filing is due by the February 28 (March 31 if filing is electronic) following the year for which the return is made. In addition, the ALE is required to furnish each full-time employee with a statement that includes the same information provided to the IRS on the information return, by January 31 following the year to which the statement relates.
Further, the ACA added section 6055 to the Code. Under that section, the plan sponsor of a self-insured group health plan (including the trustees of a multiemployer health plan) is required to file an information return relating to the plan with the IRS. This return provides information on the “minimum essential coverage” provided under the plan. The plan sponsor must generally use Form 1095-B, with transmittal Form 1094-B, as the return. The filing is due by the February 28 (March 31 if filing is electronic) following the year for which the return is made. The plan sponsor is required to furnish, to each covered individual of the plan, a statement that includes the same information provided to the IRS on the information return, by January 31 following the year to which the statement relates.
If the plan sponsor which maintains a self-insured plan is also an ALE, then the plan sponsor must combine reporting under sections 6055 and 6056, by filing a single information return, Form 1095-C and transmittal, Form 1094-C. Then a single statement would be given to each full-time employee and other covered individuals.
The first returns and statements are for calendar year 2015, and are therefore due in 2016.
Information Reporting Penalties. An ALE, or plan sponsor maintaining a self-insured group health plan, which fails to comply with the information reporting requirements described above may be subject to the general reporting penalty provisions under section 6721 (failure to file correct information returns) and section 6722 (failure to furnish correct payee statement) of the Code. And the Act has at least doubled to the applicable penalties under those sections. As such, the penalties are as follows:
• For returns required to be filed after 2015, the penalty for failure to file an information return is increased from $100 to $250 for each return for which such failure occurs, with a total penalty for any calendar year capped at $3,000,000 (up from the $1,500,000 total for pre-2015 returns).
• For statements due after 2015, the penalty for failure to provide a correct statement to a full-time employee or other covered individual is increased from $100 to $250 for each statement for which such failure occurs, with the total penalty for a calendar year capped at $3,000,000 (up from the $1,500,000 total for pre-2015 statements).
• Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to furnish a payee statement.
Note that the waiver of penalty and special rules under section 6724 of the Code, and the applicable regulations, including abatement of information return penalties for reasonable cause, may apply to certain failures under section 6721 or 6722.