REPEAL OF ACA
Yes, a Texas judge did rule on December 14, 2018, that the Affordable Care Act (“ACA”) was invalid due to the elimination of the individual mandate penalty in 2019. No, that does not mean the ACA is gone. The White House has indicated that the ACA will remain in place pending appeals. Also, the IRS retains the ability to audit past Form 1094 & Form 1095 filings and issue penalties for noncompliance, The Democrats are promising to fight this ruling every step of the way. Ultimately, this issue will be resolved by the Supreme Court later in 2019.
YET ANOTHER ACA FILING EXTENSION
The ACA requires applicable large employers (those with 50 or more full-time equivalent employees) and small employers who are self-insured (often through a level funded arrangement) to file a return (Form 1094-B or Form 1094-C) and furnish statements (Form 1095-B or Form 1095-C) to their full-time employees as to the coverage, if any, that they offer to full-time employees. Penalties exist for failure to timely file, or failure to file at all, any of these applicable forms.
Recently, the IRS again announced an extension for the furnishing of 2018 IRS Forms 1095-B (Health Coverage) and 1095-C (Employer-Provided Health Insurance Offer and Coverage), from January 31, 2019, to March 4, 2019, to employees. This extension is similar to the extension provided by the IRS last year and this is the fourth straight year some type of extension was granted. There is no additional extension granted beyond March 4, 2019, for providing these disclosures.
It is imperative to note that this extension does not extend the due date for employers, insurers, and other providers of minimum essential coverage to file 2018 Forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS. The filing due date for these forms remains February 28, 2019 (April 1, 2019, if filing electronically). Thirty day and hardship extensions for filing remain available as permitted for these forms under the regulations.
Obviously, the best approach would be to complete, file and furnish your applicable reporting forms as soon as practicable in 2019. Pushing up to the deadlines can easily result in late filings and applicable late filing penalties.
INDIVIDUAL MANDATE EXPIRES
As I indicated in the past, the time is up for the individual mandate tax (penalty). You may recall that every person was required (with limited exceptions) to maintain insurance, including coverage for dependents. Insurance could be obtained via the employer, the marketplace, individual policies directly through carriers and various government (Medicare) sources. Penalties for not carrying appropriate insurance had been increasing steadily over the years. However, President Trump eliminated the individual mandate tax this past year. Effective January 1, 2019, the individual mandate penalty will be reduced to zero. It remains to be seen how this impacts marketplace and group health plan enrollment but early returns suggest more younger people are forgoing insurance coverage with the elimination of this tax which could have a significant financial impact to them in the event of an unexpected injury or illness.
WHERE DO ACA AUDITS STAND?
The IRS is wrapping up its audit of Form 1094-C and Form 1095-C for the 2015 filing year for any “pay or play penalties”. Because the IRS is a few years behind in the review process, there are two, soon to be three, open audit years. The IRS recently acknowledged that they have begun to issue audit letters (Letter 226-J) for the 2016 filing year. In the event you receive one of these letters, please contact our office immediately. We have had nice success in contesting IRS proposed assessments against our clients.
GOOD FAITH REPORTING STANDARD REMAINS IN PLACE
IRS Notice 2018-94 which extended the 1095-B and 1095-C disclosure deadline to employees, also extended the “good faith” reporting standards for 2018 reporting purposes. This means that reporting entities will not be subject to reporting penalties for incorrect or incomplete information if they can show that they have made good faith or reasonable efforts to comply with the 1094 and 1095 information-reporting requirements. Similar to prior years, no relief is provided where there has not been a good faith effort to comply with the reporting requirements or where there has been a failure to file or furnish reports by the applicable due date.
2018 INDIVIDUAL TAX RETURNS
If an employee didn’t have health insurance coverage in 2018, he/she will be liable for the individual mandate tax when completing their year-end tax return since the individual mandate was still in effect for 2018. The IRS did indicate that once again, individual taxpayers may once again may rely on other information received from the employer or coverage provider for purposes of filing an individual tax return. Thus, you can assure your employees that there is no need to submit a copy of the Form 1095 with a tax return.