Does Your Company Employ 50 or More People?

What Is a 'Large Employer'?

The definition of large employer is not always as straightforward as it appears. A company with one employee could be subject to the large employer reporting requirements if the aggregation of its subsidiaries brings the total employee head count to 50. The reporting requirement extends to each company that comprises the large employer, although they are only liable for the information they individually report.

The ACA added Sections 6055 and 6056 of the Internal Revenue Code, which require self-insuring employers, large employers and other providers of minimum essential coverage to file and furnish annual information returns and statements to the IRS relating to the healthcare insurance the employer offers to its full-time employees.

Providers of minimum essential coverage must also furnish, for each covered individual, a statement that includes the same information provided to the IRS. The information reported includes the name and taxpayer identification number or birth date of every covered individual, the months of coverage including any month for which an individual is enrolled in minimum essential coverage for at least one day and information about the employer.

Extended Deadlines

The new deadlines are:

• March 31 is the due date for large employers to furnish IRS 2015 Forms 1095-B and 1095-C to employees.
• May 31 is the deadline for employers to file with the IRS 2015 Forms 1094-B, 1094-C, 1095-B and 1095-C if not filing electronically.
• June 30 is the deadline for electronic filing of Forms 1094-B and C and 1095-B and C.

Individual employees should note that they do not need to file Forms 1095-B or 1095-C with their tax returns, but they may need some of the information provided by their employer to complete their returns.

As a practical matter, employers should provide employees with the 1095-B and 1095-C forms as quickly as possible so that employees can expedite their own tax returns.

Failure to Comply

Failure to comply with the IRS reporting requirements could result in penalties under Internal Revenue Code Section 6721 for failure to file correct information return and Section 6722 for failure to furnish correct payee. The penalty for failure to file an information return and to furnish a correct payee statement is generally $250 for each return for which that failure occurs. The maximum total penalty imposed for all failures during a calendar year cannot exceed $3 million, so the penalties for not reporting are enough to sting.

Pay to Challenge

There are informal mechanisms in place to challenge an IRS penalty, but if unsuccessful the employer must pay the penalty in full and litigate to seek a refund in either the U.S. District Court or the U.S. Court of Federal Claims. Adequate record keeping is essential because the IRS will take into consideration the employer's reasonable efforts to prepare for the reporting.

Conclusion

While the future of the ACA and the employer mandate is unknown ' particularly if a Republican is elected president this year ' employers must for now comply with ACA's mandates and reporting requirements.

Failure to have an organized system to gather and report the necessary information could cost the large employer substantial amounts of money in penalties and potential attorney fees to challenge any fines imposed.

Jamie B. Wasserman is an attorney in Shutts & Bowen's West Palm Beach office, where she is a member of the Health Care and Business Litigation Practice Groups. This article also appeared on Law.com, an ALM affiliate of this newsletter.