The ACA reporting deadlines for minimum essential coverage and employer shared responsibility occur in the first quarter of 2016. Individual statements (Form 1095-Cs) have a Monday, February 1, 2016, deadline and the IRS electronic transmittal due date (Form 1094-C) is Thursday, March 31, 2016.
Several months ago, about half of the employers we surveyed did not yet have a plan for how they would comply with the reporting requirements. Some may initially have thought they would handle the work in-house but now have decided to seek outside assistance from one of the many third-party vendors that offer reporting solutions. However, we have been hearing that because of demand and the lengthy implementation that the work requires, some vendors can no longer commit to meeting the reporting deadlines. They are offering to send the 1095-Cs at a later date in February or in March.
Is this feasible? And if so, what are the risks? In fact, the rules clearly allow for an extension for both deadlines (as described in the 2015 reporting instructions):
- 1095-Cs. Per 26 CFR §301.6056-1(g)(1)(ii), you may apply to the IRS in writing for a 30-day extension. A simple letter to the IRS requesting the extension and providing the reasons it is needed can serve as an application. While the IRS has authority to provide procedures for automatic extensions, we are not aware of any plans to do so. The 2015 reporting instructions contain more information on the content of this letter.
- 1094-Cs. Per 26 CFR §301.6056-1(e), referencing 26 CFR §1.6081-8, the IRS will grant an automatic 30-day extension upon an employer’s filing of Form 8809. You can submit a request for a second 30-day extension if submitted before the initial extension period ends but the second extension is not automatic.
For the 1095-C, the obvious risk is that the IRS will not grant the extension. Also, employers should consider employee reaction to a delay. Recall that the 1095-C may be required in order to complete personal income tax filing. (See lines 46 and 61 of Form 1040).
Seeking an extension, though, may become the best choice for employers who do not choose a reporting solution soon. If you haven’t finalized plans for reporting, act now!
- Review the alternative reporting options — i.e., qualifying offer, qualifying offer transition relief, and 98% offer. These options can make reporting somewhat simpler, particularly for fully insured plans.
- Evaluate resources available to see if handling the reporting in-house is feasible. Even though the requirements are pretty complex, a third of employers we surveyed thought it was.
- Consider the pros and cons of filing for an extension.