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December 29, 2015

Affordable Care Act Employer Reporting Deadlines Extended and Cadillac Tax Delayed

On December 28, 2015, the Internal Revenue Service (“IRS”) issued Notice 2016-4, extending key reporting dates under the Affordable Care Act (“ACA”), including the requirement for Applicable Large Employers (“ALE”s) to furnish Form 1095-C to full-time employees, and Form 1094-C to the IRS.  In related news, on December 18, 2015, President Obama signed the federal budget bill, which delays implementation of the ACA’s “Cadillac Tax” by two years, from 2018, to 2020.
IRS Reporting Requirements
Notice 2016-4 extends the due dates for the 2015 information reporting requirements (both furnishing to individuals and filing with the IRS for insurers, self-insuring employers, and certain other providers of minimum essential coverage under section 6055 of the Internal Revenue Code (“IRC”)), and the information reporting requirements for applicable large employers under section 6056 of the IRC.
Specifically, Notice 2016-4 extends the due date (1) for furnishing to individuals the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from February 1, 2016, to March 31, 2016, and (2) for filing with the IRS the 2015 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, 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 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 employees in determining eligibility for premium tax credits under the ACA.    Form 1095-C must be sent to full-time employees and  must also be filed with the IRS.  Notice 2016-4 provides guidance to individuals who might not receive a Form 1095-B or Form 1095-C by the time they file their 2015 tax returns.

The IRS announced it is prepared to accept filings of the information returns on Forms 1094-C, and 1095-C beginning in January 2016. Following consultation with stakeholders, however, the Department of the Treasury and the IRS determined that some employers, insurers, and other providers of minimum essential coverage needed additional time to adapt and implement systems and procedures to gather, analyze, and report this information. Notwithstanding the extensions provided in this notice, the IRS encourages employers and other coverage providers to furnish statements and file the information returns as soon as they are ready.

Section 6056 of the IRC 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 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.  ALEs must also furnish full-time employees a written statement on or before January 31. The IRS designated Form 1094-C and Form 1095-C to meet the requirements of the section 6056 regulations.  The above dates have been extended, as discussed above, but only for the 2015 reporting year.

The IRS announced that in view of these extensions, the provisions regarding automatic and permissive extensions of time for filing information returns and permissive extensions of time for furnishing statements will not apply to the extended due dates.  Because these extensions apply automatically to all filers and are more generous than extensions of time to file or furnish 2015 returns and information statements under sections 6055 and 6056 that have already been requested by some filers in submissions to the IRS, the IRS announced that such requests will not be formally granted.
Cadillac Tax Delay
The Cadillac tax was set to take effect on January 1, 2018.  This tax would have imposed a 40 percent excise tax on high-cost group health coverage with values exceeding:

  • $10,200 for individuals in 2018. 
  • $27,500 for “other than individual coverage” in 2018.
  • $27,500 for a multiemployer plan (for single and family coverage) in 2018.

The budget bill delayed implementation of the excise tax until January 1, 2020.

The Cadillac tax was intended discourage high value health coverage. In effect, however, the tax would have affected a broader spectrum of plans.  Some studies indicated that the tax would affect about half of U.S. employers in 2018, and more than 80 percent by 2023.  The delay will allow extra time for solutions to be worked on regarding the impact of the tax, with some hoping for an eventual repeal of the tax.
The budget bill also removes a provision of law prohibiting the Cadillac tax from being deducted as a business expense.
If you have any questions regarding the ACA, the Cadillac tax, or reporting requirements, please contact the author.

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