It's time to take a moment from holiday celebrations to review three important changes the Federal government has issued which will impact your benefits administration in 2016.
IRS Form 1095-C and 1094-C Filing Extension
In a response to the large number of submissions from employers and insurance carriers requesting an extension to the filing requirement, the IRS has issued a blanket extension.
- Individual Statements: 1095-B and 1095-C filing deadline moved from February 1, 2016 to March 31, 2016
- Paper Filing of Employer Transmittal: 1094-B and 1094-C filing deadline moved from February 29, 2016 to May 31, 2016
- Electronic Filing Employer Transmittal: 1094-B and 1094-C filing deadline moved from March 31, 2016 to June 30, 2016
These extensions are welcomed relief to employers as they work on accurately completing these forms for their active employees, terminated employees, COBRA beneficiaries, and retirees. A special note on the COBRA beneficiaries, this extension provides time for the 2015 COBRA payment and election grace periods to expire, therefore allowing employers to accurately report on their 1094-C the total number of 1095-C forms released and provide their COBRA beneficiaries with an accurate 1095-C.
In their release, the IRS did state that individuals will not need to amend their 2015 tax filing if they file before receiving their 1095-C. It is important to note that the 1095-C is a valuable piece of data for the IRS to verify that individuals are compliant with the individual medical coverage mandate and in receiving premium subsidies through the federal or a state healthcare exchange.
As a reminder, the 2015 penalty for an individual not being covered by an ACA approved medical plan is the greater of $325 per individual per year or 2% of their annual income (that is income after exemptions and standard deductions are removed). The penalty is capped at the average annual premium cost for the bronze level medical plan.
Official IRS Notice 2016-4
Next steps for employers is to confirm with your payroll vendor or benefits administrator on how they will comply with the IRS filing extension. Simply because the IRS has issued this extension, your vendor may still hold you to the same data submission deadline.
IRS Transit Pre-Tax Limit Increase
For 2016, the IRS has increased the pre-tax monthly contribution limit on transit expenses from $130 to $255. This now brings parity to the pre-tax limit for transit and parking by having them both at a $255 limit per month. Employers will need to communicate this benefit change to employees so they can modify their January payroll deductions to take advantage of the increased pre-tax benefit.
The IRS also retro-actively increased the pre-tax transit benefit level for 2015 to $250. Employers which allowed employees to take a post-tax deduction for transit expenses above the $130 pre-tax level, can now modify the employee's deduction to bring their pre-tax level to $250 per month.
Employers will need to work internally or with their pre-tax transit administrator on modifying their process and employee communication to account for these changes.
ACA Cadillac Tax Amendment
As part of the Federal Consolidated Appropriations Act of 2016, the ACA Cadillac Tax was revised to allow a two-year delay in implementation. This extends the implementation date from 2018 to 2020. This clause also allows the excise tax to be tax deductible. Finally, the legislation addressed the need to consider the issue of how the premium costs can vary based on the individuals age and gender so employers should not be penalized if their costs are higher due to an older workforce.
This may be the first step in re-defining the Cadillac Tax which is currently slatted to be a 40% excise tax on medical plans that exceed a level of cost per individual and family as defined by the government. There is definitely more to come on this topic, especially as the 2016 election results are finalized.