Employers that sponsor group health plans are reminded that the Patient Protection and Affordable Care Act (ACA) requires the reporting of employees’ minimum essential coverage for calendar year 2015 and that doing so will necessitate the collection of taxpayer identification numbers (TINs) for all covered individuals, including employees and their dependents. Although the statements for 2015 must be furnished to individuals by Feb. 1, 2016, and filed with the IRS by Feb. 29, 2016 (paper) or March 31, 2016 (electronically), the requesting of Social Security numbers (SSNs) needs to begin now.
Under tax code section 6055 reporting, employers (or parties reporting on behalf of employers) are required to report TINs for all covered individuals. In most cases, TINs are the individuals’ SSNs. This reporting will enable the IRS to confirm that the individuals have minimum essential coverage and are not subject to the penalty for not having appropriate health insurance. The IRS will match the information about dependents on individuals’ tax returns (e.g., Form 1040) with the names and TINs reported by employers. (See also Client Action Bulletin 14-4R)
As reporting entities, group health plan sponsors must make reasonable efforts to obtain TINs, and may do so via oral, written, or electronic means. The efforts should be documented. The IRS’s final rule, issued in March 2014, outlined the following general steps as a reasonable effort:
• Make an initial solicitation for the TIN at the time the relationship with the employee is established, such as at initial enrollment or upon hire, unless the reporting entity already has the employee’s TIN and uses that TIN for all relationships with the employee.
• If TINs are not received at that initial solicitation, the first annual solicitation is generally required by Dec. 31 of the year in which the relationship with the employee began (Jan. 31 of the following year if the relationship begins in December).
• If the TINs are still not provided, a second solicitation is required by Dec. 31 of the following year.
• If at this point the TINs are still not provided, the reporting entity has acted in a responsible manner and need not continue to solicit TINs for those individuals.
A failure to receive a TIN does not authorize the employer to terminate coverage. Reporting entities also are permitted to voluntarily report TINs for individuals not enrolled in coverage.
The final rule allows for the reporting of dates of birth in lieu of TINs, but only if the reporting entity is either informed that an individual has no TIN or unable to obtain a TIN after making the aforementioned reasonable efforts. In addition, if an employee adds a new dependent, the employer must again take reasonable efforts to obtain a TIN for that new dependent. Renewed efforts to solicit TINs for individuals already covered are not required.
Employers may use truncated taxpayer identification numbers in lieu of the full identification number when providing the information to the employee. A TIN is truncated when the first five of the nine digits are replaced by asterisks or X marks (e.g., 123-45-6789 becomes XXX-XX-6789). The full TIN must be used in the forms submitted to the IRS.
Noncompliance with the section 6055 reporting requirements subjects the employer to the penalties for a failure to file correct information return and/or for a failure to furnish correct employee statements. The IRS will grant temporary relief from these penalties for incorrect or incomplete information reported on returns and statements filed and furnished in 2016 (relating to coverage in 2015), but only for entities that can demonstrate they made good faith efforts to comply with the requirements.
For additional information about the 6055 information reporting requirements, please contact your Milliman consultant.