Health Care Reform Update - IRS Provides Guidance on ACA Electronic Reporting

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Willis Human Capital Practice, National Legal & Research Group
The Internal Revenue Service (“IRS”) has released draft publications that provide guidance for
filing Patient Protection and Affordable Care Act (“PPACA” or “ACA”) reporting forms
electronically, including Forms 1094-B, 1095-B, 1094-C and 1095-C (“ACA Information
Returns”). The electronic filing system is referred to as the Affordable Care Act Information
Returns (“AIR”) System.
The following are links to the IRS guidance and corresponding slide presentations that discuss
each publication:
• Draft Publication 5165 (Early Look) Guide for Electronically Filing ACA Information
Returns for Software Developers and Transmitters / ACA Information Returns April 30,
2015 Working Group Meeting Webinar Presentation
• Draft Publication 5164 (Early Look) Test Package for Electronic Filers of ACA
Information Returns / ACA Information Returns May 28, 2015 Working Group Meeting
Webinar Presentation
Background
Under the employer mandate or “Pay or Play” provisions of PPACA, applicable large employers
(“ALEs”) must offer minimum essential coverage to their full-time employees, and the coverage
must be affordable and provide minimum value. An ALE is an employer who employs on
average at least 50 full-time employees or full-time employee equivalents on business days
during the prior calendar year. In order for the federal government to monitor compliance with
this legal obligation, the IRS requires that ALEs, insurance companies and others submit certain
reporting to the IRS.
Mandatory reporting begins during the first quarter 2016. Employers, insurance companies and
other entities filing less than 250 ACA Information Returns (either Form 1095-B or 1095-C) can
file those returns on paper, which are due March 1, 2016. If the employer or other entity is filing
250 or more Forms 1095-B or 1095-C, the employer or other entity must file electronically no
later than March 31, 2016.
It appears that the guidance was published at this time primarily to address electronic filing for
2014 reporting forms, which are scheduled to begin filing in October 2015. Since 2014 reporting
was voluntary and the electronic filing publications are in draft, the IRS indicated that minor
WEEK OF JUNE 1, 2015:
Health Care Reform Update - IRS Provides Guidance on ACA
Electronic Reporting

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Health Care Reform Update | Willis Human Capital Practice, National Legal & Research Group
changes will be made before the 2015 returns are due. This guidance provides employers and
other filers with important insights on how electronic reporting will work when the returns are
filed during first quarter 2016.
Procedures for Setting Up Electronic Filing
The guidance is directed to two types of entities who will be using the AIR system to prepare and
file ACA Information Returns electronically, either on behalf of themselves or for another
person:
• Issuers—employers and other entities who are required under Pay or Play to file ACA
Information Returns and who must file 250 or more returns. This includes ALEs who are
obligated to report offers of coverage to employees on Form 1095-C (along with Form
1094-C) and insurance companies and other persons who are required to report coverage
they are providing to individuals on Form 1095-B (along with Form 1094-B)
• Transmitters—third parties who provide ACA Information Return filing services for
Issuers.
In order to file their ACA Information Returns electronically, Issuers and Transmitters will need
to follow a two-step process, in which they identify which role they are performing (Issuer or
Transmitter) and the individuals responsible for carrying out that function, either as “Responsible
Official” or as “Contact” on the IRS system:
• First, each Responsible Official and each designated Contact for an Issuer or Transmitter
individually registers in IRS e-Services with their personal information (link provided).
This is a one-time, universal registration process that authenticates the individual
registrant to the IRS and enables that individual to do business electronically with the
IRS.
• Second, the Responsible Official for the Issuer or Transmitter initiates and signs the
application for that filer, which is referred to as the ACA Information Return Application
for Transmitter Control Code (“TCC”). The IRS indicated that this application will be
ready in June 2015.
In addition to having signing authority for the TCC application on behalf of the Issuer or
Transmitter, the Responsible Official is the first point of contact with the IRS and is responsible
for ensuring that all requirements are adhered to. The Contact is available for inquiries from the
IRS on a daily basis, and also may be responsible for transmitting the ACA Information Returns.
A minimum of two Contacts must be provided on the application and a maximum of 10 Contacts
is permitted. There may also be two or more Responsible Officials.

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Health Care Reform Update | Willis Human Capital Practice, National Legal & Research Group
As a result of this process, the Issuer or Transmitter receives a TCC that is used in the electronic
filing process. Once the TCC is assigned, the IRS provides guidelines for testing access to the
AIR system through the preparation and submission of test submissions.
In addition, this guidance is intended to help ACA reporting software developers in creating
software for the preparation or filing of ACA Information Returns, and they also are required to
register in IRS e-Services and receive a TCC.
System Requirements and Limits
The IRS made it clear that ACA Information Returns can only be filed electronically using the
AIR System. The IRS Filing Information Returns Electronically (FIRE) system (which applies
for filing of numerous IRS information returns, including the various types of Form 1099) cannot
be used for these filings.
In addition, the only acceptable electronic transmission format is XML. The IRS system does
not support ACSII and PDF formats, nor does the IRS intend to develop an Excel-based e-filing
system.
There are limits on the number of forms that can be submitted with a single transmission—100
MB. If the set of employer ACA Information Returns is larger than 100 MB, that set will need
to be split among two or more transmissions. According to IRS instructions, a Form 1094-C
transmittal form must accompany each set of Forms 1095-C that an employer files with the IRS.
Those instructions also direct that the employer designate one of the Forms 1094-C as the
“authoritative transmittal,” in which the employer collects data from all of the Forms 1095-C that
it is filing. The limits on the transmission size may necessitate that larger employers use
multiple Forms 1094-C and prepare and designate one of those Forms 1094-C as the employer’s
authoritative transmittal.
Lastly, the IRS has indicated that it does not provide a mail merge version of the forms filed with
the IRS or any other method an employer or other filer could use to print the forms that it must
send to employees. Employers and other filers must develop their own system for preparing
those employee statements independent of the IRS electronic filing system.
Conclusion
Employers with 250 or more full-time employees who are planning to file their ACA
Information Returns on their own should begin familiarizing themselves with the IRS electronic
filing process and the steps that need to be taken to prepare for electronic filing. This includes
identifying the in-house persons who are responsible for the filing process and confirming that
the employer has in place the technological capabilities to file in the required formats well before
the first quarter 2016 filing deadline.

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Health Care Reform Update | Willis Human Capital Practice, National Legal & Research Group
In addition to the guidance discussed above, the IRS also provides an email service that
distributes information about electronic filings throughout the year, called QuickAlerts. An
employer’s individuals who are responsible for monitoring the filing process should consider
signing up for this service using the QuickAlerts link provided.
More information about the IRS AIR system is available at the IRS website (link provided).
Willis’ National Legal & Research Group will continue to review and provide timely updates on
these and other related changes in Health Care Reform that affect employers.
This information is not intended to represent legal or tax advice and has been prepared solely for informational
purposes. You may wish to consult your attorney or tax adviser regarding issues raised in this publication.