6055 and 6056 Reporting: Are Your Clients Ready for the IRS Shared Responsibility Provisions? August 27, 2015

Agenda Welcome Matt Banaszynski Davd Grunke Stephanie Cook IIAW Davd Grunke Relationship Stephanie Cook IRS Law SSN Concerns David Grunke Tax Issues Impact on Individual Products Roger Ebert Impact on Group Products Impact to Self-funding Cadillac Tax Summary

Today’s Speakers David Grunke Senior Director Sales Operations Sales/WPS Health Insurance 608-226-8030 David.Grunke@wpsic.com Matt Banaszynski Executive Vice President, IIAW matt@iiaw.com Stephanie Cook Director Compliance Quality Services & HIPAA Privacy Officer Legal Department 608-221-7107 stephanie.cook@wpsic.com

Today’s Speakers Roger Ebert Regional Vice President Sales/WPS Health Insurance 262-717-3253 Roger.Ebert@wpsic.com The information provided in this webinar does not constitute legal advice. The presenters are not attorneys. You should not act on the information provided in this webinar without first seeking the advice of an attorney or tax advisor. This presentation is proprietary and confidential.

Today’s Speakers IIAW Matt Banaszynski

David Grunke WHY? Under requirements of the Patient Protection and Affordable Care Act (PPACA), entities that provide minimum essential coverage — such as health insurers and self-funded employer group plans — must report data to the Internal Revenue Service (IRS) about every individual covered by their benefit plans. A copy of the form used to report coverage must be sent to each subscriber. The federal government is seeking this data to monitor compliance with the law’s mandate that individuals obtain basic coverage. Under the PPACA, individuals are required to maintain minimum essential coverage (basic health insurance coverage) for themselves and their dependents. Employers must provide Affordable Minimum Essential Coverage This reporting combined with IRS social security number matching exercise will be the basis for the enforcement of “Everyone must have insurance” or make a “Shared Responsibility Payment” requirement of PPACA.

IRS Reporting Requirements Individual & Shared Responsibility Today’s Speakers IRS Reporting Requirements Individual & Shared Responsibility Stephanie Cook

Section 6055 Reporting: Information Reporting of Minimum Essential Coverage IRS regulations provide that, beginning with 2015 tax year reporting in 2016, every provider of minimum essential coverage (MEC) to an individual during a calendar year must for each tax year file an information return with the IRS and furnish a statement to covered individuals. Information reported is used by: The IRS to administer individual shared responsibility requirements Individuals to show compliance with individual shared responsibility requirements Providers of MEC include: Health insurance issuers of fully-insured individual and group health coverage Plan sponsors of self-insured group health plan coverage

Section 6055 Reporting: Information Reporting of Minimum Essential Coverage The following IRS Forms operationalize the information reporting requirements under section 6055. Required forms must be furnished to individuals by January 31 of the year following the tax year, and to the IRS by February 28 (if filing on paper) or March 31 (if filing electronically). 1095-A: Health Insurance Marketplace Statement; the Exchange is required to file the form with the IRS and furnish it to individuals who obtained coverage through the individual market Exchange (the requirement does not apply to coverage obtained through SHOP) 1095-B: Health Coverage; for all coverage that meets the definition of “minimum essential coverage”, insurers and sponsors of self-funded plans are required to file the form with the IRS and furnish it to each primary insured 1094-B: Transmittal of Health Coverage Information Returns; transmittal form insurers and sponsors of self-funded plans file with the IRS along with all the Forms 1095-B

Section 6056 Reporting: Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer-Sponsored Plans IRS regulations provide that, beginning with 2015 tax year reporting in 2016, “applicable large employers”, or ALEs, subject to employer shared responsibility for each tax year file an information return with the IRS with respect to each full-time employee and furnish a statement to each full-time employee about the health insurance the employer offered. Information reported is used by the IRS to administer employer shared responsibility requirements “Applicable large employer”, or ALE, is defined as an employer that employed an average of at least 50 full-time employees on business days during the preceding calendar year. A full-time employee generally includes any employee who was employed on average at least 30 hours per week and any full-time equivalents. For purposes of section 6056 reporting requirements, any member of a controlled group of employers which, in aggregate, employed at least 50 full-time employees on business days during the preceding calendar year is an ALE. This is true regardless of whether the employer purchases coverage independently or as a member of a controlled group.

Section 6056 Reporting: Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer-Sponsored Plans The following IRS Forms operationalize the information reporting requirements under section 6056. Required forms must be furnished to individuals by January 31 of the year following the tax year, and to the IRS by February 28 (if filing on paper) or March 31 (if filing electronically). 1095-C: Employer-Provided Health Insurance Offer and Coverage; ALEs are required to provide one to each full-time employee 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns; transmittal form employers will file with the IRS along with all the Forms 1095-C

Combined 6055 & 6056 Reporting: Self-Insured Applicable Large Employers (ALEs) Self-insured employers are subject to both section 6055 (as a sponsor of a self-insured plan) and 6056 (as an employer) reporting requirements. If an employer offering self-insured coverage to its employees meets the definition of an “applicable large employer”, or ALE, it fulfills both section 6055 and 6056 reporting requirements by completing IRS Forms 1095-C and 1094-C.

Summary of Reporting Requirements Reporting Entity Required Forms (and Sections) Subject of Reporting Form Form Recipient Insurer 1095- B Parts I- IV All minimum essential coverage, EXCEPT individual coverage issued through the Exchange; form reflects coverage information for the primary individual and all covered dependents IRS & Primary Individual   1094-B Filer information and attestation IRS Self-Insured Employer (<50 FTE) All covered employees of the employer; form reflects coverage information for the primary individual and all covered dependents Self-Insured Applicable Large Employer (50 or more FTE) 1095-C,Parts I- Ill All full-time employees of the employer; form reflects coverage information for the employee and all dependents IRS & employee 1094-C Insured Applicable Large Employer (50 ore more FTE) 1095-C,Parts I- II

Tax Issues David Grunke

David Grunke On March 10, 2014, the U.S. Department of the Treasury and IRS published final rules to implement the information reporting provisions for insurers and certain employers (ASO & Large) under the Patient Protection and Affordable Care Act (PPACA) that take effect in 2015. Draft versions of the forms were released on July 24, 2014 Draft Instructions for the forms were released on August 28, 2014 Final forms issued February 2015 without change from draft forms 4 changes announced June 16, 2015 Employers who provide minimum essential coverage (MEC) during a calendar year are required to report to the IRS certain information about individuals offered coverage and covered by MEC and also to provide a statement to those individuals. Summary On March 10, 2014, the U.S. Department of the Treasury and IRS published final rules to implement the information reporting provisions for insurers and certain employers under the Affordable Care Act (ACA) that take effect in 2015. Employers who provide minimum essential coverage (MEC) during a calendar year are required to report to the IRS certain information about individuals covered by MEC and also to provide a statement to those individuals. Section 6055 reporting is the required reporting to the IRS of information relating to covered individuals that have been provided MEC by health insurance issuers (issuers), certain employers, and other entities that provide MEC. A statement disclosing MEC information must also be furnished to responsible individuals (i.e., subscriber).

David Grunke March 10, 2014 Reporting Deadlines – IRS Returns Annual Deadline • Returns due on or before Feb. 28 (March 31, if filed electronically) 2015 Return Deadline • Feb. 29, 2016 (Feb. 28, 2016, is a Sunday) • March 31, 2016, if filed electronically Electronic filing is REQUIRED if filing 250+ returns Reporting Deadlines – Individual Statements • Statements due on or before Jan. 31 2015 Statement Deadline • Feb. 1, 2016 (Jan. 31 is a Sunday) Employers MAY furnish statements electronically if requirements are met Penalties • Information returns – Failure to file timely or include all required information – Including incorrect information • Individual Statements – Failure to timely furnish or include all required information – Including incorrect information on the statement TIN Collection TINs are required • Reporting of Taxpayer Identification Numbers (TINs) for all covered individuals is necessary for the IRS to verify an individual’s coverage Reporting birth dates in lieu of TINs • If providers are unable to obtain a TIN after making a reasonable effort, the individual’s date of birth may be reported in lieu of a TIN • Reasonable effort generally includes an initial solicitation, an annual solicitation and a second solicitation Penalty Relief • A will not be subject to a penalty if it demonstrates that it properly solicits the TIN but does not receive it

Annual Maximums Large Business / Small Business David Grunke As modified by the Trade Preferences Extension Act of 2015 (June 2015) Type of Failure Per Form Penalty Annual Maximums Large Business / Small Business Filed less than 30 days late $50 $500,000 / $175,000 Filed before August 1 $100 $1,500,000 / $500,000 Filed August 1 or later $250 $3,000,000 / $1,000,000 Intentional Disregard $500 No Cap

David Grunke Reporting Deadlines – IRS Returns Annual Deadline • Returns due on or before Feb. 28 (March 31, if filed electronically) 2015 Return Deadline • Feb. 29, 2016 (Feb. 28, 2016, is a Sunday) • March 31, 2016, if filed electronically Electronic filing is REQUIRED if filing 250+ returns Reporting Deadlines – Individual Statements • Statements due on or before Jan. 31 2015 Statement Deadline • Feb. 1, 2016 (Jan. 31 is a Sunday) Employers MAY furnish statements electronically if requirements are met Penalties • Information returns – Failure to file timely or include all required information – Including incorrect information • Individual Statements – Failure to timely furnish or include all required information – Including incorrect information on the statement TIN Collection TINs are required • Reporting of Taxpayer Identification Numbers (TINs) for all covered individuals is necessary for the IRS to verify an individual’s coverage Reporting birth dates in lieu of TINs • If providers are unable to obtain a TIN after making a reasonable effort, the individual’s date of birth may be reported in lieu of a TIN • Reasonable effort generally includes an initial solicitation, an annual solicitation and a second solicitation Penalty Relief • A will not be subject to a penalty if it demonstrates that it properly solicits the TIN but does not receive it

David Grunke

David Grunke

David Grunke Minimum Essential Coverage (MEC) reporting – individual mandate Employers sponsoring self-insured group health plans, and health insurers, must report on the minimum essential coverage they provide for all covered individuals starting in 2015. These employers and insurers must confirm – during every tax season – that the coverage satisfied the individual mandate requirements for any or all months during the preceding calendar year or reportable tax year. This reporting is required for all size group plans and private individual/family plans. Reporting is not required for supplemental benefits, if the supplemental coverage is provided by the same plan sponsor, or if coverage supplements government-sponsored plans, like Medicare supplemental coverage.

David Grunke Large employer reporting – employer mandate All employers subject to the employer mandate (i.e., employers with 50 or more full-time employees and/ or full-time equivalents) are required to annually report to the IRS on the coverage offered to their full-time employees and their dependent children.* This reporting will be completed on IRS Form 1095 by February 28 (March 31 if filed electronically) following the applicable calendar year. A copy of the form or alternative statement that includes the identical data must also be provided to their full-time employees by January 31.

Large Group & ASO Group IRS/Employee reporting David Grunke Large Group & ASO Group IRS/Employee reporting Social Security number Employee Spouse Dependents Coverage offered Coverage provided Sources of reporting assistance Insurer ASO Administrator Payroll Processer HR System Niche Vendor

Considerations about the filer David Grunke Considerations for choosing a reporting service vendor Considerations about the filer Identify the filer’s specific reporting requirements Number of 1095-c forms required Variance in coverage offerings among workforce Based on those, what data must the filer track? Monthly Full-Time / Part-Time status Coverage offerings Self-Insured Enrollments Where are they currently in their tracking? Will they file on paper or electronically?

Considerations about the vendor prospect David Grunke Considerations for choosing a reporting service vendor Considerations about the vendor prospect Can they efficiently receive data from the client’s time and attendance tracking system? Do they offer a written service guarantee regarding timeliness? Do they (or their software vendor) have a system of developing other systems to send electronic files to the federal government? Will they file on paper or electronically? Did they process any 2014 voluntary filings?

Individual Products David Grunke

David Grunke What Products are effected? Impact on Individual PPACA Products Products Purchased from Insurer Providing Individual Statements • Provide statements on paper by mail to last known permanent address (or temporary address) General Rule • Statements MAY be furnished electronically (not required) • Notice, consent, and hardware and software requirements apply Electronic Statements • May consent on paper or electronically (such as by email) • Consent on paper must be confirmed electronically by the individual • Statement may be furnished electronically by email or by informing the individual how to access the statement on the employer’s website Information Furnished to Individuals Providers must also furnish a written statement to responsible individuals Written statement must include: • The information reported to the IRS for the covered individual(s) • A phone number for the provider’s contact person

Group Products Roger Ebert Who is Required to Report? Applicable large employer (ALE) (50+) Applicable large employers that are subject to the employer shared responsibility provisions (including nonprofit and government entities) • Each ALE member must file an information return with the IRS and furnish a statement to its full-time employees, using its own EIN Generally ALEs are employers with 50 or more Full Time Equivalent employees during the previous calendar year but ALE members could be smaller as they could have less than 50 FTEs but belong to a controlled group of companies with 50 or more FTEs Mediumsized employers (50-99) • Will file information with the IRS to show eligibility for one-year delay Who is not Required to Report? • Employers that are not subject to the employer shared responsibility provisions are not required to report under Section 6056 • BUT small employers that sponsor self-insured plans are required to report under Section 6055 Reporting for Medium-Sized ALEs • Included a one-year delay for ALEs with fewer than 100 fulltime employees (including FTEs) on business days during 2014 • ALEs eligible for the one-year delay will still report under Section 6056 for 2015 Pay or play final rules: The ALE must certify on its Section 6056 transmittal that it: Employs a limited workforce Did not reduce its workforce size or overall hours of service to satisfy the workforce size condition Did not eliminate or materially reduce the health coverage, if any, it offered as of Feb. 9, 2014 ALEs with non-calendar year plans will also certify with regard to the months of their 2015 plan year that fall in 2015 or 2016.

Roger Ebert Who is required to report with what form? Small group fully insured (both SHOP Marketplace and off-Marketplace) Form 1095-B N A Small group self-funded Form 1095-B (sent by employer) Applicable large employer (fully insured) Form 1095-C SectionsI,II Applicable large employer (self-funded) Form 1095-C All sections (6055 + 6056) Who is Required to Report? Applicable large employer (ALE) (50+) Applicable large employers that are subject to the employer shared responsibility provisions (including nonprofit and government entities) • Each ALE member must file an information return with the IRS and furnish a statement to its full-time employees, using its own EIN Generally ALEs are employers with 50 or more Full Time Equivalent employees during the previous calendar year but ALE members could be smaller as they could have less than 50 FTEs but belong to a controlled group of companies with 50 or more FTEs Mediumsized employers (50-99) • Will file information with the IRS to show eligibility for one-year delay Who is not Required to Report? • Employers that are not subject to the employer shared responsibility provisions are not required to report under Section 6056 • BUT small employers that sponsor self-insured plans are required to report under Section 6055 Reporting for Medium-Sized ALEs • Included a one-year delay for ALEs with fewer than 100 fulltime employees (including FTEs) on business days during 2014 • ALEs eligible for the one-year delay will still report under Section 6056 for 2015 Pay or play final rules: The ALE must certify on its Section 6056 transmittal that it: Employs a limited workforce Did not reduce its workforce size or overall hours of service to satisfy the workforce size condition Did not eliminate or materially reduce the health coverage, if any, it offered as of Feb. 9, 2014 ALEs with non-calendar year plans will also certify with regard to the months of their 2015 plan year that fall in 2015 or 2016.

Roger Ebert Impact to Self-funded Plans Impact to Insured Groups Small 2-50 Large 50+ Self-Insured Plan Sponsors If the plan is… The plan sponsor is… Maintained by a single employer The employer Maintained by more than one employer (but not a multiemployer plan under ERISA) Each participating employer (without application of aggregation rules) A multiemployer plan (as defined in ERISA) The board of trustees, or other similar group of representatives of the parties who establish or maintain the plan Maintained solely by an employee organization Employee organization Sponsored by some other entity The person designated by plan terms or, if no person is designated, each entity that maintains the plan

Conclusion and Wrap up David Grunke

And you thought we were done David Grunke And you thought we were done Cadillac Tax in 2018 New projections from the Kaiser Family Foundation estimate that one in four employers (26%) offering health benefits could be subject to the Affordable Care Act's tax on high-cost health plans, also known as the "Cadillac plan" tax, in 2018 unless they make changes to their plans. The analysis also estimates that the share of employers potentially affected by the tax could grow significantly over time - to 30 percent in 2023 and 42 percent in 2028. The ACA's high-cost plan tax, which takes effect in 2018, was meant to raise revenue to fund coverage expansions under the health care law and to help contain health spending. It taxes plans at 40 percent of each employee's health benefits that exceed certain cost thresholds: In the first year, the thresholds are $10,200 for self-only coverage and $27,500 for other than self-only coverage. The thresholds increase annually with inflation.

Thank You!! The information provided in this webinar does not constitute legal advice. The presenters are not attorneys. You should not act on the information provided in this webinar without first seeking the advice of an attorney or tax advisor. This presentation is proprietary and confidential.