IRS Extends Time for Employer ACA Reporting Under §6056
The Internal Revenue Service (“IRS”) has extended the due dates for employer information reporting under Code §6056 for 2015. The due date for furnishing Form 1095-C to employees is extended from February 1, 2016 to March 31, 2016, and the due date for filing the Form 1094-C transmittal and Forms 1095-C with the IRS is extended from February 29, 2016 to May 31, 2016, if filing on paper, and from March 31, 2016 to June 30, 2016, if filing electronically. This extension, provided by IRS Notice 2016-4, is welcome relief to employers, many of whom have been struggling to understand the reporting requirements and to gather the necessary data.
The notice reiterates prior guidance that the IRS will not impose penalties on employers that make a good faith effort to comply with the information reporting requirements; however, this relief is applicable only for incomplete or incorrect returns filed or statements furnished to employees. No relief is available for employers that fail to timely file an information return or furnish a statement. Employers are therefore encouraged to file the required returns and to furnish employee statements by the due dates, even though they might be partially incomplete or imperfect. Corrections can be made after the due dates. Meeting the deadlines is required in order to satisfy the good faith effort standard to avoid penalties.
For those employers who are unable to meet deadlines, all is not lost. The penalties may still be waived or abated if the failure to furnish or file a statement or return is due to reasonable cause. However, to qualify for the reasonable cause exception, the employer must demonstrate that it acted in a responsible manner and the failure is due to significant mitigating factors or events beyond the employer’s control.
The IRS will take into account the following factors when determining whether to abate penalties for reasonable cause:
Whether the employer ultimately furnishes and files the required forms;
Whether the employer has made reasonable efforts to prepare for satisfying the reporting requirements, for example, gathering and transmitting the necessary data to an agent to prepare the data for submission; and
Whether the employer is taking steps to ensure that it will be able to comply with the reporting requirements for 2016.
The penalties that apply for a failure to furnish or file the required forms can be significant depending on the number of employees who are entitled to receive a Form 1095-C. The penalty is $250 for each failure to furnish a required Form 1095-C and $250 for each failure to file a Form 1095-C or Form 1094-C with the IRS.
Please contact us if you need assistance with the preparation of a reasonable cause statement.
Getting Your 401(k)/Retirement Plan Ready for the New Form 5500
The Department of Labor has just released draft “Form 5500’s”(to be used in 2016 for 2015 plan years) which contain new compliance questions for 401(k) and other qualified retirement plans.
The Updated Form Asks the Plan Sponsor to Identify (among other things):
How the plan meets certain coverage and discrimination tests;
Whether the plan incurred unrelated business taxable income;
Whether the plan had in service distributions (such as hardship distributions);
Whether the plan has been amended for all required law changes; and
The date of the last required amendment/restatement (including information regarding IRS approval/opinion/determination letters).
Do You Need to Answer Them? The new questions are optional for 2015, but the IRS “strongly encourages” plan sponsors to complete them. However, the new questions are expected to be mandatory for 2016, so plan sponsors may want to answer them now in preparation for next year (1) to make sure that plan administrators have the information they need to answer them;and (2) to determine if the answers reflect compliance.
More importantly: if compliance problems are found though the process of answering these questions, they can then be proactively resolved through the various voluntary compliance programs available (either the IRS’s “Employee Plans Compliance Resolution System” or “EPCRS” or the DOL’s voluntary fiduciary compliance program “VFCP”). Discovering possible compliance issues through this question answering process can save time and money as voluntary compliance is generally less costly than repairing failures found in a regulatory investigation.
To Ensure Accuracy when Addressing the New Questions:
Look to the FAQ’s: The IRS has issued a set of FAQ’s regarding how to answer the new compliance questions.
Get help: The new questions appear to focus on areas that the IRS has identified as frequent avenues of non-compliance in 401(k)/other retirement plans. Because the new questions point to potential plan qualification failures, resolution through voluntary compliance will generally result in significant cost savings over the cost of compliance following regulatory involvement.
Please contact us if you would like assistance in completing the questions, and/or would like a compliance review for required plan amendments.
Boutwell Fay Benefits News January 2016Page 2Copyright ©2016Boutwell Fay LLP. All rights reserved. This newsletter is for informational purposes only and does not constitute legal or tax advice.