For nearly four years, NCA has been educating and advising private clubs on the administrative and economic impact the Affordable Care Act will have on their operations. From tracking employee hours, to altering the number of months seasonal workers can be on property, and planning for higher insurance policy premiums, club leaders have had a lot on their plate because of the new health care law.
Unfortunately, a brand new set of requirements could cost clubs even more time and money.
Beginning in 2016, every club that falls under the law must provide specific and detailed information about its employees and insurance program to the Internal Revenue Service (IRS). Not only is this information to be filed with the IRS, but it must also be distributed to employees—a requirement called the Section 6056 reporting rule.
The president delayed the Employer Mandate provision of the health care law by one year, citing the need to provide employers with more time to prepare for the law’s requirements as the reason. In reality, the delay provided the IRS with additional time to create regulations and guidance related to the new Section 6056 rule because they weren’t prepared to launch.
Recently, that guidance was finally issued. For private clubs, complying with the Section 6056 reporting requirements will likely be one of the most time-consuming and onerous responsibilities found in the law.
The proposed IRS regulations state that every club with an average of 50 or more full-time employees during the previous year must file a return that provides information about each full-time employee who was employed for one month or more, as well as the health insurance offered by the club to that employee. Clubs provide this information even if they do not offer health insurance to their employees.
The information that is to be filed with the IRS in the Section 6056 Return must include:
1. The clubs’ name, address and employer identification number, as well as the name and telephone number of the club’s contact person, and the calendar year for which the information is reported;
2. A certification showing whether the club offered the opportunity to enroll in an employer-sponsored, government approved insurance plan, by calendar month to its full-time employees (and their dependents);
3. The number of full-time employees for each month during the calendar year;
4. The months during the calendar year for which health insurance coverage was available for each full-time employee;
5. The employee’s contribution amount for the lowest monthly premium on an employer-sponsored, government approved plan, by calendar month for each employee; and,
6. The name, address and taxpayer identification number of each full-time employee during the calendar year and the months, if any, during which the employee was covered under an employer-sponsored, government- approved plan.
In addition to the information indicated above, the IRS wants information relating to employee demographics and employer health insurance policies. The IRS is considering creating a number of “indicator codes” to expedite and simplify the filing of this required material. Unfortunately, these “indicators codes” have not yet been created. Specifically, clubs will need to disclose:
1. Whether the coverage offered to employees and their dependents meets the minimum value and whether the employee had the opportunity to enroll his or her spouse in the coverage
2. The total number of employees, by calendar month
3. Whether an employee’s effective date of coverage was affected by a waiting period
4. If the club was not conducting business during any particular month of the year and if so, which month or months
5. If the club expects that it will not fall under the law during the following year
6. If the club is a contributing employer to a multiemployer plan, whether a full-time employee is treated as eligible to participate in a multiemployer plan due to the employer’s contributions to the multiemployer plan
7. If the administrator of a multiemployer plan is reporting on behalf of the club with respect to the full-time employees who are eligible for coverage under the multiemployer plan, the name, address and employer identification number of the administrator of the multiemployer plan (in addition to the name, address and EIN of the club already required under the proposed regulations)
8. Whether the plan providing minimum essential coverage and meeting the minimum value was offered to:
a. The employee only;
b. The employee and the employee’s dependents only;
c. The employee and the employee’s spouse only; or,
d. The employee, the employee’s spouse and dependents.
9. Coverage was not offered to the employee and:
a. The employee was in a waiting period that complies with the requirements of Obamacare;
b. The employee was not a full-time employee;
c. The employee was not employed by the club during that month; or,
d. No other code or exception applies.
10. Whether coverage was offered to the employee for the month although the employee was not a full-time employee during that month
11. Whether the club met one of the affordability safe harbors with respect to the employee
Since the proposed rules just came out, the IRS will have additional time to add or subtract from this list of questions. The final regulations will be issued sometime in early 2014. However, it is expected that very little will change from this proposed rule to the final rule. Thus, club leaders should begin thinking about how they will comply with the Section 6056 requirements.
Like most tax returns, the Section 6056 Return is due annually. The IRS must receive it by February 28 or March 31 if filing electronically. Like other IRS returns, the filing will be completed with information from the previous year. The first return must be filed in 2016 with information collected in 2015.
Not only must clubs file a return with the IRS, but they must also provide a report to their full-time employees, too. Under the rule, a Section 6056 “employee statement” must include the name, address and Employer Identification Number of the club as well as the information required to be included on the Section 6056 Return filed with the IRS.
The employee statement must be given to employees annually by January 31. It is expected that clubs will treat this requirement much like they do their W-2 requirement. The first due date for clubs to issue the Section 6056 employee statement is January 31, 2016.
Clubs that self-insure will also have to provide the same kind of information to the IRS in a Section 6055 Return as well as the employee statement.
Conclusion
In the end, complying with the Section 6056 (or 6055) reporting requirement will likely take considerable time and resources that some say would be better spent elsewhere in the club. Making matters worse, this requirement forces club leaders to deal with sensitive and confidential information about their employees and their club. As such, it is unlikely many club GMs will want to outsource this task without firm guarantees that the information will be kept confidential. Thus, meeting the Section 6056/6055 requirements will most likely have to be completed by club staff in-house.
With all of the other time commitments placed on club leaders by the new health care law, NCA is mindful this is the one that could be the straw that breaks the camel’s back for many clubs.
Over the next few months, the IRS will finalize these rules and we will continue to work with them to try to minimize the administrative time necessary to comply with these reporting requirements. Unfortunately, because this information is critical to the levying of penal- ties under the Employer Mandate, there may not be much that can be modified or simplified. That being the case, clubs should begin preparing now for what could be a very trying time ahead.