Is Your Local Government Entity an ALE, an ALE Member or a DGE?
Like many U.S. Government regulations, and virtually all regulations issued by the Internal Revenue Service, regulations governing required tax filing under the Affordable Care Act (Obamacare) are filled with acronyms, abbreviations, and short-hand references. This is certainly true of the annual information reporting obligations of employers and insurers that will be due to be filed for the first time in 2016.
Final tax forms have been issued by the IRS. These forms – 1095-C, 1094-C, 1095-B, and 1094-C -- are available, along with instructions for filling out the forms on the IRS website. Information returns must be filed by February 28, 2016, if filed manually, or March 31, 2016, if filed electronically. Information statements to recipients are due to be provided by February 1, 2016.
Following are a few definitions of short-hand terms that you may need to know in order to determine whether your local government entity is required to file information forms with the IRS and, if so, which forms it is required to file. An “Applicable Large Employer” (“ALE”) is an employer with 50 or more full-time and full-time-equivalent (“fte”) employees. An “ALE member” is an employing entity that is considered to be part of an “affiliated service group” that includes one or more Applicable Large Employers. Let us assume, for example, that a city that is an ALE provides health insurance for its own employees and the employees of the local park district, which itself is not an ALE. Because the park district receives insurance services from the city, the park district is an “ALE member” for reporting (although not shared responsibility tax) purposes.
By virtue of its status as an ALE member, the park district now has a filing requirement. It can file its own forms or it can designate another governmental entity – such as the city – to file the forms for the park district. The city does not have to accept the designation. If it does, then it becomes a “Designated Governmental Entity” or “DGE”, and it will file the applicable forms for the park district. If the city does not accept the designation, then the park district will have to file the reporting forms for its own employees.
Very briefly, following is a summary of the reporting requirements, based upon the size of the employer and whether health care is provided through an insured health plan or through self-insurance:
- A small employer (less than 50 fte) that does not offer health insurance to its employees is not required to file reporting forms.
- A small employer with an insured health plan for its employees is not required to file forms 1095-C and 1094-C. But the insurer is required to file forms 1095-B and 1094-B.
- A small employer that is self-insured is required to file forms 1095-C and 1094-C. Generally, such employers are not required to file forms 1095-B and 1094-C.
- A small employer that is an ALE member and that has or whose employees who are covered by an insured plan must file forms 1095-C and 1094-C, either on its own or through a DGE. The insurer files forms 1095-B and 1094-B.
- An ALE with no health plan is required to file forms 1095-C and 1094-C, but not forms 1095-B and 1094-B.
- An ALE with an insured health plan is required to file forms 1095-C and 1094-C. The insurer files forms 1095-B and 1094-B.
- An ALE with a self-insured plan is required to file forms 1095-C and 1094-C. It generally is not required to file forms 1095-B and 1094-B.
Penalties for failure to file information returns are stiff -- $250 per return and $250 for a failure to provide a correct information statement to an employee who is reported on an information return. If the returns are to be filed by a DGE, the DGE has the responsibility not only to file the proper forms with the IRS but to provide the correct information statements (1095-C or 1095-B) to the employees of the governmental unit that delegated the reporting requirements to the DGE.