Self-Insured Plans May Struggle to Get SSNs from Employees

By Allen Smith, J.D. Sep 26, 2016
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Employees  might be wary of self-insured employers' efforts to get the Social Security numbers (SSNs) of health plan participants, including employees' spouses and dependents, even though the Affordable Care Act (ACA) requires these employers to report the numbers on Form 1095-C. (In the case of an insured employer, the responsibility of reporting covered individuals is with the provider—that is, the insurance company.)

In a July 29 proposed rule, with comments due Oct. 3, the Internal Revenue Service proposed a "three tries" approach that employers can follow to show they acted responsibly to get the SSNs. (The proposal, published Aug. 2 in the Federal Register, uses the term "taxpayer identification number," or TIN.)

"Given all the advice that has been circulated, including by the IRS, regarding the dangers of responding to solicitations for personal financial information, including SSNs, it is likely that employees' initial reaction to these requests will be to ignore them," said Ann Caresani, an attorney with Tucker Ellis in Cleveland. "Employers should explain exactly why they are required by law to ask for SSNs and that they are required to keep asking, and [they should] provide a trusted contact for verification that this is a legitimate request. This should help reduce the number of nonresponders. Employers should also establish practices for making the three timely requests, including a system to identify and track nonresponders."

Three-Step Process

"The IRS uses the SSNs on the Form 1095-C to police compliance with the  ACA's employer and individual mandates," noted Mark Holloway, J.D., CEBS, senior vice president and director of compliance services with Lockton Companies, an independent insurance brokerage firm headquartered in Kansas City, Mo.

The proposed regulations state that the filer of the form—the self-insured employer—will be treated as acting in a responsible manner if the filer makes:

  • An initial SSN solicitation at the time the account is opened.
  • A second solicitation within 75 days after the initial SSN solicitation.
  • A third solicitation by Dec. 31 of the year following the initial request.

"If three tries have been made and the SSN is not provided, the filer can use the date of birth in lieu of the SSN," said Damian Myers, an attorney with Proskauer in Washington, D.C.

For the second solicitation, if coverage is to commence retroactively based on the date the application is received, the 75-day clock begins when it is determined that the coverage will start retroactively, Myers noted. "For example, if a covered employee has a new baby, special enrollment rules provide that the employee can apply for coverage within 30 days after the birth of the child," he said. "If the application is received within that 30 days, the baby's coverage starts on the date of birth. The 75-day clock would start on the date the application is received and approved and not the date of birth."

The proposed regulations have a special rule for persons with missing SSNs enrolled on any day prior to July 29, 2016, Holloway said. "Assuming the employer has made an initial request for the SSN, make the second request within a reasonable time after July 29. If the request is made within 75 days of July 29 (i.e., by Oct. 12, 2016), it will be deemed to have been made within a reasonable time. If the employer never did make an initial request for the SSN, a first attempt must be made on or before Oct. 12, 2016," he noted.

Avoiding Missed SSNs

Self-insured employers can take steps to try to avoid missed SSNs, Myers noted. He recommended:

  • Including an SSN solicitation form in all health plan enrollment materials. The SSN solicitation should explain that the information is required for purposes of the ACA and that the covered individual faces a tax penalty in the event he or she does not provide the SSN.
  • Having procedures in place to make sure that newly covered individuals provide SSNs. Although an employee or primary insured may already have gone through the "three-tries" process, the addition of a dependent, whether a spouse or child, triggers a new process for the dependent.
  • Adopting internal procedures to ensure that a second SSN solicitation is made within 75 days of initial enrollment for new employees and newly added dependents. The 75-day clock will run at different times for new employees and newly added dependents, he noted.

"For many years, providers of health coverage—minimal essential coverage—including self-insured employers, have been concerned that they would be unable to comply with requirements to provide the SSNs of all individuals covered under the plan," said Nicole Elliott, an attorney with Holland & Knight in Washington, D.C. "Their concern was particularly acute because of the hefty penalties that are associated with failure to file accurate and complete information returns with the IRS."

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