Dependent SSNs are required on form 1095-C and 1095-B. In order to avoid penalties, there are three annual solicitations required of the reporting entity (i.e., the insurer for a fully-insured plan, or the employer/plan sponsor for a self-funded plan),
- two of which MUST be made by either telephone or mail to not only the employee, but to any adult dependents (i.e. spouse and children 18 years of age and older)
- the third can be made electronically.
It is recommended to keep records of all solicitation attempts in case of audit.
The final Code Section 6055 reporting regulations cross-reference certain other Code Sections with respect to solicitation of SSNs, including Sections 6721, 6722 and 6724. Code Sections 6721 and 6722 are the penalty provisions for failures to timely file correct information returns or failures to furnish correct statements to employees in various tax reporting contexts. ACA extended these penalty provisions to failures relating to the Code Section 6055/6056 reporting rules (such as a failure to report a required SSN on Form 1095-B or 1095-C), but also provided for a waiver of those penalties where the failure is due to reasonable cause. To qualify for this penalty relief, the “reporting entity” (i.e., the insurer for a fully-insured plan, or the employer/plan sponsor for a self-funded plan) must make three attempts to solicit the SSN of employees and/or covered individuals (i.e., spouse and dependents): an initial solicitation and two annual solicitations. If the SSN is still not provided after all three solicitation attempts, the reporting entity will be considered to have made “reasonable efforts” to obtain the SSN and will not be penalized for using the individual’s birth date in lieu of the SSN.
Notably, there are existing regulations under Code Section 6724 (relating to waivers of the penalties discussed above) that prescribe rules for soliciting SSNs in other tax reporting contexts. After the proposed Section 6055 reporting regulations were released, commenters requested that the final regulations provide rules for soliciting SSNs that would be specific to the Section 6055 reporting context. However, when the final regulations were released, the preamble generally indicated that the solicitation rules under Section 6724 would also apply for Section 6055 reporting purposes (including where a self-funded employer is using Form 1095-C to do combined Section 6055/6056 reporting).
The rules under Section 6724 discuss the manner in which the reporting entity can make the initial solicitation and the two annual solicitations. Specifically, the Section 6724 rules provide that the initial solicitation may be made orally (by phone or in person), in writing (such as through a paper application), or by electronic means (if, for example, the individual enrolls electronically). However, the two annual solicitations can only occur by mail or telephone, and must include certain prescribed information.
Since the preamble to the final Section 6055 reporting regs specifically states that the “rules for the manner of making an annual solicitation should apply in the case of Section 6055 as well,” it appears that making an annual solicitation by electronic means is not permissible at this point in time.