From: Staffing
Quick Facts:
The Affordable Care Act (ACA) added two employer reporting requirements to the Internal Revenue Code (Code):
- Code § 6056 requires applicable large employers (ALEs) to provide an annual statement to each full-time employee detailing the employer’s health coverage offer.
- Code § 6055 requires employers that provide minimum essential coverage under a self-funded (self-insured) plan to provide an annual statement to covered persons.
The IRS designed a new form, Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, for ALEs to satisfy the requirement under Code § 6056. If the ALE self-funds its plan(s), the employer also uses Form 1095-C to satisfy the additional requirement under Code § 6055.
Employers providing Forms 1095-C to employees and responsible individuals also must file copies with the IRS using a transmittal form, Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns. In addition, the transmittal form requests aggregated information.
Note: Small employers (under 50 full-time-equivalent employees) that sponsor self-funded health plans are subject to reporting requirements not discussed here. Self-funding by small employers is uncommon.
General Terms
An applicable large employer (ALE) is an employer that employed an average of 50 or more full-time employees, including full-time-equivalent employees, in the prior calendar year.
Full-time employee generally means a common-law employee that averages 30 or more hours of service per week, (or 130 hours per month), as determined under one of two specific measurement methods. An hour of service is each hour for which payment is made or due (e.g., performance of duties, vacation, holidays, paid absence, or leave).
Minimum essential coverage means any employer-sponsored group health plan, other than “excepted benefits.” Most flexible spending accounts (FSAs) or stand-alone dental or vision plans are excepted benefits; that is, they are not minimum essential coverage.
Minimum value coverage means the minimum essential coverage plan’s share of total allowed cost of benefits is at least 60 percent of such costs. For 2017, the minimum value coverage was affordable if the employee’s required contribution for self-only coverage does not exceed 9.69 percent of the employee’s income from the employer. For 2018, the percentage is decreased to 9.56 and for 2019 the percentage is increased to 9.86, due to inflation adjustments.
Details:
What is the purpose of the employer reporting requirements?
The reporting requirements are intended to help the IRS administer several provisions under the Affordable Care Act. Specifically, the IRS uses information reported by employers to determine:
- Employees that are (or are not) eligible for subsidies if they purchase health insurance in the individual Health Insurance Exchange (Marketplace);
- ALEs that fail to offer affordable minimum value coverage to full-time employees and whether the employer may be subject to potential penalties; and
- Individuals that are enrolled in minimum essential coverage that satisfies the ACA’s individual mandate. (This mandate is in force through 2018 only.)
What is Form 1095-C?
Form 1095-C is a new form designed by the IRS to collect information about ALEs and the group health coverage, if any, they offer to their full-time employees. Employers provide Form 1095-C (employee statement) to employees and file copies, along with Form 1094-C (transmittal form), to the IRS.
Form 1095-C is comprised of three parts:
- Part I: Identifying information about the employee and the employer.
- Part II: Information about the employer’s offer of group health coverage.
- Part III: Information about the employer’s self-funded health coverage (if any), including names and Social Security numbers of the primary enrollee (e.g. employee) and his or her covered dependents.
When did the new reporting requirement start?
The requirement first applied for calendar year 2015 information and the reporting forms were due in early 2016.
The 2017 forms (i.e., forms reporting calendar year 2017 information) were due as follows:
- 2017 Form 1095-C (employee statement): Due March 2, 2018.
- 2017 Form 1094-C (transmittal form with copies of Forms 1095-C): Due February 28, 2018 (or March 31, 2018, if filing electronically).
The 2018 forms (i.e., forms reporting calendar year 2018 information) are due as follows:
- 2018 Form 1095-C (employee statement): Due March 4, 2019.
- 2018 Form 1094-C (transmittal form with copies of Forms 1095-C): Due February 28, 2019 (or March 31, 2019, if filing electronically).
If the due date falls on a weekend or legal holiday, the employer may file by the next business day.
If the employer is part of a controlled group, which entity has to provide Form 1095-C?
Entities that belong to the same controlled group, e.g., parent/subsidiaries companies or sister companies under common control, are counted together and their combined employee size determines if they are an ALE. If so, each entity in the controlled group is deemed an ALE and is subject to the reporting requirements. Each of the entities will report under its Employer Identification Number (EIN).
What type of information is required to complete Form 1095-C?
Employers should work with their payroll administrators and human resources information system administrators to identify the data elements needed to complete Forms 1095-C and 1094-C. The level of detail will vary depending on the employer’s health coverage offerings.
All ALEs must report basic information, similar to W-2 information:
- Employee name, Social Security number (SSN), address.
- Employer name, Employer Identification Number (EIN), address, telephone contact.
IRS regulations provide a general method for all ALEs to complete Form 1095-C. The general method requires reporting information about the full-time employee and the health coverage (type, required contribution) offered to that employee. Some employers, however, may be able to take advantage of one of the alternative (simplified) methods outlined in the regulations.
For example, alternative methods of reporting are available for employers that made a qualifying health coverage offer to employees for all 12 months or for employers that offered affordable minimum value coverage to at least 98 percent of full-time employees (and their children).
Employers that do not sponsor a self-funded (self-insured) plan complete Parts I and II with respect to each full-time employee. Persons covered under a group insurance plan also receive a form directly from the insurance company regarding the coverage.
For self-funded employers, what type of information is required to complete Form 1095-C?
Employers that sponsor a self-funded (self-insured) health plan providing minimum essential coverage have additional reporting requirements. For full-time employees, the employer completes Parts I and II of Form 1095-C. If the full-time employee was covered under the self-funded plan, the employer also completes Part III including names and SSNs (or TINs) of any covered dependents.
In addition, for any part-time employees or non-employees (e.g., COBRA beneficiaries) covered under the self-funded plan, the employer completes Part I, a portion of Part II, and Part III.
Are nonprofit employers or governmental employers (e.g., municipalities, public school districts) subject to the reporting requirements?
Yes, the reporting requirements apply to all ALEs, including governmental employers. Employers should review the specific requirements for their type of organization with their advisors.
What is Form 1094-C?
Employers file copies of Forms 1095-C with transmittal Form 1094-C to the IRS. The employer indicates on Form 1094-C if it is eligible for alternative (simplified) reporting. Employers also use this form to certify that the employer is eligible for transition relief under the ACA “play or pay” rules, if applicable.
Are employers required to use electronic filing?
ALEs must furnish the Form 1095-C to individuals on paper by mail (unless the recipient has affirmatively consented to receive the information in an electronic format).
Form 1094-C and Form 1095-C are subject to requirements to file returns electronically with the IRS. This means that ALEs that file 250 or more information returns must file the returns electronically through the ACA Information Returns (AIR) program. (Note that AIR is a new and separate system solely for ACA information returns. Other IRS e-filing systems, such as for W-2s, do not support the ACA information returns.) The 250-or-more requirement applies separately to each type of return.
Are there penalties for failing to comply with the information reporting requirements?
Yes, and the penalties may be substantial. For instance, the penalty is $270 for each failure to file a complete return and for each failure to provide a complete form to an employee (up to over a $3,000,000 maximum). Lesser penalties may be imposed for reporting incorrect information provided the error is corrected within certain timeframes. Generally, the maximum penalties are reduced for ALEs with receipts less than $5,000,000. The IRS may abate penalties for reasonable cause.
Official Guidance:
The Internal Revenue Service (IRS) released final forms and instructions to be used for Internal Revenue Code § 6055 and § 6056 reporting:
For 2018 reporting (forms are due in early 2019):
- 2018 Form 1094-C, Employer-Provided Health Insurance Offer and Coverage.
- 2018 Form 1095-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns.
- Instructions for 2018 Forms 1094-C and 1095-C.
Additionally, the IRS maintains a helpful Information Center webpage with resources and tips for applicable large employers about the information reporting requirements and other topics.
For entities that are required to file returns electronically, the IRS has released Publication 5165, Guide for Electronically Filing ACA Information Returns.
