Employer Reporting under the Affordable Care Act
The passage of the Affordable Care Act (“ACA”) brought with it additional compliance reporting for employers, insurers, and individuals. Prior to 2015, much of this reporting was optional; but has become mandatory for the 2015 year (to be reported in early 2016). Following are some changes that you will need to consider with regard to year-end reporting for your business.
The primary purpose for all of the various reporting forms is to allow:
- The government to determine if taxpayers are subject to the new shared responsibility penalty for not having health coverage, or
- Individuals to determine if they are eligible for the premium tax credits on insurance purchased through the health insurance marketplace.
- The government to determine if employers are in compliance with the required insurance coverage rules.
The three primary reporting requirements that will impact employers are:
- Form 1095-C Employer Provided Health Insurance Offer and Coverage
- Form 1095-B Health Coverage
- Form W-2 Insurance premium disclosure
Form 1095-C (Employer-Provided Health Insurance Offer and Coverage)
Under the Internal Revenue Code (“IRC”) Section 6056, employers are required to provide Form 1095-C to their employees to report the health insurance coverage offered to them.
This reporting is required for those employers deemed applicable large employers. An applicable large employer is one who employed at least 50 full time employees during the preceding year, including full-time equivalent employees. Full-time employees are considered those who work on average at least 30 hours per week.
In determining the requirements for reporting, the employer must consider if it is part of an affiliated group with other related companies. Under the provisions, even small companies with less than the required 50 full-time employees may still need to comply with the Section 6056 reporting requirements if the combined group of companies exceeds 50 full-time employees. If the controlled group exceeds the threshold, each company is then considered a single employer for the reporting requirements.
Information reported on Form 1095-C may be used by individuals as part of the determination for qualification of the premium tax credit.
Similar to the timing of reporting 1099s and W-2s, the Form 1095-C is required to be provided to employees on or before January 31 of the following year. The Form 1095-C, along with the transmittal Form 1094-C, is to be filed with the IRS on or before February 28 (March 31 if filed electronically).
Form 1095-B (Health Coverage)
Form 1095-B, along with the transmittal Form 1094-B, are used by providers of minimum essential coverage (i.e., insurance companies, and companies with self-insured plans) to report information about that coverage to the IRS and to covered employees, as required by IRC Section 6055.
For group health plans, this reporting is completed by insurance companies. For self-funded plans where the employer is the provider, the employer will be responsible for this reporting under Section 6055.
Information reported on Form 1095-B is used by individuals to report the qualifying health coverage on their income tax return for themselves, their spouse and individuals claimed as dependents.
The Form 1095-B is required to be provided to employees on or before January 31 of the following year. The Form 1095-B, along with the transmittal Form 1094-B, is to be filed with the IRS on or before February 28 (March 31 if filed electronically).
Employer Provided Health Care on W-2
Employers are required to report the total cost of health care coverage on the W-2 form. This required reporting has been around for the past couple years, and applies to employers who issued more than 250 W-2 forms in the prior year. This reporting requirement will continue until further guidance is issued. Reporting does not affect tax liability, and is for informational purposes only.