Providing health coverage is a valuable part of employee benefits, yet the administrative responsibilities tied to offering insurance can be challenging to navigate. A key part of compliance is understanding the reporting obligations for federal agencies, such as the IRS. Here’s what you need to know to determine if your business must comply and what steps you may need to take.
When Does Compliance Begin?
Under the Affordable Care Act (ACA), employers with 50 or more full-time employees (known as “Applicable Large Employers” or ALEs) are required to report details on health coverage offers and employee enrollment using Forms 1094-C and 1095-C.
An ALE uses:
- Form 1094-C to summarize employee information and transmit Forms 1095-C to the IRS.
- Form 1095-C to report details for each employee.
This reporting helps determine if an employer is subject to payments under the employer shared responsibility provisions, often called the “employer mandate.” Employers can face penalties if they don’t offer affordable, minimum essential coverage that provides minimum value to most full-time employees and their dependents. Additionally, Form 1095-C assists in assessing employees’ eligibility for premium tax credits.
For companies with fewer than 50 full-time (or equivalent) employees, these reporting requirements and shared responsibility provisions do not apply.
What Information Must Be Reported?
On Form 1095-C, ALEs are required to report the following for each full-time employee who worked any month of the calendar year:
- Employee details: Name, Social Security number (SSN), and address.
- Employer details: Employer Identification Number (EIN) and a designated contact person’s name and phone number.
- Coverage information: A coded description of the coverage offered, the months of coverage, and the cost to the employee for the lowest-cost, minimum-value plan (reported monthly).
- Employer mandate status: The applicable safe harbor code for the employer shared responsibility provision or mandate penalty.
What If You Offer a Self-Insured Plan or Participate in a Multi-Employer Plan?
If your business offers a self-insured health plan, additional details must be reported on Form 1095-C. This includes plans with both insured and self-insured options.
For employers using a multi-employer health plan, the insurance issuer or plan sponsor generally provides coverage information directly to enrolled employees. However, if the business isn’t subject to the employer mandate but still offers self-insured coverage, Forms 1094-B and 1095-B are used for reporting instead of 1094-C and 1095-C.
The 1094-C form allows businesses to indicate whether certain eligibility certifications apply for relief from the employer mandate.
Reporting can become more complicated if your business is part of an aggregated ALE group or if health coverage is provided through a multi-employer plan. Be sure to review these scenarios carefully to avoid compliance pitfalls.
Are There Additional Reporting Requirements on Form W-2?
Employers must also include certain health coverage information on employees’ Forms W-2, although this differs from what is reported on Form 1095-C. Importantly, the information on either form does not make excludable employer-provided coverage taxable to employees—it’s for informational purposes only.
These summaries cover some of the fundamental reporting requirements, but the process can be intricate. If you have questions or need assistance with compliance, feel free to reach out to your team at Accavallo & Company LLC.
