In March 2014, the IRS released final regulations implementing the Affordable Care Act’s (ACA’s) information reporting provision for an applicable large employers (ALE), which is defined as having 50 or more full-time equivalent employees (FTEs). The new rules are mandatory for the 2015 calendar year for all ALEs. Smaller employers that are self-insured or part of a controlled group ALE will also have reporting obligations.
With the deadline approaching, now is the time for affected employers to begin assembling the necessary information. The compliance obligation will likely require a joint effort by your payroll, human resources, and benefit departments to collect the relevant data.
The ACA requires an ALE to report information to the IRS about what health care coverage, if any, it offered to FTEs. Employers must report this information no later than February 28 (March 31, if filed electronically) of the year following the calendar year to which the reporting relates (February 29, 2016, or March 31, 2016, for 2015 reporting).
An ALE must also furnish statements to employees to be used to determine whether, for each month of the calendar year, the employee can claim a premium tax credit. The statements must be provided by January 31 of the calendar year following the calendar year to which the reporting relates (February 1 for 2015 reporting).
The IRS will use the information to determine whether a penalty will be assessed against the employer under the ACA’s employer shared-responsibility provision because the employer either:
- Didn’t offer “minimum essential” health care coverage to FTEs and their dependents
- Offered coverage that wasn’t “affordable” or didn’t provide at least “minimum value,” and at least one FTE received a premium tax credit for purchasing coverage on the Health Insurance Marketplace
This reporting is required even if you don’t offer health insurance coverage. And employers with at least 50 but fewer than 100 FTEs who are eligible for transitional relief from the employer shared-responsibility provision for 2015 must still comply with the information reporting requirements.
Self-insured and Smaller Employers
Every self-insured employer must report information about all employees, spouses, and dependents who enroll in coverage under different reporting requirements for insurers. This reporting is required even for self-insureds who aren’t subject to the ALE reporting requirements.
A self-insured ALE must comply with the insurer requirements in addition to the employer reporting requirements. Further, non-ALE employers must comply with the reporting requirements if they’re members of a controlled group or treated as one employer for purposes of determining ALE status. The employers that make up a controlled-group ALE are referred to as ALE members, and the reporting requirements apply separately to each member.
New Reporting Forms
The IRS has developed new forms for this type of information reporting:
- Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
- Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
A non-ALE self-insured employer should file Forms 1094-B and 1095-B.
To Complete Form 1094-C
For this form, you’ll need:
- Identifying information for your organization
- Information about whether you offered coverage to at least 70 percent of your FTEs and their dependents in 2015 (after 2015, the threshold rises to 95 percent)
For the authoritative transmittal, you’ll need:
- Total number of Forms 1095-C you issued to employees
- Information about members of the aggregated ALE group (if any)
- FTE counts by month
- Total employee counts by month
- Whether you’re eligible for certain transitional relief
If an employer is a controlled group, it can file a separate Form 1094-C for each member, with each member’s full-time employees, but one of the forms must be designated as the authoritative transmittal reporting aggregate employer-level data for all of the members.
To Complete Form 1095-C
Here’s what you need to know in order to complete each Form 1095-C:
- Who is a FTE for each month
- Identifying information for employer and employee
- Information about the health coverage offered by month (if any)
- Employee’s share of the monthly premium for the lowest-cost self-only minimum value coverage
- Months the employee was enrolled in your coverage
- Months an affordability safe harbor applies for an employee and whether other relief applies for an employee for a month
- If you offer a self-insured plan, information (including Social Security number or, if the Social Security number isn’t available, date of birth) about the covered individuals enrolled in the plan (including spouses and dependents), by month
You can satisfy the employee statement requirement by providing employees a copy of Form 1095-C. A substitute form may be used instead, as long as the form includes all of the required information and complies with the relevant IRS guidance.
Both forms are subject to requirements related to electronic filing. Employers that will file 250 or more information returns must file electronically through the ACA information returns (AIR) system. This requirement applies separately to each type of return and separately to each type of corrected return.
Alternative Reporting Methods
The IRS developed two alternative methods that simplify reporting of the required information. The simplified methods require less detailed information from employers.
Failure to comply with the information reporting requirements may subject you to the general reporting penalty provisions.
The penalty for failing to file an information return generally will be $250 for each return, not to exceed a calendar-year total of $3 million, while the penalty for failing to provide a correct payee statement will be $250 for each statement, with a calendar-year maximum of $3 million.
Special rules apply to increase the per-statement and total penalties in the case of intentional disregard of the requirement to furnish a payee statement. Also, taxpayers with average annual gross receipts of no more than $5 million for the three preceding tax years are subject to lower maximum penalty amounts.
We're Here to Help
Collaboration between departments within your company is critical. To learn how information reporting compliance or other issues related to the ACA affect your organization, or if you need help compiling the necessary information, contact your Moss Adams professional.