Employee health coverage is a key component of many companies' benefits packages, but managing the administrative tasks that come with offering insurance can be challenging. A crucial part of this process is understanding the reporting obligations to federal agencies like the IRS.
Does your business need to comply, and if so, what steps must you take? Below are answers to common questions.
What is the employee threshold for compliance?
The Affordable Care Act (ACA), passed in 2010, sets certain requirements for employers regarding health coverage. Employers with 50 or more full-time employees, known as Applicable Large Employers (ALEs), must file Forms 1094-C and 1095-C to report health coverage offers and enrollment information for their employees.
Form 1094-C is used to provide a summary of employee information and transmit Form 1095-C to the IRS. A separate Form 1095-C is required for each employee, detailing their coverage information. These forms also help determine if the employer owes penalties under the employer shared responsibility provisions, often referred to as the "employer mandate."
Under the ACA mandate, employers can face penalties if they don’t offer affordable minimum essential coverage that meets minimum value standards to most full-time employees and their dependents. Form 1095-C also helps establish employees’ eligibility for premium tax credits.
If an employer had fewer than 50 full-time employees, including full-time equivalent employees, on average in the prior year, it is not considered an ALE for the current year. In that case, the employer is not subject to the employer mandate or the related reporting requirements.
What information needs to be reported?
On Form 1095-C, ALEs must provide the following information for each employee who was full-time for any month of the year:
Employee’s name, Social Security Number (SSN), and address
Employer Identification Number (EIN)
Contact person’s name and phone number
Description of the coverage offer (using a code from the instructions) and months of coverage
Each full-time employee’s share of the coverage cost under the lowest-cost minimum value plan offered, by calendar month
The applicable safe harbor code for compliance with the employer mandate
What if we have a self-insured or multi-employer plan?
If an ALE offers health coverage through a self-insured plan, it must include additional information on Form 1095-C. This applies even if some options are insured while others are self-insured.
For coverage provided through a multi-employer health plan, the insurance issuer or plan sponsor provides the coverage information to enrolled employees. Employers that offer self-insured coverage but are not subject to the employer mandate must file Forms 1094-B and 1095-B for enrolled employees instead of Forms 1094-C and 1095-C.
Form 1094-C also allows employers to indicate whether any eligibility certifications for relief from the employer mandate apply.
Reporting requirements may be more complex if your business is part of an aggregated ALE group or if coverage is provided through a multi-employer plan.
What are the W-2 reporting requirements?
Employers must also report certain health coverage information on employees’ W-2 forms. However, this is different from the information reported on Form 1095-C. The data on either form does not make employer-provided health coverage taxable to employees—it is for informational purposes only.
This summary provides a simplified overview of the reporting requirements. Feel free to contact us for more information or assistance in complying with these regulations.