How to meet the ACA’s new employer reporting requirements
Employers will be busy this fall preparing for new reporting requirements that are obligated by the Affordable Care Act. As you are likely aware, Applicable Large Employers, or ALEs, are required to offer health insurance coverage to full-time employees or may be mandated to pay a penalty. An ALE is an employer with an average of 50 or more full-time equivalent employees. The new reporting requirements will help the Internal Revenue Service determine which employers will have to pay a penalty.
ALEs will be required to complete IRS Forms 1094-C and 1095-C for the 2015 calendar year and send these completed forms to employees and the IRS in early 2016. Form 1094-C is referred to as the Transmittal Form and will be submitted to the IRS as the cover sheet to the 1095-C forms. Part I of 1094-C requires general information about the employer, such as address and employer identification number and how many 1095-C forms are being sent to employees. Part II requires information such as the number of full-time employees and total employees by month.
Keep in mind that “full-time” is defined by the Affordable Care Act as an employee who works an average of 30 hours per week or 130 hours per month. Also, employers with multiple tax ID numbers are encouraged to review the IRS instructions for further details.
Form 1095-C will need to be completed for each full-time employee. Employers will complete Part I with information such as the employee's name and address. Part II requires information about the type of coverage available to the employee (if offered), the cost of coverage to the employee for the lowest-cost plan for employee-only coverage, and whether the employee is enrolled in coverage. This information is to be completed on a month-by-month basis. This can present some fairly detailed record-keeping by employers.
Reporting requirements are similar for employers with fully insured health plans and employers with self-insured plans. Employers with fully insured plans will complete Parts I and II of form 1095-C. Self-insured employers will complete Parts I, II and III. Part III requires self-funded employers to provide detailed information about the dependents and spouses who are also covered under the plan. In addition, self-funded employers will complete Form 1095-C for any other employees, such as part-time employees, who are covered under the self-funded plan.
It is important for employers to keep in mind that they will be reporting on information for calendar year 2015 even if their health insurance plan runs on a non-calendar year basis.
Many of our clients are evaluating their payroll and HR systems to determine their ability to meet the reporting requirements. Payroll vendors may be able to offer tools and programs to support their clients with this requirement. There are specialized vendors offering programs as well. Employers are encouraged to evaluate their capabilities and the level of support needed.
Form 1095-C must be mailed to employees by Jan. 31, 2016. Form 1094-C along with the completed 1095-Cs must be submitted to the IRS by Feb. 28, 2016, or, if submitted electronically, by March 31, 2016. Employers with more than 250 1095-Cs must submit these documents to the IRS electronically.
The IRS released the 2014 final version of the forms. Reporting was optional for the 2014 calendar year. The IRS has released draft versions of the 2015 forms; however, the IRS has indicated that employers may use the 2014 forms for planning purposes.
Ellen McPherson is the compliance manager at Employee Benefits Solutions, a division of The Holden Agency, in Portland. She can be reached at emcpherson@holdenagency.com.
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