Affordable Care Act Reporting Requirements are Looming
In early 2016, employers with 50 or more full-time or full-time equivalent employees, labeled Applicable Large Employers (ALEs) by the federal government’s Affordable Care Act, will be required for the first time to report information about their employees and health insurance coverage afforded to them in 2015.
New Forms 1095-B (Health Coverage), and 1095-C (Employer-Provided Health Insurance Offer and Coverage), will be issued similar to the traditional Forms W-2, but with considerably different information. Additional Forms 1094-B and 1094-C will be used as transmittals to the IRS for these forms. This reporting is voluntary for 2014, but the instructions for Forms 1094-C and 1095-C were not issued until early February 2015, so it seems unlikely there will be many takers.
The IRS has put the responsibility on employers to provide the information on these forms such that the IRS can verify that:
- Individuals identified have the required minimum coverage,
- Individuals who request premium tax credits are entitled to them, and
- Applicable Large Employers are meeting their shared responsibility obligations under ACA.
Data required to be compiled on a monthly basis and reported annually includes the number of full and full-time equivalent employees, whether minimum essential coverage was offered to at least 70 percent of full-time employees, and the number of total employees, including part-time and ineligible full-time employees. Also reportable are names, addresses and social security numbers of the employees, covered spouses and dependents, whether or not the employee was offered affordable minimum essential coverage, and much more.
For employers with fully insured plans, regardless of the number of employees, their insurance company will prepare and furnish Forms 1095-B to report the employee’s information, including the type of coverage offered, whether or not they accepted or that no coverage was offered. Non-ALE employers – those with fewer than 50 full-time equivalent employees – that have self-insured health plans will also complete and file Form 1095-B.
ALEs will file Forms 1094-C and 1095-C for 2015 even though many of them – those with 50 to 99 full-time equivalent employees – are not required to provide health insurance coverage to employees until 2016.
- Form 1094-C will include information on whether or not the employer offered minimum essential coverage, the number of full-time employees and total employees, and more.
- Parts I and II of Form 1095-C will report for each employee what type of coverage was offered, the employee share of the lowest cost monthly premium, and any penalty safe harbor provision for the full year (or by month if less than the full year), covered individuals’ social security numbers and months of coverage.
- Part III of Form 1095-C duplicates the Form 1095-B information and will only be used by ALEs with self-insured health plans.
These four forms are the backbone of the ACA’s ability to verify coverage information for individuals claiming eligibility for premium tax credits on the Individual Health Insurance Marketplace. They also will form the basis for assessment of Employer Shared Responsibility Payments, also known as the Employer Mandate Penalties. The volume and complexity of data required to be reported is astounding and presents a massive opportunity for mistakes.
To put it in context, look at what occurred when the federal government itself issued Forms 1095-A a few months ago. During 2014, millions of individual taxpayers were able to acquire health insurance through the federal, and in some cases the state, Health Insurance Marketplace. In January 2015, the Marketplace, otherwise known as the federal government, issued Form 1095-A (Health Insurance Marketplace Statement), to those taxpayers to provide information needed to reconcile advance premium tax credits received with those allowed based on actual 2014 income information. While this seems simple enough in theory, events proved to be anything but. On February 20, 2015, the IRS announced that over 800,000 of the Forms 1095-A issued contained erroneous information and were being amended.
Employers of all size, particularly those considered ALEs, are facing a paradigm shift in information reporting and need to be prepared to meet this challenge. We urge all impacted employers to closely study the reporting requirements under these new forms and establish a process to gather the required data before it becomes a fire drill.
This reporting should not be taken lightly. Like Forms W-2, the penalty for late or inaccurate filing can be steep, up to $100 per day, per form required to be issued. The IRS has stated that it will not impose these penalties for 2015 reporting on entities that make a good faith effort to comply. Employers need to prepare to show that good faith effort.
Refer to Yeo & Yeo’s Affordable Care Act – Employer Reporting PowerPoint presentation for a summary of what is reported on each of the forms and a chart of the major reporting requirements.