Affordable Care Act: What is reported?

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By Chris Hadden, CPP
Greenshades Software Technical Sales Manager

Chris Hadden, CPP
Chris Hadden, CPP

January 2016. The beginning of a new and exciting year! After wrapping up the holiday season, employers will be ready to turn back their focus to kicking off the New Year with a productive bang.

For those of us in HR and Finance, January is always a very busy time of the year, but in 2016 it will be even busier and we need to start preparing now.

Starting January 2016, IRS Section 6056 states that all Applicable Large Employers (See ‘ALE? What Is That’) are required to furnish Form 1095-C (Employer-Provided Health Insurance Offer and Coverage ) to all full-time employees, as well as non-full time employees who were offered and enrolled in coverage. Small employers (those with less than 50 Full-Time employees, including FTEs) who offered self-insured coverage are required to furnish form 1095-B for all covered individuals.

In February 2016, these 1095-C forms need to be filed to the IRS along with the Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns). Form 1095-B also needs to be filed to the IRS, along with the Form 1094-B (Transmittal of Health Coverage Information Returns).

Really? Another form? What’s the purpose?

I’m hearing these types of questions on a regular basis right now. These forms are referred to as ‘information forms’ for a rather good reason. While yes, these forms are yet one more thing for you to worry about in 2016, they should be taken very seriously. Not only are there very real penalties in place for not participating, these forms can also offer significant protection to your business.

  • Form 1095-C allows you as the employer to report what offer of coverage was made to an employee. Applicable Large Employers are required to offer coverage to at least 70% of their full-time employees in 2015 (95% in 2016).
  • Form 1095-C will report Employee Share of Lowest Cost Monthly Premium, for Self-Only Minimum Value Coverage. This will be used for calculating the ‘affordability’ of a health plan
  • Form 1095-C will report the Section 4980H Safe Harbor that the employer is claiming for 2015.

If your business is offering Affordable, Minimum Value coverage to at least 70% of your full-time employees and their dependents, the Form 1095-C is your friend.

So the form 1095-C and 1094-C may not be something to be upset about, but it certainly is something to prepare for.

Here are some things to keep in mind:

  • Is self-insured coverage being offered to employees? This will lead to the completion of Part 3 of form 1095-C, and can also require a form 1095-B in certain situations.
  • How many records am I filing to IRS? An ALE member filing more than 250 records to IRS must submit Form 1094 electronically.
  • Am I an Aggregate ALE member? Employer Identification Number is no longer the deciding factor when filing returns to IRS. Any business that has common ownership is most likely considered an Aggregate ALE Group, and must report information jointly to the IRS.
  • How do I know what coverage was offered? Form 1095-C is unique because there is a monthly breakdown of what offer of coverage was made to an eligible employee – it is not reporting what the employee necessarily enrolled in. Generally most payroll systems are capturing what an employee enrolled in (to reflect a deduction in employee earnings), not necessarily what was offered (employee may have waived coverage for example). Because of this it is critical that payroll, HR, and benefits work together to ensure the proper offer of coverage is reported on form 1095-C.
  • What’s reported on line 15 of form 1095-C? The IRS not only wants employers to offer coverage to employees, but it also wants employers to offer affordable coverage. Specifically, line 15 on the form 1095-C reports the lowest monthly premium that was offered for employee only coverage. This is not reporting the cost for employee plus dependents. This produces an additional challenge because most payroll systems will be storing the employee share premium for the enrolled coverage, which may be a different premium than the employee only plan.
  • Do I have the resources to print these additional forms in January? Many, if not all of your employees who are receiving a W2 at year end will now be receiving a 1095-C as well. If you are potentially doubling the number of forms you need to issue this January, you might need to ask yourself, “What additional resources will this require?”