The Affordable Care Act (ACA) just launched a number of important new responsibilities for businesses in 2015, with the employer mandate being the most important to follow because of the possible penalties involved. Since many companies now need to report their health insurance benefits to the IRS, business owners must understand how to meet this requirement so they can stay compliant and avoid unnecessary penalties.
Which Companies Need to Report?
The ACA reporting requirements for the employer mandate — a provision that requires companies of certain sizes to offer affordable, minimum value health coverage to their employees — only apply to businesses with at least 50 full-time (including full-time-equivalent) employees. Companies below this size do not have to satisfy the employer mandate reporting because they are not required to provide health insurance for their employees.
In 2015, companies with 50–99 employees do not have to offer health insurance to employees if they meet certain requirements, but they still need to file a reporting form indicating they are exempt from the employer mandate and must provide coverage in 2016.
The ACA Reporting Requirements
There are two new IRS forms to be completed in order to meet ACA employer mandate reporting requirements: Form 1095-C and Form 1094-C. The IRS will use the information in these documents to determine whether an employer met the ACA coverage requirements or needs to pay a penalty.
Employers need to fill out a Form 1095-C for each full-time employee. This form lists the coverage that was available to each employee and their dependents throughout the year, along with coverage cost. Employers with fully-insured plans only need to fill out Parts I and II of Form 1095-C, and employers with self-funded plans will fill out the entire form. Employers will then provide each employee a copy of their completed Form 1095-C.
Form 1094-C is essentially a summary of the information that was listed in every Form 1095-C and must be filed with the IRS along with all of the Forms 1095-C. Form 1094-C features information such as the number of employees and full-time employees the company had each month and whether the company offered a minimum amount of coverage each month. Also on Form 1094-C, employers with 50–99 full-time employees can indicate that they weren’t required to meet the employer mandate requirements in 2015.
Filing the New Reports
Employers must furnish the Forms 1095-C no later than January 31 of the reporting year. (In 2016, since January 31 falls on a weekend, the deadline is February 1.) There are two separate deadlines for filing Form 1094-C, depending on whether the employer files the reports with the IRS electronically or on paper. If the employer has 250 or more employees, the employer must file electronically with a deadline of March 31. If the employer has fewer than 250 employees, it can choose to file either electronically or on paper. The deadline for filing Form 1094-C on paper is February 28.
Companies that fail to properly meet these reporting requirements are subject to a number of penalties. And this penalty can be substantial. However, the IRS has indicated that it will not be imposing penalties in 2016 on companies that show a good-faith effort to meet the new requirements, but only if the mistake is relatively minor, such as a mistake on the date of birth or Social Security Number reported.
The new reporting requirements aren’t being implemented this year, but employers should take steps to prepare for filing next year. While it will take some research to get up to speed with the requirements, most business owners — if they plan ahead — will be able to manage them and file on time in 2016.
David Rodeck is a professional freelance writer based out of Delaware. Before writing full-time, he worked as a health- and life-insurance agent. He specializes in making insurance, investing and financial planning understandable.