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Employer reporting requirements for the Affordable Care Act

March 4, 2015

Not that any of us need another reason to shake our heads at the IRS…  About two weeks ago the Internal Revenue Service released the final reporting forms and instructions that employers will use in connection with the Affordable Care Act.  Straightforward and easy to wrap your mind around are two things we will never associate with this required activity. 

That said, there is some good news.  First, if you employ fewer than 50 full-time equivalent employees and either offer fully-insured coverage, or do not offer coverage to your employees, there is no reporting required.  If your company hovers around 50 employees, make sure you know which side of the aisle your employee count falls on – not just for the reporting requirement, but also so you know if your company must comply with the employer mandate.  Second and last piece of good news, not much changed in the final forms and instructions from the draft forms which were released last summer.  So, if on the advice of your independent insurance agent, CPA, etc., you began the arduous process of data collection, you will need to make few, if any, changes.  This is where the good news ends…

For our members that are considered applicable large employers under the Affordable Care Act – meaning your company (or the controlled group of companies in which your company is included) has 50 or more full-time equivalent employees and is, therefore, subject to the employer mandate, the reporting forms and instructions are detailed, complex and the data collection and assimilation will be time consuming.

Here is the cliff note version of what you need to know:

  • Reporting is based on the calendar year without regard to your plan year or renewal year, etc.
  • Reporting is not required in 2015 for 2014
  • Reporting is required in 2016 for 2015
  • Download the IRS Forms that you will be required to file and become acquainted with the information required to report.  The forms include 1094-B, 1094-C, 1095-B, 1095-C (I will explain what each is used for in the following paragraphs).
  • If you have not already done so, start the data collection process now so that you are not recreating the data when it is time to report.

The reports have two main purposes:  1) Reporting which individuals (and their dependents) had coverage which satisfies the ACA’s individual mandate for all or part of the year and 2) which employers offered coverage that satisfies the employer mandate.

All applicable large employers (fully-insured and self-insured) are required to report and will use Form 1095-C to confirm their compliance with the employer mandate.  Separate portions of the form will apply to an individual employee and compliance with the individual mandate and the employer’s compliance with the employer mandate.

Breaking this down further for fully-insured and self-insured employers:

For Fully-Insured Employers:

Full-time employee that has accepted coverage – Form 1095-B will be sent from the insurer (insurance company) to the employer, with a copy to the IRS, showing every employee and dependent covered by months of coverage, even if coverage was only for a day.  Form 1095-C will be provided to the employee from the employer showing, by month, the coverage offered to the employee.

Full-time employee that declined coverage
– There will be no Form 1095-B from the insurer because there was no coverage provided.  Form 1095-C will be provided by the employer to the employee showing, by month, the coverage offered.

Less than full-time employee that accepted coverage
– Form 1095-B from the insurer showing months of coverage.  There is no employer to employee form required because coverage is not mandated for part-time employees.

Less than full-time employee that declined coverage
– No reporting.

For Self-Insured Employers:

Full-time employee that has accepted coverage – Form 1095-C showing by month for the employee (and dependents) the coverage offered and accepted.

Full-time employee that declined coverage-
Form 1095-C showing by month the coverage offered.

Less than full-time employee that accepted coverage
– Form 1095-C showing by month the months of coverage.

Less than full-time employee that declined coverage
– No reporting.

If your company does not offer coverage to its full-time employees, Form 1095-C showing that no coverage was offered must be submitted to the IRS.

The IRS gets copies, from you, of all the Form 1095-Cs along with the employer’s form 1094-C showing additional employer mandate related information, including Part I which outlines personal demographic information and Part II which demonstrates the employer’s compliance, by month, with the employer mandate for each individual full-time employee.  Part III of Form 1095-C is for self-insured companies and is for employees to demonstrate compliance with the individual mandate (remember that because there is no insurer, there is no Form 1095-B coming from the insurance company for these employees).

Clear as mud probably.  Here are the key takeaways:

  • Start now – download and review the IRS Forms
  • Check in with your payroll service, vendor or software company to inquire how much of this information will be captured in the payroll records.
  • Make sure whomever is doing payroll for your company is uploading/tracking the appropriate information so that in early 2016, when it is time to report, the information is readily available and you are not trying to remember what happened with which employee months ago.

Last but not least.  When are the Forms required to be submitted?

Form 1095-B and 1095-C, (Part III for self-insured) to the employee by January 31 and to the IRS by February 28th or if electronic submitting by March 31st.  Don’t forget the transmittal forms that must accompany each.

Fun stuff.  Stay tuned.  It is early and while we don’t expect any changes to the instructions or forms, there may be clarifications or additional information coming from the IRS.

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