When is reporting required? Starting in 2016, any employer identified as an “applicable large employer” under the Affordable Care Act (defined as an employer with fifty or more full-time or full-time equivalent employees) will be required to submit forms to the Internal Revenue Service. These forms outline the insurance coverage available to employees and will allow the IRS to determine if the employer owes a payment pursuant to the employer shared responsibility provisions of the Affordable Care Act. These reporting requirements were optional in 2015 (for insurance coverage offered in 2014), but are mandatory in 2016 (for insurance coverage offered in 2015).
What are the reporting requirements? An applicable large employer must file a Form 1095-C (instructions here) with the IRS for each full-time employee no later than February 29, 2016, if filing by paper (which is allowed for non-large employers) or March 31, 2016, if filing electronically (which is required for large employers). This form is completed and filed for each full-time employee regardless of whether the employee was offered coverage and whether the employee took coverage under the employer’s plan. The employer is also required to provide each employee with the completed Form 1095-C no later than February 1, 2016 (because the deadline, January 31, 2016, is a Sunday). The employer must also file one Form 1094-C with the IRS for the transmission of all of its 1095-C forms. The employee does not receive a copy of the 1094-C form.
An applicable large employer that is self-funded must also complete Part III on Form 1095-C, which provides the IRS with information that an insurance provider in a fully funded plan would normally provide (i.e., information regarding minimum essential coverage). If an employer that is not an applicable large employer (and isn’t subject to the employer shared responsibility requirements) has a self-funded plan, and therefore provides minimum essential coverage to its employees, that employer is required to file Forms 1094-B and 1095-B (instructions here) with the IRS.
Below is an overview of the necessary IRS forms for various types of employers:
How does cash-in-lieu of benefits affect reporting? One question that has been frequently asked is the manner in which an employer must report benefits paid pursuant to a Section 125 plan, specifically a plan that provides cash in lieu of insurance benefits. Consistent with IRS regulations released in November of 2014 regarding the individual mandate, an employer who provides an employee the option of cash in lieu of benefits must add the cash payment received by the employee to the employee’s share of the cost of the lowest premium single-only insurance plan to determine if the benefit offered is affordable.There is some relief from penalties for incorrect reporting. The IRS has stated that it will not impose penalties for 2015 returns and statements filed and furnished in 2016 for reporting entities, including employers, that can show that they have made good faith efforts to comply with the information reporting requirements.
As an example, an employer provides an employee with health insurance coverage that costs the employee $75 per month. The employer also provides the employee a cash stipend of $300 per month, but only if the employee opts not to enroll in the employer’s coverage. When the employer is calculating the employee’s cost of health insurance coverage for reporting purposes, the total employee cost is $375 per month (the $75 actual cost of insurance PLUS the $300 lost cash opportunity cost). This is the figure that would be reflected on IRS Form 1095-C, and could signal that an employer shared responsibility payment may be due because the coverage is not affordable. Whether an employer will have to make such a payment will depend upon whether the employee to whom coverage was not affordable receives a subsidy to purchase insurance coverage on the Exchange.
If you have questions regarding the Affordable Care Act’s reporting requirements, please contact Emily K. Ellingson at Lynch Dallas, P.C. at firstname.lastname@example.org or 319-365-9101.