In general, any entity that provides minimum essential health coverage (MEC), under the Affordable Care Act (ACA), to its employees must report that coverage to the employees and to the Internal Revenue Service (IRS). Reporting is required of health insurance carriers or issuers, government units, plan sponsors of self-insured group health plans and sponsors of MEC. The reported information will be used by the IRS to administer the ACA and by taxpayers to show compliance with the individual mandate. To assist in that reporting, we will be discussing several new IRS forms.
- Form 1095-B, Health Coverage
- Form 1095-C, Employer Provided Health Insurance Offer and Coverage
- Form 1094-B, Transmittal of Health Coverage Information Returns
- Form 1094-C, Transmittal of Employer-Provided Health Insurance and Coverage Information Returns
The ACA’s exchange marketplace will report MEC to individuals enrolled in qualified health plans on Form 1095-A (which will not be covered in this update). Government sponsored MEC (such as Medicare, Medicaid, and CHIP) will be reported by the respective federal or state agency administering such coverage. 2015 reporting is due by Feb. 1, 2016 to MEC participants and Feb. 28, 2016 (if paper-filing) or March 31, 2016 (if electronically filing) to the IRS.
Coverage reporting forms
Employers and/or insurance companies will prepare Form 1095-B to report information to the IRS about individuals who are covered by MEC and therefore not liable for the individual shared responsibility payment (a/k/a individual mandate). Filers of 250 or more information returns must file these electronically. In general, health insurance issuers or carriers will prepare and file the 1095-B forms for all insured employer coverage. Employers offering self-insured coverage that do not meet the employer mandate requirements will also use the 1095-B forms to report coverage.
In lieu of Form 1095-B, ALEs offering self-insured coverage will use Form 1095-C to report information about the coverage provided to each employee. ALEs are those employers subject to the employer shared responsibility payment or employer mandate. Contributing employers in a multi-employer plan will also use Form 1094-C and use an indicator code identifying the employer as a participant in such a plan. Generally, this form will be provided only to the employee.
Form 1095-B – Health Coverage
Form 1095-C – Employer-Provided Health Insurance Offer and Coverage
|Part I||Responsible individual||Employee and applicable large employer member (Employer)|
|Part II||Employer sponsored coverage||Employee offer and coverage|
|Part III||Issuer or other coverage provider||Covered individuals|
|Part IV||Covered individuals||N/A|
Action Item: These forms require MEC reporting on a monthly basis. As a result, employers and sponsors of MEC should begin gathering the necessary data as quickly as possible. We have provided the following action plan for your use in pulling together this information.
- Review whether you are considered an ALE and if you qualify for the one-year deferral. See our year-end tax planning letter for more details.
- Perform a controlled group/affiliated entity analysis by reviewing ownership structures of related entities to determine ALE status.
- Study the applicable 1094 and 1095 series forms and instructions.
- Determine and document each employee’s full-time (or non-full-time) status by month.
- Collect information on employee offers of health coverage and health plan enrollment by month.
- Confirm responsibility for data collection and for preparation. This could be the employer, the health insurance company, the payroll provider or a third party administrator.
Information required to be collected includes:
- Name, address and employer identification number of the MEC provider.
- The responsible individual’s name, address and taxpayer identification number (TIN).
- The name and social security number of each individual covered under the policy or plan
- Date of birth is allowed if the social security number is not available.
- The months the individual was enrolled and entitled to receive benefits.
- The employee’s share of the monthly premium for the lowest-cost minimum value health coverage offered
- Whether the employee was a full-time employee each month
- The affordability safe harbor applicable for the employee
- Whether the employee was enrolled in the health plan
- The name, address and TIN of the employer sponsoring the plan, whether the plan is a qualified plan enrolled in SHOP and the SHOP identifier.
In many cases, employers may not have the social security numbers for dependents of employees. Steps should be taken now to gather those and any other missing data. Also, safeguards should be taken to reduce the potential for stolen identification.
Form 1094-B is the transmittal for the forms 1095-B filed by the employer or sponsor of the health coverage. The name and contact information of the responsible individual, address of the filer and total number of 1094-Bs filed will be reported.
ALEs will file Form 1094-C as the transmittal for the required 1095-C forms. Form 1094-C must contain aggregate employer data for all full time employees; including, a certification by month as to whether the employer offered its full-time employees (and their dependents) the opportunity to enroll in MEC as well as the number of full-time employees per month of the calendar year. The total number of employees must also be reported on a monthly basis.
Multiple transmittal forms may be filed (for example, if an employer has multiple categories of plans or employees where separate reporting is needed); however, in these cases, an Authoritative Transmittal would also be filed (by checking the box on line 19 of part 2) summarizing data for all other 1094-Cs filed. If the employer is part of an affiliated group, the names, addresses and TINs of the other members are reported as well.
Although members of an ALE group with fewer than 100 full-time employees are generally eligible for transition relief from the employer shared responsibility penalty (employer mandate) for 2015, these employers are still required to file the necessary reporting forms mentioned above. While compliance for the ACA employer mandate is deferred for employers with between 50 and 100 full-time (or full-time equivalent) employees, these same employers have to certify on the 2015 Form 1094-C that it employs a limited workforce within this range. It must also certify that, between Feb. 9, 2014 and Dec. 31, 2014, the ALE did not reduce the size of its workforce or the overall hours of its employees in order to meet the transition deferral guidelines.
Other reporting situations
Each ALE is required to file forms 1094-C and 1095-C for its own employees, even if it participates in a health plan with other employers; such as when a parent company sponsors a plan in which its subsidiaries participate. Special rules apply to governmental entities and to multiemployer plans for collectively-bargained employees. Companies with multiple divisions or payroll centers may elect to file a Form 1094-C for each division or payroll center. In the latter case, a summary Form 1094-C must then be filed to aggregate all employer-level data for all the employer’s full-time employees (the authoritative transmittal mentioned earlier).
For more information on this topic, or to learn how Baker Tilly tax specialists can help, contact our team.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.