As part of the U.S. Patient Protection and Affordable Care Act of 2010 (the “ACA”), the IRS is requiring that certain employers file additional forms with the IRS starting tax year 2015. Employers should understand which of these new forms, if any, they are required to submit to the IRS. If relevant, employers should make sure they have made arrangements to submit these forms properly and on a timely basis whether through their payroll provider, through another service provider or on their own. Employers may also be required to provide employees with copies of these forms. This article highlights what forms are required, who is generally required to submit such forms and the relevant deadlines for submitting such forms.
Form 1095–B: Focus on Provision of “Minimum Essential Coverage”
What is it? The IRS is collecting information on Form 1095-B to help determine if individuals have “minimum essential coverage” (the health insurance that most individuals are now required to have under the ACA whether through an employer or otherwise). If an individual does not have minimum essential coverage, the individual may owe the IRS a penalty called the “individual shared responsibility payment.”
Who is required to file? In general, any entity that provides minimum essential coverage to an individual must file Form 1095-B with the IRS (together with another form – a Form 1094-B) indicating that it provided minimum essential coverage to such individual and for what periods during the applicable calendar year, and provide the Form 1095-B to the covered individual. If an employer offers health insurance through a third party health insurance company, the insurance company not the employer is the entity actually providing the coverage and therefore is the entity required to file and distribute the Form 1095-B. This is true even if the employer pays part or all of the insurance plan’s cost. If an employer provides self-funded health insurance, however, the employer itself would be required to file Form 1095-B and provide it to applicable employees.
Form 1095-C: Focus on Health Insurance Coverage by “Applicable Large Employers”
What is it? The IRS is collecting information on Form 1095-C to determine if each “applicable large employer” (as described below) offered to its employees and their dependents the health insurance coverage the employer is required to offer under the ACA. Form 1095-C information will also be used by the IRS to determine if employees may be eligible for a premium tax credit with respect to insurance they purchase through the government-sponsored health insurance marketplace (websites). In general, if an applicable large employer has not offered the required coverage, or if such coverage does not meet certain financial standards, and in either case at least one full-time employee received a premium tax credit for insurance purchased in the government marketplace, the employer could owe a penalty called the “employer shared responsibility payment.” The penalty could be in the range for the full year of $2,000 or $3,000 per full-time employee that falls into certain categories, although in certain instances no penalty may be imposed.
Who is required to file? In general, applicable large employers must file Form 1095-C with the IRS (together with another form – a Form 1094-C) and provide the Form 1095-C to their full-time employees. Determining who is an applicable large employer is very fact specific, but in general it is an employer that employed an average of 50 or more full-time employees (including full-time equivalent employees) during the prior calendar year. There are extensive rules about how to determine the number of full-time employees an employer has, including how many hours an employee needs to work to be considered full-time, how to count part-time and seasonal workers and how and when to combine employee count between related companies.
For tax year 2015, the deadline for filing Form 1095-B and Form 1095-C (and the related Forms 1094-B and 1094-C) with the IRS is May 31, 2016 or June 30, 2016 if filed electronically (which may be required). The forms must be given to applicable individuals by March 31, 2016. Both forms were optional for tax year 2014 but are mandatory for tax year 2015.