Beginning in early 2016, information reporting provisions under the Patient Protection and Affordable Care Act (the “ACA,” commonly referred to as “Health Care Reform”) require many employers to file annual information returns with the Internal Revenue Service (the “IRS”) and provide annual statements to employees containing health plan coverage information. Compliance is mandatory. Failure to file the required informational returns (or filing incomplete or inaccurate forms) could result in both reporting penalties and penalties under the ACA’s shared responsibility provisions (the so-called pay or play mandate).Employers should prepare now to meet these reporting requirements.
Forms 1094-C and 1095-C
Applicable large employers (those employers that employed an average of at least 50 full-time or full-time equivalent employees during the preceding calendar year) will be required to prepare Forms 1094-C and 1095-C. Whether an employer is “large” is determined on a consolidated basis for multiple entities under common control. However, if an employer is part of a “controlled group” that constitutes a large employer, each member of the controlled group with employees must prepare its own Forms 1094-C and 1095-C. All large employers must complete parts I and II of the Form 1095-C for each of its full-time employees, regardless of whether they offer a fully insured health plan, a self-funded health plan, or both. If a large employer offers only a fully insured health plan, it must complete only parts I and II of the Form 1095-C for each of its full-time employees, while the insurance company will be required to prepare separate Forms 1095-B to report coverage for those same full-time employees. On the other hand, if the large employer offers employer-sponsored self-insured health coverage in which the employee or other individual actually enrolls, that large employer must complete parts I, II, and III of the Form 1095-C. Form 1094-C is the transmittal form to the IRS for the Forms 1095-C (similar to the Form W-3 for Forms W-2).
The information needed to complete these forms includes whether the employee and dependents were offered coverage, the cost of coverage, and identifying information not only for the employee, but also for his or her dependents (Social Security number, or date of birth if the dependents’ Social Security number cannot be obtained). The information must be captured and reported for each month of the calendar year.
Forms 1094-B and 1095-B
Smaller employers that are not yet subject to the pay or play mandate may also have reporting requirements, but will use Forms 1094-B and 1095-B to report health coverage information to the IRS. Small employers that sponsor only fully insured group health plans are not subject to the reporting requirements, and their insurance carriers are responsible for the completion of the Forms 1094-B and 1095-B. However, small employers that sponsor self-insured group health plans are subject to the reporting requirements and must complete Forms 1094-B and 1095-B to report information about individuals enrolled in the self-insured plan.
Filing and Distribution Deadlines
The filing and distribution deadlines for the forms described above are similar to the Form W-2 filing and distribution deadlines. Accordingly, copies of the Forms 1095-C or 1095-B must be distributed to employees by February 1, 2016. (The distribution deadline is generally January 31, but January 31, 2016, is a Sunday.) The forms must be filed with the IRS on or before February 29, 2016 (March 31, 2016, if filing electronically). Electronic filing with the IRS is required if an employer is required to file at least 250 Forms 1095-C or 1095-B.
Although the information reports covering 2015 will not have to be prepared and filed until the first part of 2016, employers should take steps now so that they will be able to comply with the new reporting requirements. These action items include:
- Reviewing the Forms 1094-C and 1095-C (or Forms 1094-B and 1095-B), and the instructions for both, to identify the information required for the new reporting;
- Reviewing recordkeeping systems to ensure that the necessary information (number of hours worked, cost of coverage, etc.) is able to be captured;
- Determining whether to engage a third-party vendor to help complete the reporting requirements; and
- Working with payroll or tax department personnel (and/or outside vendors) to establish procedures for furnishing copies of the forms to employees and filing the forms with the IRS.