For many employers, the employer mandate under the Affordable Care Act (ACA) is already a reality. Having now worked out some of the administrative kinks associated with providing the health plan coverage required by the mandate, employers face a new and daunting challenge: detailed reporting to the Internal Revenue Service (IRS) to document the terms on which their coverage is offered.
In light of the upcoming February 1, 2016 deadline for employers to provide their employees with the new Form 1095-C, we have compiled the following list of questions we most frequently receive about this complex new reporting regime under the ACA.
Q: Which form(s) do I need to complete: the 1095-C or the 1095-B?
A: The form or forms you will need to complete depends on whether your organization is an “Applicable Large Employer” (ALE) and how your health benefits are funded. If you are an ALE, you must provide your full-time employees with Form 1095-C regardless of whether you provide fully-insured or self-funded coverage to your employees. Furthermore, if you are an ALE that sponsors a self-funded plan, you will also provide Form 1095-C to any part-time employees who are enrolled in the plan.
If you are not an ALE and you sponsor a self-funded plan, you will report that coverage on Form 1095-B to any employees covered by that plan.
Regardless of whether you are an ALE, if you sponsor a fully-insured plan, the insurance carrier will report that coverage to your covered employees on a Form 1095-B.
Q: Which company’s EIN do I use on Line 8 of Form 1095-C: the employer’s or the plan sponsor’s?
A: The ACA’s reporting obligations fall on the common law employer. That means that each employer should report its employees under its own employer identification number (EIN), regardless of which company is the sponsor of the plan covering those employees. For example, an employer that is a subsidiary of a parent company that sponsors the health plan should report for its own employees under its own EIN, not under the parent company’s EIN.
Q: How do I know whether I am an ALE for 2015?
A: For 2015, the ALE determination is based on the organization’s employee count for any consecutive six-month period in 2014. If the organization had 50 or more full-time employees (including full-time equivalents) for any consecutive 6-month period in 2014, it is an ALE for 2015. To determine the number of full-time employees you have, you must aggregate the employees of all companies that are considered to be a controlled group or otherwise under common control under the Internal Revenue Code.
Q: How do I count my full-time equivalent employees for purposes of determining whether I am an ALE in 2015?
A: First, count each employee who averaged 130 hours or more of work per month in 2014 (or during the 6-month period in 2014 that you are using). Those are your full-time employees. For any employee who averaged less than 130 hours, count his or her actual monthly hours up to a cap of 120. Then, total all the hours of your non-full-time employees and divide the result by 120 (or 60 if you are using a one-month period for your calculations). The resulting number is the number of full-time equivalent employees you have. Add the number of full-time equivalent employees to your full-time employee count to determine whether you have reached the ALE threshold.
Q: How do I count my seasonal workers for purposes of determining whether I am an ALE in 2015?
A: For this purpose, “seasonal workers” are those individuals who perform services on a seasonal basis as defined by the Secretary of Labor. “Seasonal workers” also includes retail workers employed only during the holidays. Employers that have 50 or more full-time employees (including full-time equivalents) employed for 120 or fewer days during the prior calendar year can disregard those seasonal workers who were employed for 120 or fewer days when determining whether they meet the ALE threshold.
Q: I thought I did not have to comply with the ACA employer mandate in 2015 if I had fewer than 100 employees! What is the rule?
A: For 2015 only, employers with 50 to 99 full-time employees (plus full-time equivalents) are exempt from complying with the employer mandate. However, these employers still must comply with the law’s reporting obligations and complete Forms 1095-C and 1094-C.
Q: Why don’t the instructions for Line 14 and Line 16 on Form 1095-C match?
A: The lines are used to report different information. Line 14 tracks whether an ALE has made a sufficient offer of coverage to meet the ACA’s Shared Responsibility provisions, commonly known as the “employer mandate.” An employer must offer coverage for every day of the month in order for it to count as an “offer” on Line 14. For any month in which you have not made an offer, you will use the 1H “No Offer” code.
By contrast, Line 16 reports whether the employee was covered for at least one day of the month. If so, you will use the Code 2C. This information, along with the information in Part III of the form, allows the IRS to determine whether the individual met the individual mandate under the ACA. If the employee is not covered, these are the months when a penalty assessment might be triggered against the employer if the employee instead purchases subsidized coverage through an Exchange. For this reason, ALEs use Line 16 to report their defense to any penalty, most commonly using one of the affordability codes, that—in conjunction with the dollar amount on Line 15 and the offer code on Line 14—tells the IRS that the employer offered sufficient coverage to meet the employer mandate and that the individual should not have been eligible for subsidized coverage on an Exchange. Be sure to complete Line 16 carefully.
Q: How do I report for new hires?
A: Prior to hire, use Code 1H on Line 14 and Code 2A on Line 16. After the hire date, you will continue to use Code 1H on Line 14 during any waiting or stability period, and use Code 2D on Line 16 to reflect that you have no obligation to offer coverage during any limited non-assessment period. Once coverage is offered, you will use the appropriate offer code on Line 14 (depending upon the type of coverage you have offered and whether your offer includes a spouse and any dependents) and Code 2C on Line 16 if the employee enrolls in coverage. If the employee does not enroll in coverage, you generally should use one of the affordability codes on Line 16, assuming you have offered affordable coverage.
Q: What do I report if someone’s employment is terminated during the year?
A: You must complete Line 14 for all months of the year. You will use Code IH (“no offer”) for any month after the termination of employment if coverage is not offered to the employee for the entire month. On Line 16, you should generally use Code 2B for the month in which the former employee’s employment was terminated and Code 2A for any month when the individual was not employed at all.
Q: Do I still have to report for employees who are offered COBRA and decline coverage?
A: Yes. For months in which an employee is offered and declines health benefits under the Consolidated Omnibus Budget Reconciliation Act (COBRA), you should generally use 1H on Line 14. On Line 16, you should report using Code 2B in any month in which the employee was employed at least one day of the month (e.g., the month employment terminates), and Code 2A for any month in which the employee was not employed at all.
Q: How do I report for employees who have elected COBRA coverage?
A: For the months in which COBRA is offered, instead of reporting the employee’s lowest cost of employee-only coverage on Line 15, report the COBRA premium for the lowest cost self-only coverage. If the employee enrolls in COBRA coverage, you will continue to use Code 2C on Line 16 for the months the employee is enrolled.
Q: Must I report for my union employees?
A: Yes, if your union employees are covered under a plan that you sponsor, you must report for them just as you would for any other employee. If they are offered coverage by a separate plan that is administered by a board of trustees comprised of representatives from the union and participating employers to which you contribute, then special reporting rules may apply. Commonly known as “Taft-Hartley funds” or “multiemployer plans,” health plans that you cosponsor with the union will report coverage to your union employees on the Form 1095-B. However, if you are an ALE, you must still file a Form 1095-C for your union employees.
Q: How do I report multiemployer plan coverage for my union employees?
A: For 2015, you may qualify for special transition relief if you are required by a collective bargaining agreement or other written agreement to contribute to a multiemployer plan for your union employees. If that plan provides “minimum essential coverage” that is “minimum value,” and if any premium charged to the union employee for coverage is “affordable” under the employer mandate provisions, then you may use Code 1H on Line 14 and Code 2E on Line 16 to report the offer of coverage on the Form 1095-C.