The first deadlines for compliance with the information reporting provisions of the Affordable Care Act (ACA) will soon be upon us. The ACA reporting obligations require employers to file annual information returns with the IRS and furnish annual statements to employees containing health plan coverage information. Compliance is mandatory, and failure to timely file the required informational returns could result in penalties. Here’s what you need to know:
Who has to report?
1. Applicable Large Employers (ALE)
Whether an employer is an ALE is determined each calendar year, and generally depends on the average size of an employer’s workforce during the prior year. An employer with 50 or more full-time or full-time equivalent employees during 2015 is considered an ALE that is subject to the employer shared responsibility provisions and the employer information reporting provisions of the ACA.
ALEs are required to prepare Forms 1094-C and 1095-C. Form 1095-C is the individual report that must be sent to each employee who was full-time for at least one month in 2015. Form 1095-C must be distributed to employees by February 1, 2016. The employer must then file the individual reports, along with a transmittal report (Form 1094-C) with the IRS. The deadline for paper filings is February 29, 2016, and the deadline for electronic filings is March 31, 2016. Employers who issue 250 or more individual reports must file electronically.
2. Minimum Essential Coverage Providers
Employers that provided minimum essential coverage to any individual in 2015—including employers of any size that sponsored self-insured group health plans for their employees—must send Form 1095-B to each employee who was covered for at least one month in 2015. Form 1095-B must be distributed by February 1, 2016. The employer must then file the individual reports, along with a transmittal report (Form 1094-B) with the IRS. The deadline for paper filings is February 29, 2016, and the deadline for electronic filings is March 31, 2016. Employers who issue 250 or more individual reports must file electronically.
Is an ALE who provided self-funded health coverage required to fill out both sets of forms?
ALEs who provide self-funded health coverage are technically required to send covered employees both Form 1095-B and Form 1095-C. However, the ACA does not require the employer to file both set of forms. Rather, the ALE need only file Forms 1094-C and 1095-C.
How do I know if an employee is full-time?
An employer identifies its full-time employees based upon each employee’s actual hours of service during the preceding year. For purposes of the employer shared responsibility provisions of the ACA, a full-time employee for any calendar month is an employee who has averaged at least 30 hours of service per week, or at least 130 hours of service during the calendar month.
There are two measurement methods for determining whether an employee has sufficient hours of service to be considered a full-time employee:
1. Monthly measurement method, under which the employer determines if an employee is a full-time employee on a month-by-month basis by looking at whether the employee has at least 130 hours of service for each month.
2. Look-back measurement method, under which the employer determines full-time status during a period of time (the stability period) based upon the employee’s hours of service during a preceding period (the measurement period). This method is only available for purposes of determining and computing liability for an employer shared responsibility payment—it may not be used to determine full-time employee status for purposes of determining whether an employer is an ALE.
Importantly, calculating the number of full-time and full-time equivalent employees using the formula provided for in the ACA requires a detailed analysis of each employer’s workforce.
What information is needed to complete the forms?
In order to complete Forms 1095-C and 1095-B, employers will need to provide identifying information for the employee and his or her dependents, identifying information for the employer sponsoring the coverage, and identifying information for the health insurer or other entity that provides coverage on behalf of the employer.
In addition to the above, Form 1095-C requires that employers provide information on whether employees and defendants were offered health insurance coverage and the cost of such coverage.
What can I do now?
Complying with the ACA reporting requirements may seem like a daunting task, but there are steps you can take now to ensure that you are prepared for February 1, 2016.
- Review the forms and the instructions.
- Confirm that you are capturing the necessary employment history data (for example, the number of hours worked by each employee).
- Establish a procedure for getting copies of forms to employees and for filing the forms with the IRS.
- Consider whether to outsource reporting obligations to an outside vendor or engage an ACA compliance expert.
If you have questions about this client alert or would like assistance in understanding the reporting requirements under the Affordable Care Act, please contact Emily Scott or Jaime Wisegarver.
Luis F. Ruiz