ACA Reporting Requirements: The What, When, and Why for Employers
by Chris Condeluci
It’s a hot topic that employers, agents/brokers, and other stakeholders are trying to wrap their heads around: the ACA’s new requirements for employers to report certain information about health insurance coverage.
What are the new reporting requirements?
Employers with 50 or more “full-time equivalent employees” (FTEs) must provide certain information to their “full-time” employees – information about (1) the specific type of health coverage offered and (2) the time period for which the coverage was offered. These employers will use the IRS Form 1095-C to report this information. Employers must also send this same information to the IRS, along with details about their workforce (e.g., how many “full-time” and “part-time” employees they have) on IRS Form 1094-C. These forms are collectively referred to as the “C Forms.”
Insurance companies underwriting an employer-sponsored plan, along with employers that self-fund their own health plans, must also report certain health care coverage information (1) to the IRS and (2) to the primary person insured under the fully-insured employer plan or covered under the self-insured health plan. This information will be sent to the IRS on Form 1094-B, and to the primary insured on Form 1095-B. These forms are collectively referred to as the “B Forms.”
Note: The IRS allows a self-insured employer subject to the employer mandate to report B Form information on its C Forms. Specifically, the IRS permits “combined reporting,” where the self-insured employer can report B Form information in Part III of the C Form that is sent to the employer’s “full-time” employees. If an employer offers a fully-insured plan, this employer is not required to send out B Forms – the insurance company is responsible for this.
When must the C Forms be sent out?
In the case of the C Forms that must be sent to an employer’s “full-time” employees, the Form must be sent to the employee by Jan. 31st of the year following the coverage year.
A C Form must also be sent to the IRS, but two different deadlines apply depending on the size of the employer. For example, if an employer sends out 250 or more C Forms, the deadline for filing with the IRS is March 31st of the year following the coverage year (and the submission must be done electronically). If an employer sends out less than 250 C Forms, the submission may be on paper, and the deadline is Feb. 28th of the year following the coverage year (these employers may choose to submit the information electronically if they want).
Why did Congress create these reporting requirements?
There are two primary reasons: (1) the “employer mandate” and (2) the “individual mandate.”
In the case of the employer mandate, Congress said the IRS needs to make sure employers are either (1) offering “affordable/minimum value” plans to their “full-time employees” or (2) paying the penalty tax, and the best way to help the IRS do its job is to require employers to report certain information about their health care coverage. In addition, as a way for the IRS to verify whether an employee is – or is not – eligible for a premium subsidy, Congress needs employers to provide certain information about (1) the type of health coverage offered and (2) whether the employees offered the coverage are “full-time” or “part-time.”
In the case of the individual mandate, Congress also said, now that we are imposing a penalty tax on people who do not have health insurance, the IRS needs to track (1) who obtained health insurance and (2) who has to pay the tax.
Are there other important things to know?
A “full-time” employee who must receive a C Form is defined as a person working 30 or more hours a week (or 130 hours in a month). An employee in a “waiting period” for coverage, or a “variable hour” employee who is currently in a “measurement/administrative period,” is not required to receive a C Form.
Importantly, employers with between 50 and 99 FTEs are still required (1) to furnish C Forms to their “full-time” employees and (2) to file a C Form with the IRS. Although these employers are generally not subject to the employer mandate penalty tax, they still need to comply with the C Form reporting requirement.
Employers may designate a third-party to furnish the C Forms to “full-time” employees and file a C Form with the IRS; however, the employer remains liable if the third-party commits any errors. Also, third-party providers will be subject to the requirements applicable to a “tax return preparer.”
Note: The new ACA reporting requirements are very complex. There are a number of special rules not discussed here that can be found in IRS instructions for the C Forms, along with the final regulations for implementing the C Forms.
If you are using a Liazon-powered exchange to distribute employee benefits, check with your broker for more about how Liazon helps employers comply with ACA requirements by making it easy to retrieve the data you will need for reporting. Not using a Liazon-powered exchange to deliver benefits to your employees yet? Learn more about our flagship product, the Bright Choices Exchange®, or contact us for more information.
Mr. Condeluci is Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C. Prior to forming CC Law & Policy, Chris served as Tax Counsel to the U.S. Senate Finance Committee where he actively participated in the development of portions of the Patient Protection and Affordable Care Act (ACA), including the ACA Exchanges, the state insurance market reforms, and all of the new taxes under the law. Based on Chris’s experience as an employee benefits attorney, he possesses a unique level of expertise on matters relating to tax law, ERISA, and the ACA.