Question: I have heard that some employers are subject to new information reporting requirements under the Affordable Care Act (ACA).  Can you tell me a little bit more about these requirements and the purpose they serve?
Answer: After a one-year delay, the ACA employer mandate, which applies to all applicable large employers (generally, those with an average of at least 50 full-time employees,) officially took effect for on January 1, 2015.  According to the mandate, also referred to as the “pay or play” mandate, an applicable large employer can either “play” by offering minimum essential coverage to all or substantially all of its full-time employees and their dependents, or “pay” by failing to offer such coverage and thereby triggering penalties in the form of nondeductible excise taxes.
To enforce the employer mandate, as well as the individual mandate which requires most adults to show they have health coverage that meets ACA specifications, employers are subject to new IRS information furnishing and reporting requirements.  To comply with these new requirements, applicable large employers must compile data related to the prior calendar year and distribute an IRS Form 1095-C to each full-time employee by March 31, 2016.  Thereafter, applicable large employers must transmit IRS Form 1094-C (with all applicable Forms 1095-C) to the IRS for each legal entity within its controlled group that employs any full-time employees, by May 31, 2016 if filing on paper, and by June 30, 2016 if filing electronically.  Also, while only applicable large employers must file Forms 1094-C and 1095-C, health insurance issuers and carriers, and small employers sponsoring self-insured group health plans have separate ACA reporting requirements.  If you are a health insurance issuer or carrier, or a small employer sponsoring a self-insured group health plan, you can visit https://www.irs.gov/instructions/i109495b/ar01.html for instructions on filing Forms 1094-B and 1095-B.
As these deadlines approach, it is particularly important for applicable large employers to keep in mind that Form 1095-C includes very different information and in some ways is more complicated than Form W-2.  For example, Form 1095-C requires employers to indicate, among other things, the following for each full-time employee on a monthly basis:

  • Whether an offer of coverage was made to the employee;
  • To whom the coverage was offered;
  • The lowest-cost monthly premium for self-only coverage available to the employee; and
  • Waiting periods, safe harbors and enrollment data.

Also, because this information must be communicated to the IRS using a variety of new indicator codes, larger employers may benefit from implementing a system that translates employee payroll and benefits data into the new codes electronically.  Therefore, if you have not already started working on your Form 1094-C and Form 1095-Cs, now is the time to begin.
The IRS conservatively estimates that the Form 1094-C will take approximately 4 hours to complete while the Form 1095-C will take approximately 12 minutes to complete per full-time employee.  An applicable large employer with 150 employees is therefore looking at approximately 40 or more hours of work to prepare its forms for mailing and subsequent filing.  With deadlines fast approaching, applicable large employers are encouraged to begin working on these forms immediately to avoid running up against the furnishing and filing deadlines and triggering the law’s penalty provisions, which may be up to $250 per form for employers that fail to report accurate and timely information.