The Affordable Care Act (ACA) requires large companies to report its health coverage offerings to the Internal Revenue Service (IRS). This requirement started in January 2015 as part of the Employer Shared Responsibility (ESR) Provisions of the ACA. The reporting of the health coverage is an annual requirement.
Is This Reporting Required for Your Company?
Every Applicable Large Employer (ALE) is required to provide detailed information about the health insurance offered to all of its full-time employees. If the Plan offered is Fully Funded the information to be reported to the IRS includes identification of the ALE, identification of full-time employees to whom an offer of coverage is made, and duration of the offer. If the plan is Self-Insured, then additionally the IRS requires information of the spouses and dependents covered under the full-time employees plan. The definition of full-time is a person working, on average 30 hours each week or working 130 hours per month. An ALE is any company that has 50 or more full-time staff members.
Companies with less than 50 full-time employees are not required under the ESR provision to report this health insurance information. However, under IRS section 6055, small companies that are self-insured are required to report the health insurance coverage of its employees, their spouses and their dependents, even though the employers are not subject to the employer shared responsibility provisions or the information reporting requirements for ALEs. These non-ALEs use Form 1095-B, Health Coverage, and the transmittal Form 1094-B, Transmittal of Health Coverage Information Returns, to meet the information reporting requirements for providers of minimum essential coverage.
ACA Reporting Deadlines
For the tax year 2016, reporting starts in January 2017. IRS Section 6056 requires employers to file forms 1094-C and 1095-C which detail the number of full-time employees you have. These forms also reveal which employees you offered health coverage to during the tax year. These forms have to be filed by February 28, 2017. If your company files the forms electronically, the deadline is March 31, 2017. ALEs that file 250 or more information returns during the calendar year must file the returns electronically.
Every ALE has to give its full-time employees the form 1095-C by February 1, 2017.
Possible Penalties Imposed
Any ALE has to provide minimum essential coverage (MEC) that is affordable to all its full-time employees. If an employer doesn’t meet this requirement, it is subject to penalties. To avoid penalties, the Applicable Large Employer has to offer coverage to at least 95 percent of its full-time employees, their spouses and dependents in 2016.
Other penalties are based on the number of full-time employees that an ALE fails to offer affordable health insurance to. Penalties are also imposed if the health plan fails to meet the minimal actuarial value of at least 60 percent of allowed benefits costs.
Employers also face penalties for failing to file the appropriate forms by the deadline.
It’s important that all large and self-insured employers take steps to meet the IRS reporting requirements for the Affordable Care Act. This is extra work, but it is necessary to ensure that full-time employee get the health coverage they and their families need and is used to report the information the IRS needs to administer the employer shared responsibility penalties. The information is also used to identify individuals who are ineligible for a premium tax credit because they were offered employer-provided insurance that was affordable and provided minimum value.