By Christy Abend
This time of year marks the reporting season for Applicable Large Employers (ALEs) working hard to comply with Affordable Care Act (ACA) Employer Mandate reporting requirements. Under IRS definitions for the ACA, if an employer has at least 50 full-time employees, including full-time equivalent employees, during the prior year, that employer is considered an ALE for the current calendar year. ALEs are subject to employer-shared responsibility and employer information reporting provisions.
While the ACA presents a copious amount of ever-changing obligations and paperwork, the two forms that play a pivotal role in helping you avoid penalties from the Internal Revenue Service (IRS) are Forms 1094 and 1095.
While reporting information on IRS Forms 1094 and 1095 are not the only responsibilities employers have to remain ACA compliant, they are the end result of the ongoing activities that employers must manage throughout the year, and used to report offers of coverage to both employees and the IRS.
Form 1094 is considered the cover sheet for all Forms 1095. The form aggregates information regarding total form counts on behalf of a single FEIN, and an employer’s meeting the requirement to offer coverage to at least 95% of their benefits eligible employees. This form only needs to be submitted to the IRS.
Form 1095 is the form providing information about offers of coverage, including who coverage is offered to and for what months, whether or not coverage was considered affordable, whether or not the employee enrolled or waived their right to enroll in coverage, and for any months where there is an absence of an offer, what reason, if any, the employer had for not offering coverage. This form must be sent to both employees and to the IRS.
There are different versions of Form 1095, including 1095-A, 1095-B and 1095-C. These designations determine who must file the forms based on the type of insurance offered.
Form 1095-A This form is completed when insurance comes from the health insurance marketplace, also known as the exchange. Reporting enrollment from the exchange is not the responsibility of the employer, rather the exchange will create and distribute these forms to enrollees.
Form 1095-B This form is used by third-party administrators or insurance carriers and is provided only to covered individuals. It may also be required for large employers offering self-funded coverage to non-employees. Any individual who is not actively employed but is covered through an employer-sponsored health plan or an individual coverage Health Reimbursement Arrangement (HRA) is considered a non-employee. For example, this may include former employees who terminated employment during a previous year, non-employee directors, retirees, and board members, etc. If a non-employee is offered and enrolls in employer-sponsored self-insured coverage, the coverage sponsor (in this case the former employer) can report this information on form 1095-B.
Form 1095-C This form is filed by ALEs that offer fully insured or self-funded coverage under the ACA. It’s important to note all full-time employees must be provided with a 1095-C tax form, even if they do not enroll in offered coverage, and all employees who enroll in self-insured coverage must be provided with a 1095-C tax form, even if they are not full time. Forms 1094 and 1095 must be filed together as the IRS uses both to determine whether an employer is possibly subject to a penalty under the employer shared responsibility provisions.
The IRS deadlines are different for paper filing and electronic filing. For the 2022 tax year, employers able to file on paper must do so no later than February 28, 2023. For ALEs filing electronically, the deadline is March 31, 2023. Forms 1095-C must also be furnished to recipients no later than March 2, 2023.
ALEs who fail to comply with IRS information reporting requirements can be subject to steep penalties. The 2023 penalty for failing to file an information return is $290 per return, with a calendar year cap of $3,532,500 (based on an employer’s gross receipts). This penalty is doubled where the IRS determined blatant disregard from the employer.
ACA employer reporting requirements grow in complexity and can change each year. Rely on the subject matter expertise of Equifax Workforce Solutions and our Affordable Care Act Management solutions.
Contact us any time with questions about getting help to better manage your Forms 1094 and 1095 and check out our guide, ACA Penalties and What They Mean for Your Company. Failure to meet ACA guidelines or properly complete your IRS forms could expose your company to penalties that increase the longer you remain outside of ACA guidelines.
The information provided is intended as general guidance and is not intended to convey any tax, benefits, or legal advice. For information pertaining to your company and its specific facts and needs, please consult your own tax advisor or legal counsel. Equifax Workforce Solutions provides services that can help employers reduce their compliance risks. Details on our provision of these services and related support will be contained in your services agreement. Links to sources may be to third party sites. We have no control over and assume no responsibility for the content, privacy policies or practices of any third party sites or services.