Most employers subject to the Affordable Care Act’s employer mandate have focused on identifying full-time employees and ensuring they receive offers of adequate coverage. But the vast majority of employers are not prepared to meet — and some remain simply unaware of — the employer mandate’s complex reporting obligations.
Whether your company has already reached the summit or just started climbing the mountain, here’s what you need to know:
To enforce the employer mandate, the IRS requires information for each of an employer’s full-time employees regarding coverage (if any) offered to the employee, price of coverage, whether the employee was enrolled and other data. The IRS also wants to know which employees, full-time or not, had coverage under an employer-based health plan.
Meeting these requirements is no easy task.
Employers need to collect and collate a tremendous volume of information from payroll and benefit administration systems, and report it — to both employees and the IRS — on up to four separate forms.
And time is running out; the first reporting deadlines arrive in early 2016.
Every employer subject to the employer mandate must issue a separate IRS Form 1095-C to each employee (with a copy to the IRS) who was 1) full-time for at least a month in 2015 or 2) covered by a self-insured plan of the employer for at least a day in 2015, even if the employee was not full-time. Generally, an employee is considered full-time if he or she works an average of at least 30 hours per week.
Part I of the Form 1095-C identifies the employee and his or her employer. For employees who were full-time for at least a month in 2015, the employer also completes Part II of the form.
Part II is complex. It includes three lines, each reflecting a separate box for each month of the calendar year. On one line, the employer will use one or more of nine new codes to reflect, for each month, the nature of the coverage offer (if any) made to the full-time employee. On another line, the employer will report the cost of the least expensive coverage offered to the employee, as long as it met minimum actuarial value and affordability requirements.
On the third line, the employer will again choose between one or more of nine different new codes to report, by month, whether the employee was covered under an employer plan, whether the employer qualified for an exception from the employer mandate and whether the employer is relying on one (or more) of three safe harbors in assessing the affordability of its coverage.
If the employer self-insures health care coverage, it must complete Parts I and III of Form 1095-C for any employee — whether full-time or part-time — who had coverage for at least a day in 2015. Part III must also reflect the employee’s covered dependents, listed by name and Social Security Number. The employee uses this portion of the form to demonstrate, on his or her federal tax return, satisfaction of the health reform law’s individual mandate.
But wait — there’s more. If the employer provided self-insured coverage to non-employees (outside directors, partners, retirees, COBRA beneficiaries, etc.), the employer may issue these individuals a Form 1095-C, completing Parts I and III, or a Form 1095-B. In both cases the forms should reflect the months in 2015 during which the individual and any dependents had coverage for at least a day.
Finally, the forms have been completed; now the employer is responsible for sending copies of all these forms to the IRS with a specific transmittal form.
Form 1094-C accompanies the employer’s many Forms 1095-C. Form 1094-C also requires the employer to demonstrate compliance with the employer mandate on an aggregate basis. If the employer prepares any Forms 1095-B, it transmits those to the IRS along with a Form 1094-B transmittal.
Complying with the ACA’s reporting obligation won’t be easy, and implementing the necessary processes can’t happen overnight. The relatively few employers who are ahead of the curve can take satisfaction in that, those who are on the curve must keep working, and those behind the curve should take immediate steps to begin the compliance effort.