ACA Employer Reporting Compliance — Part 1
Monday August 10th, 2015
The employer reporting requirements of the Affordable Care Act (ACA) continue to challenge and confuse many of those who must comply. The law empowers the IRS to verify and enforce that large employers have offered their employees affordable health insurance plans with at least minimal essential coverage. To make sure that occurs, the ACA requires several new tax reporting obligations regarding employers, insurers and individuals. Employers with more than 50 full-time equivalent (FTE) employees are referred to in the law as Applicable Large Employers (ALEs).
The IRC and forms
The parts of the Internal Revenue Code (IRC) that describe reporting requirements are Section 6055 (Reporting by Health Coverage Providers), and Section 6056 (Reporting of Offers of Health Insurance Coverage by Employers). Required forms include an information return (1095-B or 1095-C) prepared for each employee and a transmittal form (1094-B or 1094-C) filed with the IRS.
Form 1095-B (Health Coverage) and Form 1094-B (Transmittal of Health Coverage Information Returns) are generally provided by the insurance companies for individuals covered through employer-sponsored group health insurance plans. Small employers with self-insured health plans also use Form 1095-B and Form 1094-B to report such basic information as name, address and Social Security number or date of birth of employees and family members who are covered under the self-insured plan.
As with W-2s, Form 1095 (or a substitute statement) for calendar year 2015 must be provided to employees by January 31, 2016. Since January 31 falls on a Sunday in 2016, the deadline will actually be Monday, February 1. The deadlines for filing the 1094 transmittal forms for 2015 with the IRS are February 29, 2016, (leap year) for paper filing or March 31, 2016, if filing electronically. Electronic filing is required for employers filing 250 returns or more.
Self-insured: who reports?
When ALEs opt to self-insure, the ACA requires them to satisfy reporting requirements on a larger scale than employers who are not self-insured. This can present a significant challenge, since the self-insured employer must now report as both an employer and an insurer, effectively doubling the reporting requirement. The company’s employees will be dependent on the employer's reporting for purposes of their own tax filings.
Self-insured employers pay employees’ claims, but typically hire an insurance company to manage such tasks as reviewing, evaluating and processing the claims. Because ALEs often rely on the insurance companies to perform the administrative tasks, many self-insured employers and insurance companies have expressed confusion as to who should be responsible for satisfying the ACA’s reporting requirements.
A recent study revealed that many insurance companies were unsure about whether they would be responsible for reporting for their client ALEs or not. If not properly handled, employees could lack the paperwork necessary to complete their taxes, resulting in late penalties and fines for the employer and its employees. As a matter of law, the ACA places the burden for such reporting directly on the employers.
How to report
Small, self-insured employers must file Forms 1094-B and 1095-B. Self-insured ALEs report under two separate IRC sections, but on one set of forms. They’ll distribute form 1095-C to their employees and provide the 1094-C transmittal to the IRS.
Both the form and the transmittal require such specific information as:
- The employee’s insurance coverage (and dependents, if applicable)
- Employer identification numbers (EINs)
- Tax identification numbers (TINs) or social security numbers (SSNs)
- Each covered employee’s full-time status
- How long each has been a full-time employee
- Insurance coverage dates
- The employee’s share of coverage premium costs
Failure to comply with the necessary reporting requirements may result in penalties for the employer. As this process evolves, the IRS may require additional information.
Since self-insured employers must report both as an insurer and as an employer, they need to work in close coordination with their insurance company contacts to complete the 6055 and 6056 coverage reporting. Though the insurance company acts in a strictly administrative capacity, it will likely have much of the necessary information to complete the forms and IRS transmittal.
For customers using iSolved Human Capital Management, Infinisource offers two levels of ACA reporting services. iSolved ACA Reporting provides a print and file solution where Infinisource produces and files forms on the customer’s behalf, requiring some data entry by the customer. iSolved ACA Pro provides a print and file solution with additional management that will automatically and fully populate the required forms.
Part 2 will cover more about reporting requirements, forms and electronic filing.