Employer Guide to Form 1094-C and 1095-C Reporting Requirements under the Affordable Care Act (ACA)

FAQ GuideIn January of 2016, one of the major reporting and compliance provisions of the ACA, the Affordable Care Act or Obamacare, will take effect. Some employers will have to provide the IRS and their employees with forms 1095-C, often referred to as a “Health Care W-2,” and form 1094-C, the company summary form. This article will provide a Frequently Asked Question (FAQ) guide to these forms and many of the common terms needed to understand and work with these forms.

What companies have to provide the 1094-C and 1095-C Forms?

Companies that have over 50 (Full Time employees plus Full Time Equivalent (FTE’s) employees) in the calendar year must provide these forms. These companies are called Applicable Large Employers (ALE’s.) Full time employees are employees that work 130 or more hours in a month. FTE’s are calculated by adding up the hours in a month worked by the remaining workers (up to a maximum number of 120 hours per employee) and dividing by 120. A simple example would be 3 employees that work 80 hours each in a month would equal 2 FTE’s or (80+80+80)/120= 2. A company adds its full time employees to its FTE’s each month to determine whether it is an ALE. Checkright’s new ACA Monitor software module will complete these calculations.

What information is reported on these forms?

IRS Form 1095-C

IRS Form 1095-C (Click to Enlarge)

Each 1095-C form includes the company name, EIN, address, and phone number as well as the employee name, address, and social. The form then has a month by month section where a code letter is placed. In simplest terms, the code corresponds to whether the employee elected to have health insurance, did not qualify for health insurance, or declined health insurance. There are actually quite a few other codes, but the presence of health insurance, and, if not, why not, are what the codes represent. The form also asks for the employee deduction amount of the least expensive insurance available to the employee. The forms also contain areas where companies report other information about their employees and their health insurance plans. An example of the 1095-C form is shown in the image to the right. Checkright’s ACA Monitor, once set-up, will populate all lines of these forms with all the applicable data and codes.

Who will complete these forms? 

Checkright will work with our ALE customers to prepare these forms on our new ACA Monitor that is built into our payroll software. Our software already contains all of the employee census, hour, wage, and deduction information, all of which will be used to prepare the 1095-C forms. There is some additional information that will be needed. Checkright will send an ACA Questionnaire to collect all the necessary data.

Why do we need a new payroll software module to complete these forms? 

Most of the data necessary to complete these new forms is contained in the payroll and employee records in our software. But, the arrangement and presentation of the data for these forms is entirely new. Our payroll software has been tracking employee hours worked. The new module will group the employees by month into Full Time and Part Time status, calculate Full Time Equivalents, and even alert our clients when employees are misclassified. Similarly, our payroll records contain health insurance deduction information, but now the new platform will recognize that the deduction signifies that the employee has accepted health insurance coverage and provide the correct code for that month for the 1095-C form. The ACA Monitor will not only produce the required forms, but it will also be the company administrator’s ongoing tool for making sure employees are classified correctly and eligible or ineligible for benefits, all on one dashboard.

When are the forms due? 

Eligible employers must distribute these forms to their employees by January 31st. Checkright will supply the completed forms during the third and fourth week of January for your employees and will submit the agency copies to the IRS. These forms will now be required each year at this time.

Employee-counts (2)What if the same owner(s) have more than one company with employees? 

The IRS defines a group of companies (2 or more) as a controlled group if the same people or company owns or controls all companies in the group, even if the companies have different Employee Identification Numbers and different locations. In the case of a controlled group with a grand total of over 50 Full Time plus FTE employees, the reporting is required for all employees of the controlled group, even if the employee counts of some members of the group are under 50.

What if a company does not provide these forms? 

Under the Affordable Care Act, the penalty for not providing these forms is $250 per form (per employee) for the 1095-C forms. There are additional penalties that would be assessed at the company level. These are different penalties than the penalties that exist for an ALE that does not offer health insurance to its employees.

What other information will be needed to complete these forms? 

Each company will need to consult with its health insurance broker in order to provide the company Measurement Period, Initial Assessment Period, Stability Period, and Administrative Period. Each company will also have to know whether any of its health insurance plans is considered Self-Insured. The company will need to provide the employee payroll deduction amount per month for the lowest cost, compliant, single-only health insurance plan the company offers. Finally, each company will need to have the dates of all employees who declined health insurance in 2015 (use January 1st for employees that declined health insurance in a past year.)

What is the company Measurement Period?

The Measurement Period refers to the time, a number of months, during which the company counts its employees’ hours in order to determine the full time status and health insurance eligibility for each employee. The company is measuring the amount of hours worked. Common measurement periods are 12 months or 6 months. An example would be an employee works for a company with a 6 month Measurement Period and works 850 hours in that time. Since the hours worked are more than 130 (minimum) x 6 = 780, the employee is considered full time and must be offered benefits. Checkright’s ACA Monitor automatically applies the Measurement Period to each employee in the company to determine eligibility.

What is the Initial Assessment Period? 

Calendar

The Initial Assessment Period is the amount of time between hire date and eligibility for benefits for an employee. By far the most common Initial Assessment Period is the second first day of a month following hire date. An example of that would be an employee that was hired October 7th would be eligible for benefits December 1st. That time period between October 7th and December 1st is the Initial Assessment Period. Checkright’s ACA Monitor will use the hire date to alert our customers as to when their employee’s Initial Assessment Period is over and the employee is eligible for benefits.

What is a company’s Stability Period? 

The Stability Period is the period of time after the Measurement Period in which an employee’s eligibility for benefits can’t be changed. The Stability Period can’t be shorter than the Measurement Period and must be at least 6 months. What that means is that if a company measured an employee’s hours worked for 6 months and determined that the employee worked enough hours to be eligible for benefits, that classification can’t change during the Stability Period, even if the employee begins to work fewer hours.

What is the Administrative Period? 

The Administrative Period is the short period of time after the Measurement Period in which companies have some time to contact and enroll newly eligible employees for health benefits. Not every company will utilize an Administrative Period, but if the company does, the company will not be fined for failing to offer benefits during that time.

What do you mean by the question, is our company health plan considered Self-Insured and what does that matter for these forms?

From HealthCare.gov, a Self-Insured plan is a “Type of plan usually present in larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims.” The reason this information is necessary is that if a Self-Insured Plan is present, all spouse and dependents covered by the plan must be listed on the 1095-C form for that employee, and a different form code is used. Checkright will need to know about the presence of a Self-Insured plan so we can set up the ACA Monitor correctly to allow for the input of spouse and dependent information.

Why does my company need to provide the employee deduction amount for our lowest cost single health plan? 

One of the items that must be reported on the 1095-C forms is whether the lowest cost, single plan meets the ACA definition of affordable. Checkright’s ACA platform will use the gross wage data for each employee to determine whether the company plan meets the minimum affordability level and then place that data on the 1095-C.

Legal Disclaimer: The information presented in this article is meant to be interpreted in a general manner and should not provide specific instruction on Forms 1094-C, 1095-C, or complying with any of the specific regulations of the ACA. All readers should seek specific legal and tax advice from their attorney or CPA. The subject matter in this article is periodically revised by the IRS and this article may not be revised in the future. Neither Checkright nor the author warrant the accuracy of this text, but instead, present it as a means for the reader to begin to familiarize himself with the 1094-C, 1095-C forms and other ACA regulatory provisions.