A skimming of recent headlines suggests that the ACA is not only doing what it was intended to do—increase access to quality health care—but has surpassed expectations. Studies show that the ACA is significantly reducing the number of uninsured people across the country.
Under the Affordable Care Act (ACA), the Applicable Large Employers (ALEs) with at least 50 full-time equivalent employees in the previous calendar year must meet the ACA reporting requirements every year. The IRS forms used to report this information are 1095-B and 1095-C, along with transmittal forms 1094-B and 1094-C.
Here’s a guide for employers to the ACA Forms for the tax year 2023
Under the ACA, certain large employers and smaller, self-insured employers must report health insurance coverage information to the IRS and provide annual statements to employees. This report, mandated by Sections 6055 and 6056 of the Internal Revenue Code, summarizes coverage offered and ensures compliance with ACA specifications.
Section 6055 applies to health insurance carriers, small employers with self-funded plans, and other entities offering essential coverage.
Section 6056 targets Applicable Large Employers (ALEs) with 50 or more full-time employees, requiring them to share coverage details with employees for premium tax credit eligibility.
These reporting requirements, along with related 1095 forms, help enforce Employer Shared Responsibility provisions, penalizing employers for failing to offer affordable, adequate coverage to full-time employees and dependents.
The ACA information returns include:
- Form 1094-B, Transmittal of Health Coverage Information Returns
- Form 1095-B, Health Coverage
- Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
- Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
Applicable Large Employers (ALEs)
Applicable large employers (ALEs) are primarily impacted by ACA reporting requirements if they have 50 or more full-time or full-time equivalent employees. An ALE can be a single entity or a group of related entities, such as parent and subsidiary companies. If the combined number of full-time and full-time equivalent employees in the group meets the ALE threshold, each employer within the group becomes an ALE member subject to the Employer Shared Responsibility provision.
It’s crucial to understand the distinction between full-time employees, who average at least 30 hours of service per week, and full-time equivalent employees, which are a combination of part-time employees whose hours together equal a full-time employee.
- Full-time employee: Averages at least 30 hours of service per week during the calendar month (or 130 hours in a calendar month).
- Full-time equivalent employee: Combination of employees, each of whom is not treated as a full-time employee, but that, together, count as a full-time employee.
Smaller and Self-insured Employers
Smaller businesses, defined by the ACA as having fewer than 50 full-time employees, have significantly reduced reporting obligations. Self-insured businesses are required to complete the 1095-B (and 1094-B transmittal form) to report employee and family member information covered under the plan. Small businesses that are not self-insured are exempt from filing any forms.
Understanding Minimum Essential Coverage (MEC)
Minimum Essential Coverage (MEC) refers to the type of health insurance coverage that satisfies the individual mandate provision of the Affordable Care Act (ACA). It includes various types of health coverage deemed adequate by the ACA, such as employer-sponsored plans, government-sponsored programs like Medicare and Medicaid, certain individual market plans, and other recognized health benefits. Individuals who have MEC are considered compliant with the ACA’s requirement to maintain health insurance coverage.
What is IRS Form 1094?
Form 1094 acts as a cover sheet for all Forms 1095. It summarizes total form counts for a single Federal Employer Identification Number (FEIN) and confirms if the employer offered coverage to at least 95% of eligible employees. This form only needs to be submitted to the IRS.
Form 1094-C: Form 1094-C is a document used for reporting employer-provided health insurance coverage information to the IRS under the Affordable Care Act (ACA). It provides an overview of the employer’s coverage offerings and is submitted along with Form 1095-C.
What is IRS Form 1095?
Form 1095 provides essential information about offers of health coverage, detailing to whom coverage is offered, the months it is offered, affordability considerations, and whether the employee enrolled or waived coverage. It also indicates reasons for not offering coverage in certain months. This form must be sent to employees and the IRS. There are various versions of Form 1095, such as 1095-A, 1095-B, and 1095-C, each determining the filing obligations based on the type of insurance offered.
1095-A: This form is completed when insurance is obtained from the Health Insurance Marketplace, also known as the exchange. Reporting enrollment from the exchange is not the employer’s responsibility; instead, the exchange will generate and distribute these forms to enrollees.
1095-B: This form is utilized by third-party administrators or insurance carriers and is exclusively provided to covered individuals. It may also be necessary for large employers to offer self-funded coverage to non-employees.
Anyone not actively employed but covered through an employer-sponsored health plan or an individual coverage Health Reimbursement Arrangement (HRA) is considered a non-employee. Examples include former employees who terminated employment during a previous year, non-employee directors, retirees, and board members. If a non-employee is offered and enrolls in employer-sponsored self-insured coverage, the coverage sponsor (such as the former employer) can report this information on Form 1095-B.
1095-C: The Affordable Care Act mandates that employers with a minimum of 50 full-time workers provide health insurance to their employees. Each year, these employers must send a statement, known as Form 1095-C, to all eligible employees. This statement outlines:
- Details of coverage offered to the employee
- Lowest-cost premium available to the employee
- Months of the year when the coverage was available All eligible employees, regardless of their participation in the employer’s health plan, should receive a Form 1095-C.
To learn more about the ACA Form Deadline, other important dates, visit: ACA Form 1095-B/C Reporting Deadline, Penalties, and Extension for 2024
e-File Form 1095 with Tax1099
File ACA Form 1095-B/C and Form 1094 with Tax1099 in 3 simple steps:
- Create Your Tax1099 Account:
Sign up or login on Tax1099 and select the form you want to file.
- Enter Information:
Access the ACA Forms section, then enter all the details, including employee and coverage details.
- Submit Form to IRS:
Review the entered information for accuracy, then submit the forms electronically to the IRS.
