As a mid-sized business owner, you likely have much on your plate. But if your company has 50 or more full-time employees, there's one thing you can't afford to ignore: 1095 filing requirements.
This guide will help you understand these requirements to comply with the Affordable Care Act (ACA). By the end of this read, our goal is to help you better understand all the 1095 filing requirements you need to stay compliant.
Understanding ACA Reporting for ALEs
The Affordable Care Act (ACA) changed many things for business owners, including the implementation of the Employer Shared Responsibility provision. You may also know it as the employer mandate.
This provision mandates that applicable large employers (ALEs) offer minimum essential coverage (MEC) to their full-time employees, including full-time equivalents. These requirements ensure that more Americans have access to affordable health insurance.
An ALE, under the ACA, is any business that had at least 50 full-time or full-time equivalent employees during the previous calendar year. The number of full-time employees you have determines whether you need to file and comply with these rules.
These full-time equivalents (FTEs) account for employees who may not work a standard 40-hour workweek but still reach a specific hourly threshold across a month or year.
The calculation of FTEs can get complicated, especially for businesses with fluctuating staffing levels. It involves totaling the hours worked by all part-time employees in a month, dividing that number by 120, and then adding that result to your total full-time employee count.
Understanding these definitions and categorizing your employees correctly as either full-time or part-time is crucial to determining if you even need to worry about these reporting requirements. You can find details on these calculations and requirements on the HHS website.
Decoding the Forms: 1094-C and 1095-C
When it comes to ACA reporting for ALEs, there are two forms you need to know: 1094-C and 1095-C. The 1094-C is a transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns. The 1095-C breaks down the Employer-Provided Health Insurance Offer and Coverage details for individual employees.
What is Form 1095-C?
Form 1095-C acts like a report card for every full-time employee you have. Whether or not they enrolled in the health plan you offered, you'll still need to send this form to them by January 31 of the following year.
The IRS may change this deadline, as they recently proposed a rule change that would automatically extend it by 30 days. You can read more on that proposed rule change on SHRM (Society for Human Resource Management).
On Form 1095-C, you will report information about the employee and their coverage options. These details help the employee file their tax return and allow them to claim any applicable Premium Tax Credit.
Here is a table outlining some of the information included in Form 1095-C:
| Information Reported | Description |
|---|---|
| Employee details | Name, address, SSN |
| Months considered full-time | Shows which months the employee was eligible for coverage due to their full-time status |
| Type of health insurance offered | Outlines the specific health insurance plan that was offered to the employee |
| Cost of the lowest-priced coverage offered | The employee needs this to calculate if they are eligible for a tax credit. |
Specific codes are entered into the 1095-C Form based on whether the employee was eligible for coverage, was enrolled in coverage, or declined coverage. Think of those codes as the language used by the IRS to process your employee's individual income tax return. The official Form 1095-C on the IRS website outlines which codes apply in what scenarios.
What is Form 1094-C?
Once you have completed all the Form 1095-C's for your employees, think about Form 1094-C. It acts as a cover sheet for all the individual employee forms when you send them to the IRS. The form summarizes the data on all the Form 1095-Cs, which helps paint a picture of your company's healthcare offerings.
You will need to report some key details on the 1094-C, like your Employer Identification Number (EIN) and the total number of 1095-C’s included. You also must indicate whether or not your company is part of an Aggregated ALE Group and provide the name and phone number of the person the IRS can contact if they have questions. More details about Form 1094-C are available on the IRS website.
Determining if Your Business is an ALE
Determining if you are an ALE might seem tricky at first, but once you know how it works you will be fine. It comes down to understanding how many full-time employees, including full-time equivalent employees, you had on average during the previous calendar year.
Reviewing the guidelines set out by the Affordable Care Act (ACA) is key to making sure you're not accidentally overlooking any important information.
For example, one guideline worth noting is that the IRS defines a full-time employee as someone working at least 30 hours a week. Another is that any employee working more than 130 hours in a calendar month is considered full-time for that month.
Carefully review those specific methods laid out by the ACA to help determine the average number of full-time and full-time equivalent employees your company employed during the previous calendar year.
Remember to use last year's employee data to make this calculation because that is the correct data for figuring out this year's 1095 filing requirements.
Filing Deadlines and Methods
Understanding what to file is one thing. Getting your forms filed properly by the deadline is something entirely different. Forms 1094-C and 1095-C typically need to be filed by February 28th of the year following the calendar year they are for.
But if you are filing electronically, the deadline extends to March 31. So in 2024, if you are sending your Forms 1094-C and 1095-C electronically, you have until April 1, 2024, to file them with the IRS.
You have two main options when it comes to filing methods: paper or electronic filing. The IRS wants employers with more than 10 returns to file electronically, especially for 2024.
What Happens if You Fail to Comply?
There are pretty steep penalties if you don't follow these 1095 filing requirements. These penalties can vary depending on several factors.
Some of those factors include how late you filed, how many forms were missing, and if you intentionally failed to comply. You can read more about this on IRS Notice 2020-76.
Getting Help with ACA Reporting
Figuring all of this out can feel overwhelming at times. Many businesses get help to ensure they are doing it right. Tax professionals or HR consultants who specialize in ACA reporting can provide a huge amount of guidance.
Other ACA Reporting Forms You Should Know
The Affordable Care Act (ACA) includes several different forms related to insurance. The forms you will see depend on different scenarios and whether you're an individual or a business owner. Here is some more information about some of those other forms related to the ACA.
Form 1095-A: For Individuals Who Got Coverage Through the Health Insurance Marketplace
This form provides detailed information to individuals who enrolled in health insurance coverage through a health insurance marketplace established under the ACA. You need this form to file your income taxes and claim any applicable premium tax credits on your tax return.
Form 1095-B: For Minimum Essential Coverage (MEC) Provided by Small Employers
Form 1095-B is specifically used to report information regarding coverage provided by entities that are not applicable to large employers (ALEs). For example, a small employer sponsoring self-insured health plans for their covered individuals would provide Form 1095-B to applicable employees. For more information on this, you can read more about Form 1095-B on the IRS website.
FAQs About 1095 Filing Requirements
What is the 1095-A Filing Requirement?
The 1095-A is not a filing requirement. Instead, it's a form that individuals receive if they obtained health insurance coverage through the Marketplace (also known as an exchange) during the relevant tax year. This form helps individuals properly fill out their tax return and reconcile any Advance Premium Tax Credit they received during the year.
Does 1095 Need To Be Filed?
It depends on which form. An individual doesn't file 1095-A, 1095-B, or 1095-C with the IRS - but employers do. As a business owner, whether you need to file these forms will depend on whether you are classified as an ALE or a small employer sponsoring self-insured health plans.
Large employers subject to employer-shared responsibility must file Form 1094-C and 1095-C with the IRS and send Form 1095-C to their employees. Smaller employers sponsoring self-insured health plans must file Form 1094-B and 1095-B with the IRS and provide 1095-B to covered individuals.
Who is Required to Complete 1095?
Both large employers (ALEs) who are subject to employer-shared responsibility and small employers offering self-insured health plans need to complete a 1095 form. ALEs complete Form 1095-C and provide it to all their full-time employees and file a copy with the IRS. Smaller employers, meanwhile, who are sponsoring self-insured health plans must provide their covered employees with Form 1095-B and file those with the IRS as well.
Do all Employers Have to Send Out 1095 Forms?
No, not all employers are required to send out these forms. The only ones who do are:
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Applicable Large Employers (ALEs) which are companies with 50 or more full-time employees (including FTEs) for the prior calendar year.
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Small employers sponsoring self-insured health plans for their covered individuals.
Stay Compliant With 1095EZ
The Affordable Care Act added another layer to healthcare coverage in the US, impacting businesses nationwide. While understanding the nuances of 1095 filing requirements can take time, getting familiar with the details will give you peace of mind when it’s time to file.
Failure to adhere to these rules can lead to steep penalties, so it's important to understand them. You can ensure you meet your 1095 filing requirements by making sure your internal processes and definitions are up-to-date, understanding how ALE classification is calculated, accurately completing your Forms 1094-C and 1095-C, and staying on top of deadlines.
Ensure your business stays compliant with ACA regulations and avoids penalties. Simplify your 1095 filing process with expert guidance tailored to your needs. Let us handle the paperwork while you focus on running your business. Contact us today and get peace of mind knowing your 1095 forms are filed accurately and on time. Stay ahead of deadlines and ensure compliance effortlessly—just answer a few questions, and we’ll take care of the rest!