Tax Insights

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New Affordable Care Act Reporting Requirement

Under the Affordable Care Act, applicable large employers –those with 50 or more full-time employees, including full-time equivalent employees – are required to take some new actions. These employers must file information returns with the IRS and also provide statements to full-time employees about health coverage the employer offered or to show the employer didn’t offer coverage. Small employers may also have a filing requirement if they are self-insured or part of a controlled or affiliated service group.

Information reporting was voluntary for calendar year 2014. All applicable large employers are required to report health coverage information for the first time in early 2016 for calendar year 2015.

This new reporting requirement is similar to W-2 reporting. Each applicable employee will be issued a Form 1095 (Health Coverage) and these returns will be filed with the IRS using a single Form 1094 (Transmittal of Health Coverage Information Returns).

Here are a few quick facts on who this applies to and how it works:
1. If Form 1095 is required, it must be given to employees by January 31, 2016 for 2015. Form 1094 along with the 1095s must be filed with the IRS by February 28th (paper file) or March 31st (e-file).

2. Form 1095-B/1094-B is used by small employers.

3. Form 1095-C/1094-C is used by large employers.

4. For Small Employers
a. If they have no health insurance, then there is nothing to file.
b. If they have group health insurance, then the insurance company files forms 1095-B & 1094-B for the employer.
c. If they are self-insured, then the employer files forms 1095-B & 1094-B.

5. For Large Employers
a. If they have no health insurance, then they file form 1095-C and 1094-C.
b. If they have group health insurance, then the insurance company files forms 1095-B & 1094-B and the employer files form 1095-C and 1094-C.
c. If they are self-insured, then the employer files forms 1095-C & 1094-C.

6. Small employers who are part of a larger group will generally follow the large employer reporting requirements.

7. The IRS will use this information to determine whether employees have insurance and if the employer is liable for a “shared responsibility penalty”.

Now is the time to review employee counts and ownership structure to check if you fall under the small or large reporting requirements. Discuss your reporting requirements with your health insurance provider and benefits administrator. Also discuss the requirement with your payroll vendor. Many/most payroll vendors are working on software enhancements to accommodate this new requirement.

By Scott W. Clouse, CPA