2015 ACA IRS Filing Requirements

Kimberly Flett, CPA, QPA, QKA

The Affordable Care Act (ACA) requires most taxpayers to have health insurance or pay a penalty with some exceptions such as income levels and minimal breaks in coverage. Known as minimal essential coverage (MEC), these plans provide the necessary requirements under the ACA and can be obtained by plans purchased on the Health Insurance Marketplace, Medicare, Medicaid, CHIP, veteran plans and most employer-provided coverage. 

The IRS relied on good faith when individual taxpayers verified they had MEC on the 2014 Form 1040. Beginning in 2015 in order to determine proof of coverage as well as satisfy the employer mandate,  employers with more than 50 full-time equivalent employees, applicable large employers (ALEs) must submit reports to the IRS that summarize details about the health care benefits they provide to employees. The information will demonstrate to the IRS not only whether an individual taxpayer has met the shared responsibility payment as part of the individual mandate, but also if the employer has met the requirements under the employer mandate.

These forms — known as 1095-B or 1095-C, depending on the size of the employer and type of coverage offered — need to be distributed to employees by March 31, 2016 (note that an extension was granted under IRS Notice 2016-4 as this due date was previously Feb. 1, 2016). ALEs must distribute Form 1095-C to employees regardless of whether they offer fully insured or self-funded insurance plans. Form 1095-B is issued to employees by the health insurance carrier regardless of the number of employees or employer for self-funded plans with less than 50 employees. The IRS will use the forms to determine not only whether the individual has coverage, but also if the employer has met the specific employer mandate requirements under the ACA. Complicated with special coding, it is important that employers provide accurate information in order to avoid an incorrect penalty assessment by the IRS.

Form 1094-B and Form 1094-C are the transmittal forms that employers need to submit to the IRS by May 31, 2016, or June 30 if the electronic filing requirement is met.  Additionally, Form 1095-A is issued by the government to taxpayers who purchased health care on the exchange.

The reporting requirements under the ACA are similar for non-profit employers with no distinction. Full-time employees (defined under the ACA as those who worked 30 hours or more weekly), must be reported on the 1095-B or 1095-C series forms whether or not insurance is offered or chosen by the employee. Variable-hour employees determined to be full-time during a measurement period and part-time employees with coverage must also be reported. It can be particularly complicated when there are a number of employees who fluctuate between full- and part-time working hours and are not covered by insurance, which can be typical in a not-for-profit-employer. Missing an offer of coverage for an employee who should otherwise be covered can trigger a penalty for employers under the ACA.

Coverage information such as dependents, type of coverage and costs are listed by month for these reports. This can get complicated in situations in which employees are hired mid-year, terminate or have a qualified change in status such as marriage or divorce.

It is essential to consult with a tax advisor or a legal and benefits expert to determine compliance with the ACA reporting requirements. Ultimately, it is the responsibility of the plan sponsor to ensure the insurance carrier is providing the necessary forms as well as fulfilling the employer filing requirements as well. If employers have not prepared for the 2015 filing year, action must be taken now.