You may have heard the recent announcement that the IRS extended the deadline for 2018 for employers to distribute Form 1095-C, or the Employer-Provided Health Insurance Offer and Coverage Form, from January 31st to March 4th, 2019. This dictum reinforces the message that the IRS continues to mandate ACA reporting requirements for those employers who are ALEs, or applicable large employers with 50 or more full-time or part-time equivalent employees in their workforces.
Review of Affordable Care Act (ACA) Coverage and Reporting
The purpose of the forms is to demonstrate to the IRS that your company is complying with the ACA’s employer shared-responsibility mandate. Form 1095-C reports whether your company offered eligible employees affordable health coverage for that tax year as dictated by the Affordable Care Act by providing minimum essential job-based coverage, including individual market policies, Medicare, Medicaid, CHIP and TRICARE, that also meet the minimum value threshold of paying at least 60% of covered benefits. As John Duval, President and CEO of Fuse Workforce Management, a compliance software firm based in Florida, points out, “Form 1095-C helps employees complete their individual tax returns by providing important information regarding their health coverage for the previous calendar year.”
While most small employers that don’t meet the 50-employee threshold are exempt from the ACA reporting requirements, there are some exceptions, such as self-insured small employers who are expected to file Form 1095-B along with the applicable transmittal form, and those who are members of a controlled or affiliated service group, who are required to file Form 1095-C along with the applicable transmittal form, while also providing full-time employees with a copy of 1095-B for their own tax filing.
In addition, the IRS recently released Form 8941, or the Credit for Small Employer Health Insurance Premiums, for 2018, which offers a maximum credit of 50 percent of premiums paid for small businesses and 35 percent for small nonprofit organizations and is offered for two consecutive taxable years. However, this credit is limited to employers with less than 25 full-time equivalent employees that pay average wages of approximately $50,000 per year or less, and also subsidize at least half of their employees’ health insurance premiums for Small Business Health Options Program (SHOP) coverage. If SHOP coverage is not available in your area but you still meet the less than 25-employee threshold, the IRS has posted some guidance on its website to consult.
Preparing for the Deadline
While there are no substantial changes to the IRS forms from 2017, it is still advised that employers remain on top of their employee data for 2017 now as the calendar year winds down. This will ensure that your company (if subject) will not incur any penalties or assessment letters doled out by the IRS called Letters 226J. As Kim Buckey, vice president of client services at DirectPath, a benefits education, enrollment and health care transparency firm based in North Carolina, advises, “The focus for most employers should continue to be on accurate, timely gathering of the required data for reporting. Employers can save themselves time, money and effort by carefully reviewing the data before year-end to ensure that full-time employees are correctly identified, and that the company is designing its programs to offer affordable coverage to all full-time employees.”
A good plan to follow if you are an ALE as recommended by the IRS is:
- Identify full-time employees per the ACA’s definition (those who average 30 hours of work per week in one month) while also considering special classifications such as staffing employees, independent contractors, temporary or short-term employees, and even unpaid interns.
- Decide if the monthly measurement method or look-back measurement method is best in order to determine full-time status of employees.
- Update plan documents and summary plan descriptions for the determined measurement method.
- Determine the appropriate safe harbor rule that the company will use for the affordability calculation—either W-2, rate of pay, or federal poverty line.
- Check your eligibility for electronic filing status for the IRS, which is April 1st, or file by paper forms by February 28th.
Lastly, if you are unclear or wondering if the ACA requirements apply to your company, there is a Q&A page on the IRS website that provides more comprehensive information on 1095 and other filing requirements. You can also review or download more specific filing instructions there.