Forms 1094 c and 1095 c

Form 1094-C

Definition

Form 1094-C, also known as the Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, is a summary form that Applicable Large Employers (ALEs) file with the IRS. It transmits the Forms 1095-C submitted for each employee and provides aggregate data on the employer’s health coverage offerings.

Purpose

This form acts as a cover sheet for the individual 1095-C forms. It summarizes the employer’s overall compliance with the Affordable Care Act’s (ACA) employer mandate to offer minimum essential coverage to full-time employees. The IRS uses Form 1094-C to verify the accuracy and completeness of the information provided by employers.

Filing Deadline

Employers must file Form 1094-C with the IRS by February 28 if filing on paper or by March 31 if filing electronically for the preceding calendar year.

Form 1095-C

Definition

Form 1095-C, titled Employer-Provided Health Insurance Offer and Coverage, is an individual form provided to each full-time employee by an ALE. It details the health insurance coverage offered to the employee (and their dependents) during the calendar year.

Purpose

This form informs the IRS and the employee about the health insurance coverage status. It is essential for determining whether the employee qualifies for the premium tax credit and for assessing the employer’s liability under the employer shared responsibility provisions.

Employee Copy Requirement

Employers must furnish a copy of Form 1095-C to each full-time employee by January 31 of the year following the reporting year, enabling employees to reconcile their coverage status on their tax returns.

1094 and 1095 Reporting Requirements

• Applicability: The ACA requires ALEs—those with 50 or more full-time equivalent employees—to report health coverage information annually. This includes the obligation to submit Forms 1094-C and 1095-C to the IRS and provide the 1095-C forms to their full-time employees.
• Full-Time Equivalent (FTE) Calculation: An ALE’s status is determined by calculating the total number of full-time employees plus full-time equivalents derived from part-time employees. The formula is:
• FTE Total = Number of Full-Time Employees + (Total Part-Time Hours ÷ 30)/: This ensures that businesses with many part-time workers are properly assessed for ACA compliance.

Purpose of Reporting

• Employer Mandate Compliance: These forms allow the IRS to verify whether ALEs are meeting the ACA’s employer shared responsibility requirements—offering minimum essential coverage that is affordable and provides minimum value to full-time employees.
• Employee Tax Credits: Employees use the information on Form 1095-C to confirm eligibility for premium tax credits if they obtained coverage through the Health Insurance Marketplace.
• Data Transparency: The reporting improves transparency of employer health coverage offerings, allowing both employees and the government to monitor compliance and enforce penalties if necessary.

Key Terminology and Concepts

• Applicable Large Employer (ALE): An employer with 50 or more full-time equivalent employees, subject to ACA reporting rules.
• Minimum Essential Coverage (MEC): A health insurance plan that meets ACA standards, which employers must offer to avoid penalties.
• Minimum Value: Coverage must cover at least 60% of total allowed costs expected to be incurred under the plan.
• Affordable Coverage: Coverage is deemed affordable if the employee’s required contribution for self-only coverage does not exceed a certain percentage of household income (determined annually by the IRS).
• Full-Time Employee: An employee who averages at least 30 hours of service per week or 130 hours per month.
• Part-Time Employee: An employee who works less than 30 hours per week; their hours contribute to FTE calculations.

Penalties for Non-Compliance

Failure to comply with ACA reporting requirements can result in significant penalties, including:

• Failure to File Penalty: For not submitting the required forms to the IRS on time.
• Failure to Furnish Penalty: For not providing employees with their Forms 1095-C by the deadline.
• Incorrect Information Penalty: For providing inaccurate information on the forms.

Penalties are subject to adjustment for inflation annually.

Electronic Reporting

Employers filing 250 or more forms are required to submit the 1094-C and 1095-C electronically. Electronic filing simplifies processing, reduces errors, and ensures timely receipt by the IRS. The IRS provides specifications for file formatting and electronic submission through the Affordable Care Act Information Returns (AIR) system.

Summary

Forms 1094-C and 1095-C play a crucial role in enforcing the ACA’s employer mandate by documenting the health coverage offered to employees. ALEs must carefully calculate their full-time equivalent employees, accurately complete these forms, file them timely with the IRS, and distribute copies to employees. Proper compliance supports both employers and employees in managing healthcare responsibilities and tax obligations under the ACA.