In March 2010, Congress passed a comprehensive health care reform law known as the Affordable Care Act.
What is the Affordable Care Act (ACA)?
The Affordable Care Act is a comprehensive health care reform law that was passed in March 2010. Alternatively, known as ACA, Patient Protection and Affordable Care Act (PPACA), or Obamacare. It’s designed to lower the cost of health insurance for those who qualify.
The Affordable Care Act has 3 main goals:
- Increase the availability of affordable health insurance
- Expand the Medicaid program
- Improve health care delivery methods to lower healthcare costs
What does the ACA mean for employers?
The Affordable Care Act has responsibilities for employers, many of which are dependent upon the size of the employer. There are two main types of employers: small employers and Applicable Large Employers (ALEs).
The difference between these employer types is the number of full-time and full-time equivalent employees the employer had during the previous calendar year.
The IRS describes a full-time (FT) employee as an individual that averages at least 30 hours of service per week or 130 hours of service per month. Whereas, the IRS describes a full-time equivalent (FTE) as a combination of employees, each of whom individually is not a FT employee, but who, in combination, are equivalent to a FT employee. Employers can use two different measurement methods to determine employee count.
Small employers are employers with less than 50 FT and FTE employees. Some provisions only apply to small employers.
- They can purchase coverage through the Small Business Options Program (SHOP).
- They may also be required to report the value of the coverage provided to each employee on their Form W-2.
Applicable Large Employers
Applicable Large Employers (ALEs) are generally employers with 50 or more FT and FTE employees.
This can also be an Aggregated ALE Group, which is a group of employers that, combined, employed 50 or more FT or FTE employees in the previous year on average. Each employer within this group is an ALE Member.
ALEs are subject to the employer shared responsibility provisions (ESRP). This requires ALEs to offer affordable health coverage to at least 95% of their full-time employees and any applicable dependents. If they do not comply, then they may be subject to ESRP payments to the IRS.
Types of Affordable Care Act Reporting
There are two types of ACA reporting that employers should know about: B Series and C Series.
IRC Section 6055 Reporting – B Series ACA forms
This is the ACA reporting for health coverage providers, including self-insured small employers and insurance providers. It includes Form 1094-B, Transmittal of Health Coverage Information Returns, and Form 1095-B, Health Coverage.
This is designed to report health coverage information for individuals that enrolled.
Health Coverage Providers, such as insurance companies and self-insured small businesses, must transmit coverage information to the IRS. These entities must also provide a copy of Form 1095-B to those who are insured.
IRC Section 6056 Reporting – C Series ACA forms
This is the ACA reporting for ALEs. It includes Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-B, Employer-Provided Health Insurance Offer and Coverage.
This is designed to report health coverage offer information for all full-time employees and employees that enrolled in the offered coverage.
ALEs subject to ESRP must transmit health insurance offer information to the IRS. They must also provide a copy of Form 1095-C to the employees
What about self-insured employers?
Self-insured, or self-funded, employers are considered the coverage provider for their employees and must provide coverage information about the employees.
If the self-insured employer is a small employer, then they must file using Forms 1094-B and 1095-B.
If the self-insured employer is an ALE, then they must report as both the employer and the provider. This means that they need to provide health insurance offer information and health insurance coverage information. Coverage information can be reported using Form 1095-C, Part III – Covered Individuals.
Self-Insured ALEs must include the coverage information for any covered employee and covered spouses and dependents, if applicable.
Part III should only be completed if the ALE offers employer-sponsored, self-insured health coverage.
B Series ACA Forms
Form 1094-B is used to summarize the coverage provider information and transmit the Forms 1095-B to the IRS.
Form 1095-B is used to report certain information about each responsible individual, and any covered dependents, to the IRS and the responsible individual.
It’s important to note that the IRS should receive both the Form 1094-B and all Forms 1095-B.
Who must file?
Every entity that provides MEC to an individual during a calendar year must file an information return reporting the coverage. Filers must submit both transmittal Form 1094-B and Forms 1095-B.
However, Applicable Large Employers should use Form 1095-C – Part III to report coverage information, instead of Form 1095-B.
Learn more about filing B Series Forms using our essential guides:
C Series ACA Forms
Form 1094-C is used to summarize ALE information and transmit Forms 1095-C to the IRS.
Form 1095-C is used to report information about each employee to the IRS and the employee.
It’s important to note that the IRS should receive both the Form 1094-C and all Forms 1095-C.
Who must file?
Each ALE, or ALE Member, must file Forms 1094-C and 1095-C reporting offer of coverage to its employees, even if the ALE Member has fewer than 50 full-time employees on its own. There must be a Form 1095-C for each employee that was full-time for any month of the calendar year, and a copy of the form must be furnished to the employee.
Learn more about filing C Series Forms using our essential guides:
The Affordable Care Act is a comprehensive health care reform law designed to lower the cost of health insurance for qualified individuals. It has many responsibilities for employers, including filing and furnishing forms by the specified deadlines.
The IRS is going to continue enforcing ACA responsibilities for timely filing and furnishing forms, so it’s important that employers stay up-to-date on all the latest Affordable Care Act and Tax news.
Check out this page further guidance and a detailed breakdown of the differences between IRS 1095-B and 1095-C.
BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.