Both Forms 1095-B and 1095-C are for Affordable Care Act reporting, but you may find yourself asking: which ACA form do I need? There are some key differences in each form, so we have created this guide to help you decide which you need in order to report your data.
What is the ACA?
In 2015, the IRS mandated that employers must report under the Affordable Care Act (ACA). This requirement involves two primary forms: Form 1095-B, Health Coverage, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage.
What are the ACA reporting requirements?
The IRS outlines specific reporting requirements for the Affordable Care Act (ACA) under two sections: Section 6055 and Section 6056.
Section 6055 targets health coverage providers and small employers with self-insured plans, requiring them to report using Forms 1094-B and 1095-B.
In contrast, Section 6056 applies to larger employers with 50 or more employees, known as Applicable Large Employers (ALEs). This can include a single company or a group of related companies (such as parent-subsidiary relationships or affiliated entities), collectively referred to as an Aggregated ALE Group. These entities are required to use Forms 1094-C and 1095-C for their reporting.
Both sets of returns demand that the filer submits the necessary information to the IRS, any relevant states, and to the individuals concerned. Failure to meet these criteria can result in fines and penalties.
Penalties may also be imposed on employers for inaccurately issuing or submitting forms to the IRS and the intended recipients. The IRS typically initiates the penalty process with Letter 5699, serving as a preliminary warning. If unaddressed, this is usually followed by Letter 226-J, detailing the penalty amount and further details.
To avoid such penalties, businesses must diligently adhere to their IRS reporting obligations, ensuring accurate and timely submission of the required forms.
What is Form 1095-B?
Form 1095-B is distributed by insurers and small employers who offer self funded coverage to their employees. The form provides information regarding the individuals covered, such as their name, type of coverage, and duration of coverage.
What is Form 1095-C?
Form 1095-C is distributed to eligible employees by employers who have 50 or more full-time + full-time equivalent employees on average (also known as ALEs). This form provides information regarding the employees such as their name, whether they accepted the coverage, and any dependents covered beneath them.
Which ACA form do I need?
There are a few different categories to consider when determining what type of ACA filing is required. These are:
- Type of filer
- Group size
- Insurance type
Type of Filer
The first thing to ask yourself is: Are you an insurance provider or an employer?
- If you’re an insurance provider, then you likely need to complete a Form 1095-B Filing.
- If you’re an employer, then you need to determine your group size next.
If you’re an employer, thee next question to ask yourself is: Are you an Applicable Large Employer (ALE) or a small employer?
- If you had less than 50 FT & FTE employees in the previous year, then you are generally considered a small employer.
- If you had 50 or more FT & FTE employees in the previous year, then you are generally considered an Applicable Large Employer, or an ALE.
- Please note: If a company shares common ownership with other companies, then the total employee count across all entities must be used to determine employer size.
After determining employer size, the next step is to determine what type of insurance is offered to employees. There are two main ways that insurance plans are funded: Fully-Insured and Self-Insured.
A self-insured plan typically involves the employer paying the health claims of the employees as they occur. In contrast, in a fully-insured health plan, the employer pays a certain amount each month (the premium) to the health insurance company, who then pays the health claims of the employees as they occur.
- If you are a small employer and fully-insured:
- Then you typically do not need to submit a filing, as your insurance provider usually does this on your behalf. It’s important to verify with your insurance provider that an ACA filing has been completed.
- If you are a small employer and self-insured:
- Then you typically need to complete a Form 1095-B Filing.
- If you are an Applicable Large Employer (ALE) and fully-insured:
- Then you typically need to complete a Form 1095-C Filing with only Parts I and II completed.
- If you are an Applicable Large Employer (ALE) and self-insured:
- Then you typically need to complete a Form 1095-C Filing with all parts (Parts I, II and III) completed.
Forms 1095-B and 1095-C are filed with the IRS using transmittal Forms 1094-B and 1094-C, respectively.
You can also use our questionnaire tool to help determine which type of filing is required.
Frequently Asked Questions
How do I calculate full-time and full-time equivalent employee counts?
Understanding the count of full-time and full-time equivalent employees isn’t as simple as it might appear at first glance.
Let’s clarify the terms to comprehend how these numbers are derived:
- A full-time (FT) employee is defined as someone who has an average of at least 30 hours of service per week, or 130 hours per month.
- A full-time equivalent (FTE) employee represents a group of workers, none of whom are full-time by themselves, but collectively they equate to a full-time employee.
Full-Time Employee Count
Calculating the FT employee count is straightforward: tally up the number of employees working an average of 30 hours or more per month. This figure represents your FT employee count.
Full-Time Equivalent Employee Count
For the FTE employee count, the process is more complex. It’s not a mere sum of employees but a calculation based on the collective service hours of part-time employees.
Here’s how to determine the number of FTEs:
- Sum the total hours of service paid to employees over the year.
- Ensure no individual employee’s hours exceed 2,080 for the year. If they do, round down to 2080.
- Divide this total by 2,080.
- If the quotient isn’t a whole number, round down to the nearest whole number.
- Round up to one (1) if the result is less than one.
We’ve included an example below for reference:
What if I had 50 or more full-time equivalent employees for only part of the year?
In order to determine if you are required to report as a large group (also known as an Applicable Large Employer or “ALE”), add the total number of full-time and full-time equivalent employees for each month of the entire year and divide that total by 12.
If the number equals 50 or more, you are considered an ALE and should file the appropriate 1095 form.
What if there are two EINs that are small groups under common ownership?
An ALE may be a single employer or may consist of a group of related employers (such as parent and subsidiary entities or other related/affiliated entities), called an Aggregated ALE Group. These filers would use Forms 1094-C and 1095-C for their filings.
Understanding the differences between Forms 1095-B and 1095-C is crucial for accurate Affordable Care Act (ACA) reporting. Whether you’re an insurance provider, a small employer, or an Applicable Large Employer (ALE), it’s essential to identify the correct form based on your organization’s size, type, and insurance offerings.
Check out this page for 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.