The Affordable Care Act (ACA) has created additional recordkeeping and reporting requirements for employers, including new forms to file. The IRS has recently released final Forms 1094 and 1095, which were released in draft form with draft instructions in July 2014. These forms will be used to enforce ACA employer penalties and individual mandate and tax credit eligibility rules with mandatory reporting starting in 2016 for the tax year 2015.
Understanding the final forms and how to use them is important for employers to stay in compliance and avoid penalties. IRS Publication 5196 summarizes Applicable Large Employer (ALE) reporting requirements and what data ALEs will need to complete the forms, but read on to learn some of the changes from the draft to final 1094 and 1095 forms.
Form 1094-B transmittal and Form 1095-B information return (also serves as the required statement to individuals) are primarily used by health insurers to report individuals enrolled in minimum essential coverage (MEC). The final B forms have few changes from the drafts.
Form 1094-C transmittal (also serves to report information related to employer penalties) and Form 1095-C information return (also serves as the required statement to employees) are filed by applicable large employers (ALEs). The final C forms are unchanged from the drafts except for some modifications to recipient instructions for 1095-C.
Final C form instructions include some important changes employers must pay attention to and understand for the required use in 2016.
Enrollment Information for Non-Employees
The draft instructions proposed combined reporting for ALEs sponsoring self-insured health plans using the C forms but required using B forms for non-employees enrolled in the ALE’s plan. The final instructions allow ALEs to use either the B forms or the C forms for enrolled non-employees such as retirees and COBRA beneficiaries. This is good news for ALEs who extend coverage to non-employees because they can just use the C forms.
All family members with coverage due to an employee’s or non-employee’s enrollment must be included on the same form as the employee or non-employee whether the ALE uses B forms or C forms.
The final instructions are unchanged from the draft instructions in allowing an ALE to file more than one Form 1094-C transmittal when there are more than one operating divisions or business units as long as one of the transmittals is designated as the “authoritative transmittal.” A clarifying point is that only the authoritative transmittal reports detailed information for the ALE such as full-time employee counts and eligibility for transition relief, while the “non-authoritative transmittals” leave this information blank.
The draft instructions proposed two methods for counting employees: first or last day of each calendar month. The final instructions allow these two methods or counting on the first or last day of the first payroll period starting in the calendar month and require ALEs to report their total number of employees.
The final instructions note that employee contribution information is based on the lowest-cost, self-only coverage providing minimum value that is offered to the employee, but the reported contribution won’t always be the amount that the employee pays if enrolled in a different plan, such as family coverage.
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