Employer Guide to ACA Reporting

Which companies have to provide 1094-C and 1095-C Forms?

Employers with 50 or more full-time and full-time equivalent employees are called Applicable Large Employers (ALEs) Generally, employers that have over 50 Full-Time (FT) plus full-time equivalent (FTE) employees in the previous calendar year must produce 1094-C and 1095-C forms for the current calendar year, which are in turn, furnished to full-time employees and subsequently transmitted to the IRS. In this context, full-time employees work 130 or more hours in a month. FTEs are calculated by adding the total hours of service in a month by the remaining employees (to a maximum of 120 hours per employee) and dividing those total hours by 120. A company adds its Full-Time employees to its FTEs each month and takes the average over the months of the year to determine its’ ALE status. United will complete these calculations for your company.

What if I own more than one company?

The IRS defines a group of companies (2 or more) as a Controlled Group if the same people or company owns or controls all companies in the group. This holds true even if the companies have different Employee Identification Numbers and different locations. So, employees of companies within the same Controlled Group must be aggregated to determine whether the commonly-owned companies are subject to the employer mandate. Three types of Controlled Groups are considered to be a single employer for the purposes of the ACA employer mandate.

(1) Parent-Subsidy Group – When one or more businesses are connected through stock ownership with a common parent corporation (such as a chain), and 80% of the stock of each corporation (except the common parent) is owned by one or more corporations in the group, and the parent corporation owns 80% of at least one other corporation.

(2) Brother-Sister Group – A group of two or more corporations, where five or fewer common owners own directly or indirectly a "controlling interest" of each group and have “effective control.” A common owner must be an individual, a trust, or an estate. A “controlling interest” is generally 80% or more of the stock of each corporation (but only if the common owner owns this amount of stock in each corporation). “Effective control” is generally more than 50% of the stock of each corporation.

(3) Combined Group – A group consisting of three or more organizations that are organized as follows: each organization is a member of either a parent-subsidiary or brother-sister group, and at least one corporation is the common parent of a parent-subsidiary, and is also a member of a brother-sister group.

What information is reported on these forms?

The Affordable Care Act added Section 6056 to the Internal Revenue Code. This requires Applicable Large Employers to file information returns (1094-Cs & 1095-Cs) with the IRS and provide statements to their full-time employees regarding the health insurance coverage the employer offered.

Under the regulations implemented in Section 6056, an Applicable Large Employer may be a single entity or may consist of a group of related entities (such as parent and subsidiary or other affiliated entities). In either case, these reporting requirements apply to each separate entity, and each separate entity is referred to as an Applicable Large Employer Member (ALE Member). The IRS and the employees of an ALE Member will use the information provided to help determine whether an employee was eligible for the premium tax credit under Section 36B.

ALE Members that sponsor self-insured group health plans also are required to report information under Section 6055 about the health coverage they provide. Such ALE Members file with the IRS and furnish to employees the information required under Sections 6055 and 6056 on a single form. The IRS and individuals will use the information provided under Section 6055 to administer or to show compliance with the individual-shared responsibility provisions of Section 5000A.

What information is needed to complete these forms?

Upon engaging services with United, we will design a compliance plan in order to determine your company’s Measurement Method. Required data includes the following:

(1) Complete employee census, hours, and wage information

(2) Whether any of the company’s health insurance plans are Self-Insured

(3) Whether group health coverage is considered “affordable” (It is considered “affordable” if an employee’s share of the monthly cost for self-only coverage is not more than 9.5% of the employee’s monthly income from the employer, or not more than 9.5% of the Federal Poverty Level.)

(4) Dates, by employee, showing the period of time when health coverage was offered, and the corresponding period when the employee accepted or declined the offered coverage.

Who will complete these forms?

United will complete these forms for employers. United would receive client provided data through our secure file transfer site and prepare the IRS forms which are then furnished to the client’s full-time employees and transmitted to the IRS.

Why do I need United to complete these forms?

Compliance with the employer mandate requires a combination of an expert understanding of the IRS regulations, the ability to administer and comply with the complex regulations, and timely report to the IRS. Developing an in-house expertise would be cumbersome, expensive and risky. Even employers with solid HR, payroll and administration departments will find the entire process exceedingly difficult.

United ACA Solutions, LLC exists to support companies in providing excellent service. We deliver the industry’s best ACA reporting experience. We are proud to offer companies across the country our unbeatable solution to the Affordable Care Act.

When are the forms due?

Forms 1095-B and 1095-C are due to individuals by January, 31st (plus an automatic 30 day extention).

Forms 1094-B, 1095-B, 1094-C and 1095-C are required to be filed with the IRS by February, 28th if filing on paper, or March 31st, if filing electronically.

United will generate and provide 1095-Cs or if applicable 1095-Bs to qualifying employers who must then distribute these forms to their employees by the furnishing deadline. United will generate and electronically file 1094-C and 1095-Cs and any applicable 1094-B and 1095-B forms to the IRS by March 31st.

What if an employer does not provide these forms?

Generally, the fine for either failing to file or filing incomplete or inaccurate information on submissions is $250 per required return, with a maximum of $3 million a year./ Additional penalties would also be assessed to ALEs that don’t offer health insurance to eligible employees.

What are the IRS Section 6056 Assessable Payments?

There are two classes of assessable payments (“penalties”) specific to IRC §54.4980H regulations, these are known as the “a” and “b” penalties.

“a” penalty

If an ALE fails to offer to at least 95% of its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage for any calendar month, and ALE receives a Section 1411 Certification (see definition below) with respect to at least one full-time employee, the “a” penalty is imposed. If an ALE fails to offer coverage to a full-time employee for any day of a calendar month, that employee is treated as not offered coverage during that entire month. The exception to this is if an employee terminates during the a calendar month but the employee would have been offered coverage for the entire calendar month, should they have remained employed through the end of the calendar month, that employee will be treated as having been offered coverage for that entire month with respect to the assessment of the “a” penalty.

(1) The “a” penalty calculation per calendar month: Assessable payment = $2,000 x (1/12) (# of full-time employees (as defined by one of the allowable measurement methods) - ((# of full-time employees (as defined by one of the allowable measurement methods) in a limited non-assessment period) – 30)

(2) the $2,000 amount is indexed and the IRS will issue new amounts annually

“b” penalty

If an ALE offers to at least 95% of its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage for any calendar month and the ALE receives a Section 1411 Certification (see definition below) with respect to one or more full-time employees, then there is a “b” penalty assessed which is equal to the product of the number of full-time employees for which a Section 1411 Certification was received less the number of those employees who were in a limited non-assessment period and the number of employees who were offered the opportunity to enroll in minimum essential coverage that satisfied the minimum value standard and also met one or more of the affordability safe harbors described in the regulations.

(1) The “b” penalty calculation per calendar month: Assessable payment = $3,000 x (1/12) x ((# of full-time employees (as defined by one of the allowable measurement methods) for which an ALE received a Section 1411 Certification) – (# of full-time employees (as defined by one of the allowable measurement methods) who were in a limited non-assessment period + the # of full-time employees (as defined by one of the allowable measurement methods) who were offered the opportunity to enroll in minimum essential coverage that satisfied the minimum value standard and also met one or more of the affordability safe harbors described in the regulations))) ≤ (( “a” penalty amount for the month) x (# of full-time employees (as defined by one of the allowable measurement methods) during the calendar month - 30))

(2) the $3,000 amount is indexed and the IRS will issue new amounts annually

What is Section 1411 Certification?

The term Section 1411 Certification means the certification received as part of the process established by the Secretary of Health and Human Services under which an employee is certified to the employer under section 1411 of the Affordable Care Act as having enrolled for a calendar month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee.

Look Back Measurement or Monthly Measurement Method?

Great question! Most employers who use the Monthly Measurement Method (MMM) do so because they are intimidated by the complexity of the Look Back Measurement Method (LBMM). United handles that complexity so you can mark that off your list of concerns. The problem with the MMM is that it is after the fact. After an employee has worked 130 hours in a month only then do you know that you should have covered them – ouch. Sure you’re covering your salaried and full time folks, but what happens when a manager has to adjust the work schedule for some unanticipated employee shortage and has an employee work enough hours to be "full-time" according to the ACA’s definition? The employer pays the B penalty for that employee for that month. Not the end of the world but it could have been avoided by using the LBMM. The LBMM is essentially very similar to an eligibility requirement you might have for your 401(k) plan. For example, a 401(k) plan can require that an employee work for the employer for one year, and during that year have 1,000 hours of service. When they meet those two requirements, then they are able to enter into the plan and defer some of their compensation. It’s fairly easy to forecast who will become eligible for your 401(k) plan. Similarly, if you know the rules for LBMM, an employee’s entitlement to an offer of coverage can be anticipated because the employer can choose an "eligibility" of basically a year and during that year if the employee works the requisite number of hours that the ACA regulations specify deems them to be "full time" then that employee must be offered health insurance by a specific known date following the attainment of the year and hours of service requirements. This gives the employer the ability to forecast the entitlement of a benefit offer for all of their part time or "variable hour" employees. United’s data scientists work with our clients each month to gather the hours and coverage information on all employees, allowing us to forecast every employee’s future entitlement, notify the employer’s HR department in plenty of time for them to make the offer and document the acceptance or decline of the offer. Over 97% of our clients trust us to handle the complexity of the LBMM which helps them anticipate their obligations to offer and avoid penalties.

Are there any downsides to the Look Back Measurement Method?

Yes, there are two. The first is the complexity of correctly applying the IRS 4980H regulations. They are quite complicated and nuanced. Of course this "downside" is null once you become a United client, as one of the many perks of your patronage you will have a team of experts that know how to apply these ugly rules to your data, and our data experts know how to transform your sometimes less than pretty data into useable information compliant to the LBMM rules. The second "downside" is the requirement that the employer continues to have the obligation to offer coverage to an employee who, during their look back measurement period, was determined to be a "full-time employee" and thus entitled to an offer of coverage for the duration of the subsequent coverage period – even if the employee’s hours drop significantly during the coverage period. Some employers chafe at this point but remember, the employer did not have to cover the employee during the "measurement period" and thus, at least in the IRS’s eyes, it's only fair that the employer be required to offer coverage during the coverage period. It's also important to remember that each coverage period is also the measurement period for the subsequent coverage period so if an employee’s hours drop, they may be entitled to maintain coverage, but the employer won’t have to offer them coverage in the subsequent coverage period. Knowing about these transitions in eligibility is just one more area where United's data scientists shine!