The passage of the Affordable Care Act (ACA) brought with it numerous new administrative requirements for many employers. One of those is IRS Form 1095-C, “Employer-Provided Health Insurance Offer and Coverage.” Read on to learn more about this form and what it means for your business.
What is Form 1095-C?
This is the form certain employers must send annually to the IRS and certain employees to report information about health insurance. The IRS uses the information to check employers’ compliance with the ACA and impose penalties on covered employers that fail to provide health insurance.
It also uses the information to administer premium tax credits. The IRS and any employee not enrolled in an employer plan (but who instead enrolls in a plan via a health insurance exchange) need information on the employer’s coverage, including the cost, to determine employees’ eligibility for the credits.
Note: California, the District of Columbia, Massachusetts, New Jersey, and Rhode Island also require some reporting of health insurance information.
How is it different from Form 1095-B?
Form 1095-B, “Health Coverage,” provides information about an employee’s actual health insurance coverage, including who was covered and during which months. The form generally is sent by the insurance company rather than the employer.
But, if the company is self-insured, the employer is considered the insurer. In that case, the employer must send employees both forms.
What about Form 1094-C?
Form 1094-C, “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns,” is basically the cover sheet employers must send the IRS when submitting their Forms 1095-C each year. You don’t send it to the employees themselves.
Which employers must file Form 1095-C?
You must file the form if you’re required by the ACA to offer health insurance coverage to your employees — in other words, if you’re considered an applicable large employer (ALE). ALEs are those employers with 50 or more full-time workers, including full-time equivalent workers, in the prior year.
Under the ACA, any employee who works an average of at least 30 hours per week, or 130 hours of service per month, is a full-time worker. This means that two part-time workers who each average 15 hours per week could constitute a single full-time equivalent worker for ALE determination purposes.
- Combine the number of hours of service of all non-full-time employees for the month but don’t include more than 120 hours of service per employee, and
- Divide the total by 120.
An employer’s number of full-time equivalent employees (or part-time employees) is only relevant to determining whether an employer is an ALE.
Do small employers ever need to file the form?
You may need to file and provide the form if your business is a member of an “aggregated ALE” under common control. The obligation is triggered if the aggregated ALE employed, on average, 50 or more full-time employees (including full-time equivalent employees) on business days during the preceding calendar year.
However, know that each member of an aggregated ALE is subject to the reporting requirements separately. This means you can be held liable for noncompliance with your own reporting requirements but not for the noncompliance of any other member.
And, even if you’re neither an ALE nor an ALE member, you need to report the information if you have an employer-sponsored, self-insured group health plan. But rather than filing Forms 1095-C and 1094-C, you should file Forms 1095-B, “Health Coverage,” and 1094-B, “Transmittal of Health Insurance Coverage Returns,” to report information for employees who are enrolled in the health coverage.
Which employees should receive Form 1095-C?
You should send a Form 1095-C to every employee eligible for health insurance coverage, meaning everyone who was a full-time employee during any month of the calendar year. You must send the form even if they don’t participate in your health plan.
What information is included on Form 1095-C?
The form includes details related to the coverage you offered the employee, the lowest cost premium available to that employee, and the months of the year that coverage was available. The IRS needs this information to determine whether you offered eligible employees affordable health coverage that provides minimum essential coverage and satisfies the minimum value threshold.
When should I send my forms?
You must send the form to your employees by January 31 (or the next business day if this day falls on a weekend or holiday) of the year immediately following the calendar year for which the return relates. (For 2021, the deadline was automatically extended to March 2, 2022.) Proposed regulations would permanently extend the deadline for ALEs to March 2 (or the next business day if this day falls on a weekend or holiday).
The proposed regulations also would allow ALEs that offer employer-sponsored self-insured health coverage to make Form 1095-C available to non-full-time employees and non-employees enrolled in the coverage through their website, if certain conditions are met.
Form 1095-B (along with Form 1094-B) is due to the IRS by February 28 if filing paper forms. You have until March 31 if you file electronically. Employers with 250 or more forms must submit electronically through the ACA Information Returns (AIR) program.
Note: You can file Form 8809, “Application for Extension of Time to File Information Returns,” on or before the due date to obtain an automatic 30-day extension of the deadline for your IRS filing. Under certain circumstances, you can apply for an additional 30-day extension. You generally still must meet the employee reporting deadlines, though.
The form may be submitted on paper, or through the FIRE System either as a fill-in form or an electronic file. No signature or explanation is required for the extension. However, you must file Form 8809 on or before the due date of the returns to get the 30-day extension. Under certain hardship conditions, you may apply for an additional 30-day extension.
How should I send the form to my employees?
You should send Form 1095-C to your employees by mail, unless the employee affirmatively consents to receive the statement in an electronic format. An employee can consent on paper or electronically; if consent is given on paper, the employee must confirm the consent electronically.
What if I don’t comply?
You could face costly penalties. The penalty for failure to file an information return with the IRS generally is $280 for each return, up to $3,426,000. The penalty for failing to provide a correct employee statement is also $280 for each statement, up to a maximum of $3,426,000.
Special rules increase the allowable per-statement and total penalties when the IRS finds an employer intentionally disregarded the requirement to furnish an employee statement or file a return.
Penalties can be waived in some circumstances, including when an employer can show reasonable cause.
What if I made a mistake on a Form 1095-C?
Don’t worry—you can issue a corrected Form 1095-C. Simply complete the new form, check the “CORRECTED” box, and send it to the employee and the IRS. You should file a Form 1094-C with corrected Form(s) 1095-C., but don’t mark the “CORRECTED” checkbox on Form 1094-C.
You might not need to file a corrected form, though. Forms 1095-C that report an incorrect Employee Required Contribution (line 15) may fall under a safe harbor for certain de minimis errors.
The safe harbor generally applies if no single amount in error differs from the correct amount by more than $100. If the safe harbor applies, you don’t need to correct Form 1095-C to avoid penalties. However, if the employee elects for the safe harbor not to apply, you may have to issue a corrected Form 1095-C to avoid penalties.