Under the Affordable Care Act (ACA), applicable large employers (ALEs) are required to offer health benefits to their full-time employees and individuals are required to have health insurance. There are penalties for ALEs that do not provide the required coverage, however, Executive Action changed the penalty for individuals to $0 for failing to have minimum essential coverage starting in 2019.
Reporting on health coverage that is offered is required by insurers, employers with 50 or more full-time (or full-time equivalent), and sponsors of self-funded health plans. This is necessary so the Internal Revenue Service (IRS) may verify that:
- Individuals have minimum essential coverage,
- Individuals who request premium tax credits are entitled to them, and
- ALEs are meeting their shared responsibility (play or pay) obligations.
2019 Draft Forms and Instructions
The IRS recently released draft forms and instructions for the 1094-C and 1095-C forms. There are no substantive changes in the forms or instructions between 2018 and 2019.
In past years, the IRS provided relief to employers who made a good faith effort to comply with the information reporting requirements and determined that they would not be subject to penalties for failure to correctly or completely file. This relief did not apply to employers that failed to timely file or furnish a statement.
In December 2019, the IRS released Notice 2019-63 to extend such relief for 2019. As in prior years, the relief is applied only to incorrect or incomplete information reported on the statement or return in good faith. The relief does not apply to a failure to timely furnish or file a statement or return.
When? Which Employers?
Reporting for coverage in 2019 will be due early in 2020.
For calendar year 2019, Forms 1094-C and 1095-C must be filed with the IRS by February 28, 2020, or March 31, 2020, if filing electronically. Employers may file Form 8809 to receive an automatic 30-day extension of this due date for forms due to the IRS.
Under Notice 2019-63, the IRS extended the due date for furnishing statements to individuals from January 31, 2020, to March 2, 2020. The permissive 30-day extension that the IRS may grant to an employer for good cause will not apply to this extended due date for furnishing statements to individuals.
All reporting will be for the 2019 calendar year, even for non-calendar year plans.
Major Reporting Summary
| |
Fully Insured
|
Self-Funded
|
< 50 FTEs
|
50+ FTEs
|
< 50 FTEs
|
50+ FTEs
|
Forms to Employee
|
1095-B
Filed by Insurer
|
1095-C
(Parts I and II only)
Filed by Employer
|
1095-B
Filed by Employer
|
1095-C
(Parts I, II, III)
|
Forms to
IRS
|
1094-B
Filed by Insurer
|
1094-C
(+ copies of 1095-Cs)
Filed by Employer
1094-B
(+ copies of 1095-Bs)
Filed by Insurer
|
1094-B
(+ copies of 1095-Bs)
Filed by Employer
|
1094-C
(+ copies of 1095-Cs)
Filed by Employer
1094-B
(+ copies of 1095-Bs)
Filed by Insurer
|
Penalties for Failure to File
- The penalty for failure to file a correct information return is $270 for each return for which the failure occurs, with the total penalty for a calendar year not to exceed $3,339,000.
- The penalty for failure to provide a correct payee statement is $270 for each statement for which the failure occurs, with the total penalty for a calendar year not to exceed $3,339,000.
Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to file the returns and furnish the required statements.
Detailed Reporting Requirements for Forms 1094-C and 1095-C
IRS Form 1095-C is used primarily to meet the reporting requirement relating to the employer shared responsibility / play or pay requirement. Information from Form 1095-C is also used to determine whether an individual is eligible for a premium tax credit.
Employers with 50 or more full-time or full-time equivalent employees must complete Parts I and II of Form 1095-C to report on coverage that was offered to the employee and eligible dependents.
Large employers that sponsor self-funded plans may also complete Part III (to avoid filing both the employer and the insurer forms). Employers with 50 or more full-time or full-time equivalent employees with fully insured plans skip Part III, and their insurance carrier will complete a separate 1095-B series form to report detailed information on coverage for each family member.
Employers with 50 or more full-time or full-time equivalent employees must provide Form 1095-C to virtually all employees who were full-time (averaged 30 hours per week) during any month during the year, even if coverage was not offered to the employee or the employee declined coverage. (If the full-time employee never became eligible during the year, most likely because the employee is a variable-hours employee in an initial measurement period, the form does not need to be provided).
Vita’s Takeaway
While the deadline extension and good faith relief will help an employer avoid penalties, employers should continue to focus on making sure reporting is accurate and timely. The Vita team will continue to monitor the ACA reporting developments and keep you apprised as the law evolves.
