ACA 1095-C Reporting – What You Need to Know

It has not left the building!

Do you think the ACA 1095-C Reporting Requirement is Temporary?

It’s not; companies are being penalized for not offering the benefits and/or not reporting.  These companies are being fined tens of thousands of dollars for just a few employees who were not offered benefits on time.  Filing 1095-Cs is how your business informs the IRS that you are in compliance. Click here for details about the fines and penalties.

Four years ago everyone was muddling their way through the new ACA 1095-C Reporting.  Not a single company in the United States was happy about it.  Many people thought “it won’t last”, “do I really have to do this? I’m too busy!”

 Well here we are… four years later and it’s still the law of the land.  In the beginning it made me think of how companies must have felt when W-2’s were first required for the 1943 tax year.  I’m sure no one was happy about it, didn’t think it would last, and now we don’t even think twice about them being a normal part of doing business!

So how do we get to the point of “not thinking twice” about a 1095-C form? 

It’s not as hard as you think!

Need to File ACA 1095-Cs?

There are many articles and websites to determine IF you need to report, but what do you need to track if you DO have to report?

  • ACA Reporting is only for your medical benefits. Vision, Dental, Prescription (if independent), etc. are not included.
  • ACA Reporting only cares about your lowest cost plan’s single only coverage amount. It doesn’t matter what the employee actually selected or how many people they have on the plan.
  • The type of insurance you have will determine what you have to track and report on:
    1. Fully Insured – This type of insurance only needs to report on the employee’s offer of insurance and if they enrolled or waivered while the individual was employed. Your Health Carrier will send a 1095-B form showing who was enrolled, including dependents.
    2. State Insured – Those on State Benefits need to track and report enrollments and waivers while the individual was employed as well as their dependents that were enrolled. The State will send a 1095-B form to those on COBRA or Retiree Benefits.
    3. Self Insured – These plans require the most complex reporting. You need to report the employees and dependents enrollment/waiver while the individual was employed as well as those on COBRA and who had Retiree Benefits.  The employees will not receive any additional notices from other parties.

How do you be prepared?

  • Most businesses outsource their payroll processing and tax filing, which means they outsource the creation and filing of their W2s. If your business is an Applicable Large Employer you may want to outsource the creation and filing of your business’s 1095Cs.  This is especially true if you have more than 250 employees.
    1. If you have more than 250 employees you are required to file electronically.
    2. Filing with the IRS electronically is a pain-staking business to put it lightly. It takes months to prepare and a lot of programming is involved.
  • Make recording benefit activity part of your normal process. Some businesses attempt to do it with a spreadsheet, but you’ll be much happier using a Benefit Management System.
    1. Using a Benefit Management System to help track enrollments and waivers is crucial for success.
      1. This provides a place for you to record your enrollments and waivers easily.
      2. The right Benefit Management System will assist with your 1095-C reports by populating the complex codes of the IRS form based on the enrollment data you enter throughout the year.
    2. If you have to go into the benefit carrier to make a change then you should also update your Benefit Management System. What situations do you need to update for?
      1. New Enrollment
      2. Termination of Enrollment
      3. Life Event
      4. Waiver
  • Diligently monitor Variable Hour employees – It’s really what this is all about…
    1. A Variable Hour employee who works an average of 30+ hours per week, or 120+ hours per month, over a predetermined measurement period (also known as look-back period) is now eligible for medical benefits.
      1. A measurement period (look back period) is an official company policy and should be treated as such.
    2. Be attentive so you are ready to offer benefits, on time, if they, the Variable Hour employee is eligible
      1. As mentioned at the beginning of this article, companies are being penalized for not offering the benefits and are being fined tens of thousands of dollars for just a few employees who were not offered benefits on time.
  • Be certain to obtain Waiver forms for those who waive benefits
    1. If you are ever fined by the IRS, you will want to provide this document to show you offered the benefit, and the employee declined.
  • Using the names as shown on an individual’s social security card is critical
    1. ACA forms submitted to the IRS are run through a state-of-the-art, one-of-a-kind system to match names and social security numbers. As of now no other Federal forms are run through this system.
    2. If there is a miss-match, the IRS sends back a request to have it corrected which can be time consuming and difficult.
  • Remember: this isn’t just a burden and additional work.  Having to file these reports has actually helped companies save money!  Managing your benefit information helps you audit your activity
    1. Companies have found they had been paying for benefits for years after the employee was no longer employed.
    2. Companies found they had employees enrolled in incorrect plans. Often having them enrolled in higher cost plans than what they should have been or what they were paying for.
    3. Some even discovered they had employees who were not who they said they were, using false ID and causing a whole host of other issues!

If you take these steps to make your ACA reporting be a smooth process you will begin to see that a 1095-C form is simply a by-product of you managing your benefit information just like a W-2 is a by-product of you managing your payroll information.