Large Employer ACA Reporting 2019
IRS releases 1094-C & 1095-C reporting requirements for 2019
The Affordable Care Act requires applicable large employers (ALEs) to report information to the Internal Revenue Service (IRS) under Internal Revenue Code (IRC) Section 6056. This reporting requirement applies to all employers that meet the definition of an ALE or ALE member.
In general, an ALE, as defined in IRC Section 4980H, is an employer with an average of 50 or more full-time employees plus full-time equivalents for the calendar year prior to the reporting year. All persons or employers treated as a single employer under the IRS aggregation rules are treated as a single employer for the purposes of determining ALE status. Each person or employer comprising the ALE is referred to as an ALE member, and the reporting requirements apply separately to each ALE member. This definition is the same as the definition used in regulations concerning employer responsibilities, also known as the play or pay penalty.
The information being reported by ALE members will be used to administer and ensure compliance with the employer shared responsibility provision and determine compliance with an individual's eligibility for premium tax credits if enrolled on the Marketplace. Individuals for whom information is reported will also receive a statement from the ALE member. This statement will include the information that will be reported to the IRS.
The IRS issued a final rule regarding ALE reporting in March 2014. A fact sheet from the IRS is also available. Employers who meet the definition of ALE or ALE members are urged to read the rule in order to understand how the reporting requirements will impact them. The following article provides general information. Employers should direct specific questions to their legal counsel or tax professional.
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Information to Report
Each ALE member must make an information return to the IRS with respect to each full-time employee. The return must include:
· Name, address, and employer identification number (EIN) for ALE member.
· Name and phone number of ALE member contact person.
· Calendar year for which information is being reported.
· A certification that the ALE member offered its full-time employees and their dependents the opportunity to enroll in minimum essential coverage (MEC) under an employer-sponsored plan by calendar month.
· The months during the calendar year for which coverage under the plan was available.
· Each full-time employee's share of the lowest cost monthly premium (self-only) for coverage providing minimum value offered to the full-time employee, by calendar month.
· Number of full-time employees for each month during the calendar year.
· Name, address, and taxpayer identification number of each full-time employee during the calendar year and the months during which the employee was covered under the plan.
· Other information as specified in forms, instructions, and guidance.
ALE members must provide each full-time employee with a statement that includes the name, address, and EIN of the ALE member, and the individual's information listed above that is reported to the IRS.
How to Report Information
Similar to other IRS reporting required of employers “ such as forms W-2 and 1099 “ the information will be reported to two entities: the IRS and employees in this case.
Statements will be provided to full-time employees using form 1095-C or other form specified by the IRS. The employee information will be transmitted to the IRS using form 1094-C or other form specified by the IRS. Draft versions of forms 1094-C and 1095-C are available for review. The IRS expects to publish draft instructions sometime this month. Forms and instructions will be finalized later this year.
ALE members that file more than 250 returns of any type during the calendar year must file the ALE information return with the IRS electronically, unless the member receives a hardship waiver. An ALE member may contract with a third party to facilitate reporting, but generally remains responsible for the reporting.
Employers with self-funded plans will also be required to report information about minimum essential coverage as required by IRC Section 6055 on a combined form.
The final rule permits a few options for employers who wish to use an alternative method if it better fits their specific situation. From the IRS fact sheet:
"Simplified" Option for Employer Reporting
For employers that provide a "qualifying offer" to any of their full time employees, the final rules provide a simplified alternative to reporting monthly, employee-specific information on those employees.
A qualifying offer is an offer of minimum value coverage that provides employee-only coverage at a cost to the employee of no more than 9.86 percent of the lowest paid employees income based on a 30 hour work week., combined with an offer of coverage for the employee's family. So, if your lowest paid employee earns $11 per hour you multiply times 30 hours ($330) and multiply by .0986 for $32.53 which is the most you could charge for a weekly deduction. The 2019 safe harbor number is based on the Federal Poverty Level and is $99.75 per month or $23.02 per week.
For employees who receive qualifying offers for all 12 months of the year, employers will need to report only the names, addresses, and taxpayer identification numbers (TINs) of those employees and the fact that they received a full-year qualifying offer. Employers will also give the employees a copy of that simplified report or a standard statement indicating that the employee received a full-year qualifying offer.
For employees who receive a qualifying offer for fewer than all 12 months of the year, employers will be able to simplify reporting to the IRS and to employees for each of those months by simply entering a code indicating that the qualifying offer was made.
To provide for a phase-in of the simplified option, employers certifying that they have made a qualifying offer to at least 95% of their full-time employees (plus an offer to their families) will be able to use an even simpler alternative reporting method for 2019. Those employers will be able to use the simplified, streamlined reporting method for their entire workforce, including for any employees who do not receive a qualifying offer for the full year. Those employers will provide employees with standard statements relating to their possible eligibility for premium tax credits.
The final regulations also give employers the option to avoid identifying in the report which of its employees are full-time, and instead to just include in the report those employees who may be full-time. To take advantage of this option, the employer must certify that it offered affordable, minimum value coverage to at least 98 percent of the employees on whom it is reporting.
Reporting is required to begin for calendar years starting with 2015 (reporting for the 2014 calendar year is voluntary). The deadline for reporting to the IRS is Feb. 28 after the end of the year for which the return is being filed, or March 31 if the return is filed electronically. These deadlines begin in 2016 for the first year that reporting is required. Reporting is on a calendar year basis regardless of a group's plan year or renewal date.
Statements must be provided to full-time employees by Jan. 31 after the end of the year for which the information is being reporting.
ALE members may be penalized for failing to file correct returns and for failing to provide responsible individuals and full-time employees with accurate statements. Penalties may be up to $250 per return or statement, up to $1,500,000, but may be waived if the failure was due to reasonable cause and not willful neglect.
This information is provided for general use. Employers should direct specific questions to their legal counsel or tax professional.