This August the Internal Revenue Service (IRS) released draft instructions for Forms 1094-C, 1095-C and other tax forms in order to collect information regarding employer provided health care plans. These forms affect employers under the Affordable Care Act’s (ACA) Employer Mandate (generally employers with 50 or more full-time employees), and will start being collected on Feb. 28, 2016 (or March 31, 2016 for those filing electronically) using information from the 2015 calendar year. Form 1095-C will need to be given to employees beginning on Jan. 31, 2016 and each year thereafter. Many clubs have more than 50 full-time employees or are close to reaching that threshold, therefore it is critical to prepare for these forms and carefully collect the necessary employee health care information in 2015 and beyond.
Terminology
Form 1095-C will be used to report whether a club has offered adequate coverage to its employees. Form 1094-C is a transmittal form which requires additional information to be reported under Section 6056 and for Section 6055 if the employer is self-insured and has 50 or more full-time employees or full-time equivalents (also known as Applicable Large Employer (ALE) Members). Employers with 250 or more filings are required to file their forms electronically.
Employers with 50 or more FTEs and subject to Section 6056 can file multiple Forms 1094-C if applicable. In doing so, they must file one Form 1094-C as the Authoritative Transmittal. The Authoritative Transmittal is a single Form 1094-C that reports all employer-level data for all full-time employees, including all Forms 1095-C. To identify the Authoritative Transmittal in your filings, check the box on line 19 on Form 1094-C.
Though the instructions for these filings are complex, employers must abide by them in order to avoid serious penalties.
Form 1094-C and Authoritative Transmittal Walkthrough
In part one of the 1094-C, employers must list basic contact information and the total number of Forms 1095-C submitted. Employers only fill out part two if the 1094-C is being used as an Authoritative Transmittal. In this section employers are required to report the total number of Forms 1095-C to be filed for their full-time employees as well as non-full-time employees enrolled in the organization’s health care plan. Certain “simplified reporting” rules can be filled in on Line 22 of the Authoritative Transmittal.
The first “simplified reporting” rule is Qualifying Offer Method. This rule applies to employers under the Employer Mandate who shared a responsibility payment and made a minimal essential coverage offer, a “Qualifying Offer,” to the employee. The amount paid by the employee must not exceed 9.5 percent of the poverty line (approximately $1,100 in 2015) and must cover at least 60 percent of actuarial value. Coverage must have also been offered to the employee’s dependents. If these stipulations were not followed for employees enrolled through the exchange and receiving premium tax credits, a $3,000 penalty will be incurred.
Next, the Qualifying Offer Method Transition Relief applies to employers that made a Qualifying Offer to at least 95 percent of its full-time staff. This simplification only applies to the 2015 calendar year.
The third “simplified reporting” rule is Section 4980H (Employer Mandate) Transition Relief and is divided into two parts. The first of which is 50-99 Transition Relief, which applies to businesses more than 50 and fewer than 100 full-time employees in 2014 and does not enforce the Employer Mandate penalties for 2015. Though, Forms 1094-C and 1095-C must still be filed. The second part, the 100 or More Transition Relief, affects organizations with more than 100 employees and states that if an Employer Mandate penalty is incurred, it will be calculated by reducing the employer’s number of full-time employees by the employer’s applicable share of 80 instead of 30.
The final simplification is the 98 Percent Offer Method, which applies to employers that can claim to have offered the minimum required coverage to at least 98 percent of its employees and dependents.
On part three of Form 1094-C, monthly employer information is only required on the Authoritative Transmittal, like in part two. This section allows employers to report a variety of monthly data such as if essential coverage was offered to at least 95 percent of employees, the total number of full-time employees, the organization’s total number of employees (both full- and part-time) full-time staff and other information.
The final section, part four is also only to be completed on the Authoritative Transmittal if the employer has 50 or more employees during any point of the year.
These instructions are still in draft form and are therefore subject to change, though the information requested in unlikely to be modified. Clubs should work with their CPAs now if they have not done so already to consider the implications of these forms and devise a strategy to comply with them. To review the draft instructions, please visit http://www.irs.gov/pub/irs-dft/i109495c–dft.pdf.
Phillip Mike is NCA’s Communication Manager.