Offering employee health coverage is a vital part of many businesses’ benefits packages, but navigating the reporting requirements can be challenging. As a business owner, it’s essential to understand your obligations under federal laws like the Affordable Care Act (ACA) to ensure compliance and avoid potential penalties. So, does your business need to report employee health coverage to the IRS? Let’s dive into the details and answer some common questions.
How Many Employees Trigger Reporting Requirements?
Under the ACA, businesses with 50 or more full-time employees, known as Applicable Large Employers (ALEs), are required to report employee health coverage to the IRS. Specifically, ALEs must file Forms 1094-C and 1095-C to report details of the health coverage offered and the enrollment status of each employee.
- Form 1094-C: This form serves as a summary that provides details on health coverage offers made to employees and transmits the individual employee forms to the IRS.
- Form 1095-C: Each full-time employee receives this form, which outlines the health insurance offered, the months they were covered, and the share of costs.
These forms are also used to determine if an employer is liable for any payments under the “employer mandate.” ALEs that fail to offer affordable minimum essential coverage to their full-time employees and their dependents may face penalties. Form 1095-C also helps the IRS determine employee eligibility for premium tax credits.
For businesses with fewer than 50 full-time employees, including equivalents, the employer is not considered an ALE and therefore is exempt from the employer mandate and related reporting requirements for that year.
What Information Needs to Be Reported?
On Form 1095-C, ALEs must include the following information for each full-time employee who was employed during any month of the calendar year:
- The employee’s name, Social Security number (SSN), and address.
- Employer’s EIN (Employer Identification Number).
- Contact person’s name and phone number.
- A description of the health coverage offered, using designated codes.
- The monthly cost of the lowest-cost plan available to full-time employees.
- Safe harbor codes related to the employer mandate penalty, if applicable.
Reporting for Self-Insured and Multiemployer Plans
If your business offers a self-insured health plan, you’ll need to include additional information on Form 1095-C. A self-insured plan may offer both insured and self-insured enrollment options, so ensure all necessary details are reported accurately.
For employers that offer coverage through a multiemployer health plan, the plan sponsor or insurance issuer is responsible for providing health coverage information to employees. However, if your business provides self-insured health coverage but is not subject to the employer mandate, you’ll need to file Forms 1094-B and 1095-B for covered employees instead.
Keep in mind that these reporting requirements become more complex if your business is part of an aggregated ALE group or uses a multiemployer plan. Be sure to consult with an expert if this applies to your situation.
What Are the W-2 Reporting Requirements?
In addition to Forms 1094-C and 1095-C, employers must also report certain health coverage information on employees’ W-2 forms. This information is for reporting purposes only and does not affect the taxability of the coverage provided. It’s essential to remember that W-2 reporting and Form 1095-C reporting are separate obligations.
Get Help with Health Coverage Reporting
Understanding your business’s employee health coverage reporting requirements is crucial for avoiding penalties and ensuring compliance. While this guide provides an overview of the essential obligations, the regulations can be complex, especially for businesses with unique circumstances like self-insured plans or multiemployer coverage.
If you need help navigating these rules or ensuring proper filing, contact us today for expert assistance.
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Q&A below:
What is the minimum number of employees a business must have before being required to report health coverage?
Under the Affordable Care Act (ACA), businesses with 50 or more full-time employees, known as “applicable large employers” (ALEs), must report health coverage information using Forms 1094-C and 1095-C. Businesses with fewer than 50 full-time employees are exempt from these reporting requirements.
What information needs to be reported by applicable large employers?
ALEs must report details for each full-time employee, including their name, Social Security number, address, the employer’s EIN, and information about the health coverage offered, such as cost and the months of coverage. They must also indicate if any safe harbor provisions apply under the employer shared responsibility provisions.
What if our business offers a self-insured health plan?
If an ALE provides health coverage through a self-insured plan, additional information must be reported on Form 1095-C. If a business offers self-insured coverage but is not subject to the employer mandate, reporting is done using Forms 1094-B and 1095-B for enrolled employees.
What health coverage information should be reported on employees’ W-2 forms?
Employers are required to report specific health coverage details on employees’ W-2 forms, though this information differs from what is reported on Form 1095-C. The W-2 reporting is for informational purposes and does not make employer-provided coverage taxable to employees.
