What Size Businesses Are Required to Report Coverage?

Affordable Care ActCompanies with more than 100 employees are required to provide and report health coverage in 2015, and those with 50 or more have to begin reporting the number of qualified employees for 2016 coverage.  In 2016, the second group of employers with 50 or more employees will have to comply with all coverage and reporting mandates.

The type of coverage required by employers is a separate issue that depends on many factors, but the new forms, 1094 and 1095, are the way that the coverage will be verified and tracked by the IRS.   The reporting rules are complex and small businesses may be well served by using third party assistance such as commercial payroll providers, tax preparation services and transmittal services.

New Forms and Types of Information Required

Form 1095B: Minimal Essential Coverage

This form is important to the employee because it verifies the minimum coverage required under ACA to avoid paying a penalty.  This form is usually supplied by the insurance company that provides the employer coverage, but employers who use a method of self-insurance coverage would have to file the form and supply a copy to employees.

Form 1095C:  Employer Sponsored Coverage

This is the form that employers are required to supply to their employees to list in detail the type and extent of coverage.  The variables to meet the ACA standards are complex and sure to give businesses a challenge as they get accustomed to the form.  The requirement of ‘minimal essential value’ is especially important, as the ACA seeks to limit businesses from offering ‘bare-bones’ policies to employees simply to meet the mandate.  If they do, there will be additional employer payments required to offset the less than minimal coverage.

One Form 1095C must be submitted for every employee, and will be accompanied by one transmittal Form 1094C for all covered employees.

Form W-2 Changes under the ACA

The ACA has also affected the W-2 form used to report wages and tax withholding for employees.  There is a new requirement for employers to report the cost of coverage for each employee in an employer sponsored group health plan on the W-2 Form, even though the amount is not taxable to the employee.  The information is included on the W-2 for informational purposes only, including cost comparison by the employee and government evaluation of program effectiveness.

This information is optional for employers who filed fewer than 250 Forms W-2 in the prior calendar year.  This small employer exemption continues to be extended until the IRS issues further notice, but employers should monitor these developments to make sure they don’t miss any rule changes that would make the reporting mandatory.

Making Sense of the New Forms Required for Businesses Under the Affordable Care Act