Filing Form 1095-C: Employer Health Insurance Reporting Guide

Form 1095-C: A Comprehensive Guide for Employers

Navigating the intricacies of employer healthcare and health insurance reporting is essential for compliance with the Affordable Care Act (ACA). Form 1095-C, known as "Employer-Provided Health Insurance Offer and Coverage," is a pivotal document that Applicable Large Employers (ALEs) must file to report health coverage information offered to employees. This guide will empower you with the knowledge needed to understand, complete, and file Form 1095-C effectively, ensuring compliance and avoiding penalties.

Understanding Form 1095-C

Form 1095-C is a document used by Applicable Large Employers (ALEs)—those with 50 or more full-time employees, including full-time equivalent employees—to report details about the health insurance coverage offered to their workforce. This form plays a dual role:

  1. Informing Employees: It provides employees with information about the health coverage offered, which is crucial for their individual tax returns and determining eligibility for the premium tax credit.
  2. IRS Reporting: It assists the Internal Revenue Service (IRS) in enforcing employer shared responsibility provisions and assessing employee eligibility for premium tax credits.

Who Needs to File Form 1095-C?

An ALE is required to file Form 1095-C for each employee who was a full-time employee for any month of the tax year. This includes:

  • Full-Time Employees: Generally, those averaging at least 30 hours of service per week.
  • Non-Full-Time Employees Enrolled in Self-Insured Coverage: If the employer offers a self-insured health plan, Form 1095-C must also be filed for any non-full-time employee (and any spouse or dependent of that employee) who enrolls in the coverage.

Each ALE member, or separate entity within a controlled group, is responsible for its own reporting. Therefore, if you are part of an aggregated ALE group, each employer within the group must file Forms 1095-C for its respective employees.

Components of Form 1095-C

Form 1095-C is divided into three parts:

  1. Part I – Employee and Employer Information: This section includes basic identification information for both the employee and the employer, such as names, addresses, and Social Security Numbers (SSNs) or Employer Identification Numbers (EINs).
  2. Part II – Employer Offer and Coverage: This part details the coverage offered to the employee, the employee's share of the lowest-cost monthly premium for self-only minimum essential coverage, and applicable safe harbor codes.
  3. Part III – Covered Individuals (Self-Insured Coverage Only): This section lists individuals enrolled in the self-insured health coverage, including the employee and any dependents, along with their SSNs and the months they were covered.

Step-by-Step Guide to Completing Form 1095-C

Completing Form 1095-C accurately, along with other necessary tax forms related to taxation, is crucial for compliance with IRS requirements. Here’s a detailed guide to help you fill out each section correctly.

Step 1: Fill Out Part I – Employee and Employer Information

  • Employee Information: Provide the employee’s name, address, and Social Security Number (SSN). Ensure the information matches IRS records to avoid discrepancies.
  • Employer Information: Enter the employer's name, Employer Identification Number (EIN), address, and contact details.

Step 2: Complete Part II – Employer Offer and Coverage

This section outlines the health coverage details:

  • Line 14 (Offer of Coverage): Use the appropriate code from the IRS instructions to indicate the type of health coverage offered to the employee for each month. For example:
    • Code 1A: Qualifying Offer (affordable coverage meeting the Federal Poverty Line Safe Harbor).
    • Code 1E: Minimum essential coverage offered to employee, spouse, and dependents.
  • Line 15 (Employee Contribution): Enter the employee’s share of the lowest-cost monthly premium for self-only coverage offered, even if they did not enroll.
  • Line 16 (Safe Harbor Codes and Other Relief): Enter the code indicating applicable circumstances, such as affordability safe harbors or exemptions (e.g., Code 2C for employees enrolled in the offered coverage).

Step 3: Fill Out Part III – Covered Individuals (Self-Insured Plans Only)

If your organization offers a self-insured health plan:

  • List all individuals (employees, spouses, and dependents) covered under the plan.
  • Provide their names, SSNs (or date of birth if SSN is unavailable), and indicate the months they were covered during the calendar year.

Avoiding Common Errors

  • Ensure accurate SSNs or EINs are provided.
  • Use correct codes in Part II.
  • Include required forms for covered non-full-time employees in self-insured plans.

How to File Form 1095-C

Employers must file Form 1095-C with the IRS and provide copies to employees for the relevant tax year. Here's how to handle both:

  1. Filing with the IRS:
    • Submit Form 1095-C along with Form 1094-C, the transmittal form summarizing the 1095-C filings for the year.
    • File electronically if submitting 250 or more forms. Smaller employers may file on paper but are encouraged to file electronically.
    • Use the IRS Affordable Care Act Information Returns (AIR) system for electronic filing.
  2. Providing to Employees:
    • Distribute a copy of Form 1095-C to each eligible employee, either in person or via mail. Electronic delivery is allowed with the employee’s consent.

Key Deadlines for Form 1095-C Filing

  • Employee Copy: Must be provided by January 31 (or the next business day if this falls on a weekend).
  • IRS Submission (Paper Filing): February 28.
  • IRS Submission (Electronic Filing): March 31.

Penalties for Non-Compliance

Failing to file Form 1095-C or providing inaccurate information can result in substantial penalties under the Internal Revenue Code (IRC) Sections 6721 and 6722:

  • Failure to File: $310 per form, up to a maximum annual penalty of $3,783,000.
  • Failure to Furnish to Employees: $310 per form, with the same maximum cap.

The IRS may waive penalties for reasonable cause, such as unforeseen circumstances or significant efforts to comply.

Correcting Form 1095-C

If errors are identified after submission:

  • To Correct Employee Copies: Mark the “CORRECTED” box on the new Form 1095-C, update the erroneous information, and distribute it to the employee.
  • To Correct IRS Filings: Submit both a corrected Form 1095-C and a new Form 1094-C. Use specific correction codes outlined in IRS instructions.

Tips for Streamlining Form 1095-C Filing

  • Invest in specialized software to automate the reporting process and reduce the risk of errors.
  • Keep meticulous records of employee work hours, coverage offers, and enrollment details.
  • Regularly review IRS guidance and updates to ensure compliance with ACA reporting rules.

FAQs

  1. What’s the difference between Form 1095-B and 1095-C?
    • Form 1095-B reports health coverage provided by insurers or small employers with self-insured plans. Form 1095-C is used by ALEs to report employer-provided health insurance offers and coverage.
  2. Can an employee file taxes without Form 1095-C?
    • Yes, employees can file their tax returns without Form 1095-C. However, the form provides helpful information for determining eligibility for premium tax credits.
  3. What should employers do if employees don’t receive Form 1095-C?
    • Confirm the address on record and resend the form. For electronic delivery, verify that consent was obtained and email instructions were followed.

Staying Ahead: Navigating ACA Reporting with Confidence

The IRS periodically updates the rules and codes for Form 1095-C filing. Employers should monitor IRS bulletins and consult with tax professionals or legal advisors to remain compliant with evolving requirements. By following this guide, employers can confidently navigate the complexities of Form 1095-C filing, ensuring accuracy and compliance with ACA reporting mandates.

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