Straight Talk on ACA Compliance: IRS Forms 1094 & 1095

Posted by Melanie Crow on Jul 14, 2015
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ACA complianceReporting and filing IRS forms 1094 and 1095 is a new Affordable Care Act (ACA) requirement for 2015 that communicates the offer and coverage of health insurance for each of your employees. Though this reporting technically happens in 2016, that doesn’t mean you can put it off. In order to file on time and minimize any fines related to the employer shared responsibility provision of the ACA, there’s data you need to be monitoring now. Don’t panic - there’s plenty of confusing information out there – which certainly doesn’t help. But forms 1094 and 1095 aren’t much more complicated than the W-2s and W-3 you generate annually. And the good news is you’ve already got a team in place that can help.

First things first. 50 or more employees?

The new 1094/1095 reporting is required for employers with an average of 50 full-time and full-time equivalent employees (FTEs) during the prior calendar year. In general, a full-time employee is defined as having worked 30 hours or more per week or 130 hours during a calendar month. FTEs are determined by combining the number of hours of service of all part-time employees for the month, but only up to 120 hours per employee, then dividing the total by 120. Add full time employees and FTEs to get your total number for each month. Add monthly totals and divide by 12 to get your average for the previous year. If you’ve hit 50 or more, it means you are an applicable large employer and it’s time to get compliant. 

If you’re not certain how your mix of full-time and part-time employees add up or if you have seasonal workers or common ownership, go to the IRS webpage, Determining if an Employer is an Applicable Large Employer (ALE).

Data Breakdown

Now that you know your status, gathering all the right information for monitoring compliance and reporting may seem like the equivalent of getting a root canal. Tackle it anyway! Though the 1094/1095 forms aren’t due until 2016, the information within those forms is based upon this year, which is why you need to start compiling and monitoring it now. Plus, it’s better to assess your benefits program now while there is still time to course correct and minimize or eliminate steep fines for noncompliance. Here’s a list of what you’ll need to be tracking:

  • Date of hire and termination date
  • SSN, date of birth and state of residence
  • Hours worked and paid, and not worked but paid
  • Jury duty, FMLA and USERRA, other state-mandated leaves with start and end dates
  • Payroll begin and end dates
  • Eligibility status and proof of medical insurance offering
  • If eligible, enrolled or waived
  • Benefits plan funding<

Reference the draft versions of the 2015 IRS form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2015 IRS form 1095-C, Employer-Provided Health Insurance Offer and Coverage, to see exactly what you’re required to report.

Note: Self-insured ALEs have additional information to report on forms 1094-C and 1095-C, including employee share of cost and the list of covered individuals. Self-insured employers that are not an applicable large employer must use forms 1094-B and 1095-B.

Your Dream Team

Believe it or not, you’ve likely got all the components you need to expertly handle your ACA compliance monitoring and reporting. Your benefits administrator or HR system will have all the benefits data on-hand that you need. Your payroll service provider can help you aggregate relevant pay-related data for more streamlined reporting with less stress. And you can and should utilize your broker, attorney and tax advisor before making business changes that may impact your compliance. As with any new legislation, you’re best served by investigating all the legal and monetary implications of your current practices and projected future changes. But you’ve already got help in place, now it’s time to use it!

Buyer Beware

This isn’t news for anyone in a business endeavor. But there are a couple of things specific to ACA reporting that you should be aware of. First, this is your data. You own it. Some companies are charging to export or import your data from or into their own systems to help you with compliance monitoring and reporting. This may very well be worth the expense to you, just be sure that you’re getting a cost breakdown up front. Also be sure to review all costs for specific ACA-related reports that allow you to monitor compliance throughout the year as well as costs to report and file 1094 and 1095s on your behalf at year-end. Benefits administration firms, HR software companies and payroll providers have offerings, and pricing structures will differ. Ask for details and you won’t be unduly surprised later.

 Download our ACA Terms to Know FREE List of Key ACA Terms & Definitions

  For tax and legal guidance, please seek the counsel of a certified tax professional and a licensed attorney. Inova Payroll does not provide professional tax or legal services.

Topics: Affordable Care Act

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