At the conclusion of a calendar year, each ALE must report the coverage it offered (or did not offer) to any person employed FT for at least one calendar month to the IRS, for that previous calendar year.
The ACA IRS reporting determines two major items:
- The ALE’s compliance with the ACA employer mandate
- Potential non-compliance penalty assessments on the ALE by the IRS
- Must report on the coverage offered – or not offered – to FT employees and their dependents, but at the employee-only rate (after the employer’s contribution) for coverage
- ALEs only report on the lowest-cost MEC/MV plan offered (at the “employee only” rate), not the plan in which the employee is enrolled.
- Employees’ eligibilities for Premium Tax Credits (PTCs) on the state exchange (i.e., Covered California, Nevada Health Link)
- Taxpayers are not eligible for federal PTCs from the health insurance exchange if they have been offered affordable, minimum-value MEC by an employer, regardless of the employer’s size and ALE status.
- When individuals enroll for coverage on the state exchange, they self-report their household incomes and disclose whether they have been offered employer-sponsored coverage to determine their eligibility for PTCs.
- Additionally, when a full-time employee of an ALE waives their employer’s offer of affordable MEC/MV coverage, the ALE reports this to the IRS using a safe harbor code. The IRS uses this information to understand the offers (or non-offers) of coverage made by employers. The IRS also uses this information to determine eligibility for PTCs based on these factors. Any person who erroneously accepts an advanceable Premium Tax Credit must repay it in full. Consultation with a CPA and/or tax counsel is recommended.
Health insurance carriers must separately report coverage actually maintained by Americans, which demonstrates individual compliance with the Individual Mandate at the federal level, as well as at the state level in California. Employers of any size with self-funded insurance must also report coverage maintained to the IRS, since there is no insurance carrier in place to do so.
Note: Most other states, including Nevada, do not have state individual mandates. There are currently six “states” that have individual insurance mandates: California, District of Columbia (D.C.), Massachusetts, New Jersey, Rhode Island, and Vermont.
Only ALEs with fully insured coverage are required to complete ACA IRS reporting. All employers with self-funded coverage must complete ACA IRS reporting, regardless of size and ALE status. The information in this guide relates to employers with fully insured coverage.
IRS Form 1094-C contains company information. The ALE completes one of these forms, which tells the IRS who the employer is, how many reports it is submitting, certificates of eligibility, affiliated companies, employee count, etc.
IRS Form 1095 contains employee information, related to the coverage offered by the ALE. An ALE must complete one form for any person employed FT for one full calendar month of the reporting year. State health insurance exchanges and health insurance carriers also use form 1095 to report coverage held/maintained by the taxpayer. There are three versions of IRS form 1095, and copies of each form must be given to the IRS as well as to the taxpayer whose information is reported.
Note: Some carriers release 1095-B forms by request and/or online portal, in accordance with a recent ACA change.
Most taxpayers receive multiple Forms 1095 from different entities as follows:
- IRS Form 1095-A is used by the state exchanges, which demonstrates possession of MEC to the IRS as part of the ACA’s individual mandate. Anyone with coverage from the state individual exchange (Covered California, Nevada Health Link, etc.) will get this form.
- IRS Form 1095-B is used by health insurance carriers, which demonstrates possession of MEC to the IRS as part of the ACA’s individual mandate. This form tells the IRS what coverage was elected and held by the taxpayer.
- IRS Form 1095-C is used by ALEs (both fully insured and self-funded policies). It demonstrates the ALE’s compliance with the employer mandate, and reports on coverage offered to employees. For self-funded employers, additional reporting is required that demonstrates possession of MEC coverage to the IRS for enforcement of the ACA’s individual mandate.