Does Your Business Need to Report Employee Health Coverage?

Employee health coverage is a key component of many companies’ benefits packages. However, managing the administrative duties that come with offering health insurance can be complex. One critical area is understanding the federal reporting requirements, particularly those of the IRS. Does your business need to comply, and if so, what steps must be taken? Below are answers to some frequently asked questions.

What is the Employee Threshold for Compliance?

The Affordable Care Act (ACA), implemented in 2010, established specific responsibilities for employers regarding health coverage. Businesses with 50 or more full-time employees, known as Applicable Large Employers (ALEs), are required to file Forms 1094-C and 1095-C to report health coverage information for their employees.

- Form 1094-C: This form is used to transmit the 1095-C forms to the IRS and includes summary information about the employer and its employees.

- Form 1095-C: This form provides detailed information on each employee’s health coverage. It also helps determine whether the employer is subject to payments under the ACA's employer shared responsibility provisions, often referred to as the "employer mandate."

Under the ACA, an employer may face penalties if it fails to offer affordable, minimum essential coverage that provides minimum value to the majority of full-time employees and their dependents. Additionally, Form 1095-C is used to determine if employees are eligible for premium tax credits.

If your business has fewer than 50 full-time employees (or their equivalent) on average during the prior year, you are not considered an ALE for the current year. Consequently, you are not subject to the employer shared responsibility provisions or the associated reporting requirements.

What Information Needs to be Reported?

For ALEs, Form 1095-C must include the following details for each employee classified as full-time for any month during the calendar year:

- Employee’s name, Social Security number (SSN), and address

- Employer’s Identification Number (EIN)

- Contact person’s name and phone number for the employer

- Description of the health coverage offer, using specific codes provided in the form instructions, as well as the months in which coverage was offered

- The employee’s share of the cost for the lowest-cost, minimum-value plan offered by the employer, listed by calendar month

- The applicable safe harbor codes regarding the employer mandate penalty

What if We Offer a Self-Insured or Multi-Employer Plan?

If an ALE provides health coverage through a self-insured plan, additional information must be reported on Form 1095-C. A self-insured plan may include options that offer a mix of insured and self-insured arrangements.

For employers that offer health coverage through a multiemployer health plan, the insurance issuer or plan sponsor will provide the necessary information to enrolled employees. Employers who provide self-insured coverage but are not subject to the employer mandate must use Forms 1094-B and 1095-B to report on enrolled employees.

Employers should also indicate on Form 1094-C if any eligibility certifications for relief from the employer mandate apply. Be aware that reporting requirements can be more complex if your business is part of an aggregated ALE group or if coverage is provided through a multiemployer plan.

What Are the Reporting Requirements for Form W-2?

Employers must report certain health coverage information on employees’ Forms W-2. However, the details reported on Form W-2 differ from those on Form 1095-C. The information provided on either form does not make employer-provided health coverage taxable for employees; it is for informational purposes only.

This overview simplifies the key reporting obligations under the ACA. For specific questions or assistance with compliance, please reach out to us.