The time for ACA reporting is rapidly approaching, and here at Dominion we're of the opinion that we should offer as much information on the subject as possible. Because of this, you can look forward to a variety of resources coming your way, ranging from blog posts to webinars and even an ACA eBook. For now, however, let's go over Forms 1094 and 1095 and Code Series 1 and 2.
Forms 1094 and 1095
Essentially Forms 1094 and 1095 are the W-3s and W-2s of benefits, respectively. These forms are required to prove to the IRS that your employees were offered an affordable method of health insurance. These forms are divided into 1094-B and -C and 1095-B and -C. Your company’s insurance carrier will typically submit the B Forms for you, but you, as the employer, are responsible for supplying the IRS with the C Forms.
The 1094-C, which is also known as the Employer Transmittal Form, is used to supply the IRS with the following information:
- The number of 1095 C’s that are being filed.
- Whether the ALE member is a part of an aggregate group. If so, other members of that group must be provided*.
- Whether the employer qualifies for transition relief.
- The months that the employer provided minimum essential coverage to a set percentage of its full-time employees.
The IRS uses the 1095-B forms to determine how individuals were or were not covered in order to enforce the individual mandate. This form and the income tax return are used to verify the required minimum coverage.
The 1095-C, which is also known as the Offer of Coverage to the Employee Form, will need to be submitted by you to the IRS and to the employee. This will provide the following information:
- Basic information for the employees and employers, similar to that found on a W-2.
- Whether insurance was offered.
- Whether or not the individual accepted coverage.
- Those individuals who are self-insured are required to list each individual who is covered by their insurance, including dependents of employees.
So who needs the 1095-C Form? Employees that are considered full-time, or work more than 30 hours per week (or an average of 130 hours per month) must be offered qualifying health coverage to avoid fines. The 1094 and 1095 reports are how the government determines who is complying and who requires fines. Therefore, each eligible employee must receive a 1095-C.
Self-Insured vs. Fully-Insured
Only self-insured employer groups are required to complete Part 3 of the 1095-C. Employer groups that self-fund their medical insurance must complete the final section of the 1095-C for each employee. Part 3 requires a list of each covered individual on the employee's coverage and the months in which the member was enrolled, if not all year. Personal information for the employee, spouse and dependents are required.
Code Series 1 and 2
The various offers of coverage are defined by two different series of codes. Code series 1 and 2 are entered in the second part of the 1095-C. Code series 1 begins with 1A through 1K, with 1J and 1K having only been added this year; each letter defines different scenarios regarding the employee’s offer of coverage. The codes 2A through 2I further describe an employee’s scenario, providing the IRS with information to determine whether or not a penalty should be applied.
For example, if line 14 states that there was no offer of coverage, then the code for line 16 could explain to the IRS that the employee was not active for that month. Therefore, the employer is not liable and will not be subject to penalties.
These code series must be interpreted by the employer groups since each employee’s situation will differ. For more information, please refer to the IRS instructions.
Want to see how Dominion can assist with all your ACA needs? Check out our ACA page here!
*An aggregated group is a selection of affiliated entities that are under a common control. If your business is under 50 FTEs, but you are a part of an aggregated group that is commonly owned, you might still be required to file. In this instance, seek advice from your employment lawyer before coming to a conclusion on whether or not you will need to file. If so, you will have to file with the companies you are associated with under your commonly controlled group.