Understanding the Affordable Care Act

Clearing Up Confusion over ACA Reporting Documents

CJC Benefits, HR News, Legislative Updates

Health coverage forms due to employees by Mar. 31

The deadline for employers to provide their employees with IRS Forms 1095-B and 1095-C is fast approaching.

As 2016 is the first year under the Affordable Care Act (ACA) that employers must report information to the IRS about the health care coverage offered to employees and distribute copies of the appropriate forms to their employees to assist them with their 2015 income tax filing, a brief explaining the informational forms may be in order.

There are two different 1095 forms that an employee or former employee might get, depending on how coverage was provided:

  • Fully-insured employers with 50 or more full-time employees or equivalents must provide the Form 1095-C to employees. They will receive the Form 1095-B from the insurance company.
  • Self-insured employers with 50 or more full-time employees or equivalents will provide a 1095-C that combines the information that would otherwise appear on both forms.
  • Small businesses with fewer than 50 full-time employers or equivalents that are fully insured are not required to provide either form.
  • Small businesses that are self-insured must provide employees with Form 1095-B, but are not required to send Form 1095-Cs to employees or to the IRS.

Workers can use the forms when completing their individual tax returns, showing that they had qualifying health coverage from their employer during the filing year. But they don’t need the forms to prepare their tax filings. To quell confusion over this point, the IRS updated its webpage with Questions and Answers about Health Care Information Forms for Individuals. The agency clarified that only workers enrolled in a non-group plan through the ACA’s Health Insurance Marketplace should wait to receive a Form 1095-A before filing a tax return. Those waiting for Forms 1095-B or 1095-C do not actually need them to file and can prepare and file their returns using other information about their health insurance. Individuals should not attach any of these forms to the tax return.

Employers need to communicate to workers that they will receive their health coverage form by March 31, but that there’s no need to wait for it before filing taxes. HR should reassure workers that while having the form is helpful, it’s not necessary. If an employee worked for the company and had coverage all year, they can check the box that indicates they were covered. If they changed jobs but had coverage under their previous and current employer without a gap, they can also answer affirmatively.

HR should also be prepared for concerned employees who receive their 1095s after they filed their tax returns. Some may have to be reassured that not having the form before they filed is OK. Even if employees think they might have had a gap in health coverage, they still don’t necessarily need the form. HR should be prepared in this case to let employees know whether or not they had coverage.

Mitigate Panic over ACA Filing Requirements

A recent study by ADP found that 83 percent of midsize employers and 57 percent of larger employers don’t think their employees understand these forms or how they are related to their 2015 tax filing obligations. As always, getting ahead of confusion by providing a roadmap for employees is a benefits communication best practice. Employers are advised to:

  • Communicate to employees about the health insurance coverage forms via the company intranet, payroll portal or manager-led meetings.
  • Translate the IRS instructions regarding the forms into plain language to ensure understanding.

What to Do with Undeliverable 1095-Cs

What if you’ve mailed out 1095-Cs to your workforce and former employees but some of them are returned with invalid addresses?

The IRS doesn’t have detailed instructions on this but it’s advised that employers make a good-faith, reasonable effort to reach all employees and covered former employees and document evidence of the attempt. Of note, the IRS asks employers to keep undeliverable employee copies of W-2 forms for four years.

For assistance with this or other HR-related concerns, please contact CJC Human Resource Services www.cjchrservices.com