Employer Shared Responsibility and Reporting
The Affordable Care Act defines large employers as companies that have, on average, at least 50 full-time (or full-time equivalent) employees. These employers are required to provide health coverage that is affordable and meets a minimum value or pay a tax penalty.
The provision was originally slated to take effect in 2014 and then, under transitional relief, moved to 2015. Then in February 2014, the administration announced final rules that provide additional flexibility for employers.
Play or Pay
Nicknamed the "Play or Pay Rules," this provision applies to for-profit, nonprofit and government employers, and defines a full-time employee as an employee who was employed on average at least 30 hours of service per week during the preceding calendar year. The penalty applies if the employer does not offer coverage that meets the minimum value standard and is affordable, and at least one employee gets financial help through their state marketplace or the federal Health Insurance Marketplace.
- Minimum value standard: Employer-sponsored health plans must cover at least 60 percent of covered costs.
- Definition of affordable coverage under Safe Harbor rules:
- Employees pay no more than 9.5% of their household income for their contribution of an employer-sponsored health plan.
- Employers that offer more than one health plan: The affordability test applies to the lowest-cost option available to the employee as long as that option meets minimum value.
Employers can use the government-developed calculator to check minimum value. The Health Net Summary of Benefits of Coverage (SBC) states whether the plan meets minimum value.
The IRS published final regulations on February 12, 2014. Under the final regulations, applicable large employers that have fewer than 100 full-time employees generally will have until 2016 to comply with the pay or play rules. Applicable large employers with 100 or more full-time employees must comply starting in 2015.
Employer Shared Responsibility Reporting Requirements (ACA Section 6056)
Applicable Large Employers (ALEs) who are subject to the employer shared responsibility provisions of the Affordable Care Act must comply with IRS reporting requirements. The IRS defines an ALE as an employer with at least 50 full-time employees or a combination of full-time and part-time employees that is equivalent to at least 50 full-time employees (for example, 100 half-time employees equals 50 full-time employees).
Beginning in 2016, ALEs must annually report the offer of health insurance coverage to employees, and send a statement about the offer of coverage to full-time employees. The IRS will use the information to determine if individuals are eligible for a marketplace subsidy and/or if ALE owes a shared responsibility penalty.
When to report and send statements to employees
Employer shared responsibility reporting begins in 2016, for the 2015 calendar year. Employers are required to:
- File Forms 1094-C and 1095-C with the IRS by February 28 (March 31 if filing electronically); and
- Send Form 1095-C to each full-time employee (including former employees employed at any point during the prior year) by January 31. Attention: IRS Notice 2016-4, released December 28, 2015, provides additional time for Employers to comply with Employer Shared Responsibility filing requirements for tax year 2015. Applicable Large Group Employers must provide Form 1095C to full time employees by March 31, 2016 and file the 1094C with the IRS by May 31, 2016 or by June 30, 2016 if filing electronically.
- The form may be sent with an employee’s W2 statement.
- Groups may send Form 1095-C to employees electronically, but only if the group obtains the employee’s consent in advance and follows all the rules for notice, updating and withdrawal of consent.
Note: ALEs with self-insured plans may use Forms 1094-C and 1095-C to fulfill reporting requirements under Sections 6055 (MEC reporting) and 6056 (Employer Shared Responsibility reporting). Non-ALE groups (i.e., small business groups) with self-insured plans must also report under Section 6055 but are not required to report under Section 6056.
What to include on the forms
- Identifying information for your organization, including your Employer Identification Number (EIN) and a name of a person the IRS may contact;
- Information about whether you offered coverage to 70 percent of your full-time employees and their dependents in 2015. (In 2016, the threshold changes to 95 percent);
- Total number of 1095-C forms you issued to employees;
- Full-time employee and total employee counts by month; and
- Whether you are eligible for transition relief under Section 4980H.
- Who is/was a full-time employee for each month;
- Identifying information for employer and employee, including the employee’s TIN/SSN;
- Information about the health coverage offered by month, if any;
- The employee's share of the monthly premium for lowest-cost self-only minimum value coverage;
- Months the employee was enrolled in your coverage;
- Months the employer met an affordability safe harbor with respect to an employee and whether other relief applies for an employee for a month; and
- If the employer offers a self-insured plan, information about the covered individuals, including dependents enrolled in the plan, by month.
Filing requirements at-a-glance
In addition to the forms that health plans are required to file, the marketplaces and certain employer groups also have form-filing requirements. The chart below outlines who sends what form.
The chart below summarizes the responsibility for entities that provides Minimum Essential Coverage and are subject to Employer Shared Responsibility.
|Plan Type||Minimum Essential Coverage Reporting (Section 6055)||Employer Shared Responsibility Reporting (Section 6056)|
|Individual (marketplace plan)||Form 1095-A Sent by the marketplace||N/A|
|Individual (non‑marketplace)||Forms 1094-B and 1095-B Filed and sent by the health plan||N/A|
|Small Group fully insured plan (SHOP and non‑marketplace)||Forms 1094-B and 1095-B Filed and sent by the health plan||N/A|
|Small Group self-insured plan (non-ALE)||Forms 1094-B and 1095-B Employer's responsibility to file and send statements to employees/former employees||N/A|
|ALE fully insured plan||Forms 1094-B and 1095-B Filed and sent by the health plan||Forms 1094-C and 1095-C (sections I and II only) Employer's responsibility to file and send statements to employees|
|ALE self-insured plan||
Forms 1094-C and 1095-C (all sections)
Forms 1094-C and 1095-C (all sections)
Additional forms and information
- IRS Form 1095-A – Health Insurance Marketplace Statement
- IRS Form 1094-C – Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
- IRS Form 1095-C – Employer-Provided Health Insurance Offer and Coverage Insurance
- IRS Form 1094-B – Transmittal of Health Coverage Information Returns
- IRS Form 1095-B – Health Coverage
- IRS FAQ – ESR section 6056 reporting
This information is for general purposes only and is not legal or tax advice. For more detailed information about IRS filings, taxes or legal implications, please contact your professional tax advisor or legal counselor.