IRS Issues Forms and Instructions for ACA Reporting

New reporting and disclosure requirement may catch some employers off-guard

Stephen Miller, CEBS By Stephen Miller, CEBS February 10, 2015

updated 8/11/2015

Update: On June 16, 2015, the IRS issued revised draft forms for reporting 2015 information required by the Affordable Care Act; some of these were subsequently revised in August 2015:

2015 Draft IRS Form 1095-A: Health Insurance Marketplace Statement (as revised Aug. 4, 2015)

2015 Draft IRS Form 1095-B: Health Coverage (as revised Aug. 6, 2015)

2015 Draft IRS Form 1095-C: Employer-Provided Health Insurance Offer and Coverage (as revised Aug. 6, 2015)

2015 Draft IRS Form 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns

In addition, on Aug. 6, 2015, the IRS also issued:

2015 Draft IRS Instructions for Forms 1094-B and 1095-B

2015 Draft IRS Instructions for Forms 1094-C and 1095-C

On Aug. 11, 2015, the IRS issued:

General Rules and Specifications for ACA Substitute Forms 1095-A, 1094-B, 1095-B, 1094-C and 1095-C

“The new drafts largely follow the forms issued for those who voluntarily chose to report information for 2014,” according to an August 2015 analysis by law firm Ballard Spahr LLP. “The most significant changes include additional procedural guidance on obtaining extensions and filing corrections, instructions for governmental employers on designating another governmental entity to complete the reports, and clarifications on the reporting of coverage for COBRA participants.”

Also see the SHRM Online article Reporting for ACA Mandates: Final Forms and Additional Guidance.

In early February 2015, the IRS released draft versions of the forms that employers subject to the Affordable Care Act (ACA) “shared responsibility” mandate—sometimes referred to as “play or pay”—will be required to file in order to show that the health coverage they offer to their employees is compliant with ACA requirements. The forms implement reporting obligations under Internal Revenue Code sections 6055 and 6066, which the ACA added to the tax code.

The IRS also released a new brochure Affordable Care Act: Reporting Requirements for Applicable Large Employers, which discusses getting ready for monthly tracking and preparing to fill out new IRS forms in 2016.

The forms include:

Form 1095-B: Health Coverage. To be filed with the IRS and provided to taxpayers by insurers, as well as by self-insured employers that are not subject to the employer "shared responsibility" mandate, to verify that individuals have minimum essential coverage that complies with the individual coverage requirements.

Form 1095-C: Employer-Provided Health Insurance Offer and Coverage. To be filed by employers with 50 or more full-time or full-time equivalent employees to verify their compliance with the employer "shared responsibility" mandate. Form 1095-C will also be used to establish employee eligibility for premium tax credits if the employer does not offer affordable and adequate coverage.

Form 1094-B: Transmittal of Health Coverage Information Returns and Form 1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns. These are the transmittal forms that insurers and employers will use to transmit the individual 1095-Bs and 1095-Cs to the IRS.

“Insurers and self-insured health plans will provide a Form 1095-B to each of their enrollees and members, and file these forms, together with a transmittal Form 1094-B with the IRS,” explained Timothy Jost, J.D., a professor at the Washington and Lee University School of Law, in an earlier post regarding the draft forms on the Health Affairs Blog. “Large employers must provide a Form 1095-C to each employee, and transmit these, together with a transmittal [Form 1094-C] to the IRS.”

The IRS also issued instructions relating to the above forms:

Text of Instructions for IRS Forms 1094-B and 1095-B.

Text of Instructions for IRS Forms 1094-C and 1095-C.

“The instructions for the 1094-C and 1095-C are by far the most complex of the instructions...filling 13 pages with dense, two column, print,” noted Jost in a blog post regarding the draft versions (the final instructions reach 14 pages and are in a smaller type face, and thus even longer). “Most of the complexity derives from the options for complying with the employer mandate and the transition exceptions to that mandate that the administration has created,” Jost explained.

The forms “are identical to the draft forms released in the late summer of 2014,” Jost noted in a February 2015 blog post. “The instructions for the transmittal forms 1094-B and 1095-B are virtually identical to the draft instructions. … The final instructions for forms 1094-C and 1095-C, however, contain a number of changes from the draft instructions and should be reviewed carefully by insurers, employers, and those who advise them.”

“We hoped that the IRS was finding a way to streamline and simplify the reporting forms and instructions that employers will use in connection with the...employer and individual mandates. Those hopes were dashed...when the IRS released the final reporting forms and instructions,” stated a February 2015 alert from Lockton, an insurance brokerage. “The reporting forms and instructions remain detailed and complex, with many caveats, exceptions and special rules. Complicating this, reporting continues to be based on the calendar year, regardless of the year on which an employer’s plan operates.”

The Lockton alert further notes:

The final forms and instructions are labeled as “2014” forms, meaning they would relate to coverage during 2014. It is apparent, however, that these materials were created for the required reporting in 2016 with respect to coverage during 2015. In addition to explicitly stating that reporting with respect to 2014 is voluntary, the instructions explain how to indicate use of various transition rules that apply during 2015.

“As the forms must be filed by Feb. 28 (March 31 if filed electronically) and were just released in final form, it is very unlikely that many employers, insurers, or government programs will file for 2014,” noted Jost. “The 2015 forms are likely to be very similar, however, so it is probably important for employers and insurers to review these forms to ensure that they are on track for 2015 reporting.”

Advised a February 2015 alert from Fox Rothchild LLP, “Bear in mind that there is a considerable amount of time between now and the final filing obligation so there may be additional revisions to these instructions, or at least some further clarification. But in the meantime, read the instructions and familiarize yourself with the reporting obligations.”

Tracking and Reporting Employee Data

Companies with 100 or more full-time equivalent employees must begin complying with the ACA coverage requirements in 2015, although they will have two years to phase up to the requirement that they cover 95 percent of their workers. Companies with 50 to 99 full-time equivalent employees will have another year—until 2016—to start complying. Smaller businesses are exempt.

Under tax code sections 6055 and 6056, employers must compile monthly and report annually numerous data points to the IRS and their own employees. This data will be used to verify the individual and employer mandates under the law.

“Although required reporting under sections 6055 and 6056 will not occur until January 2016 to employees and March 2016 to the IRS, the data being reported is based on what happened during 2015,” according to an August 2014 article in HR Magazine. “Therefore, employers should have the necessary infrastructure in place to gather that information by January 2015 or very soon after.”

Employers should have infrastructure 
in place to gather information.


Given the cross-functional compliance and reporting requirements, having a multidisciplinary team in place is important, with a written workplan that specifies the responsibilities of HR, payroll, finance and other departments. The chief HR officer and the chief financial officer should coordinate their efforts and those of their staffs. Top-level executive sponsorship should ensure that all functions are working together and doing their part.

“Ideally, technology will take much of the reporting burden off of employers, automating significant portions of the data collection and reporting processes,” observed the Lockton alert, adding:

Unfortunately, technology will not produce accurate reporting without accurate data. In addition, while an employer’s current HR technology solutions may capture the information required for ACA reporting, it is unlikely that the employer has any one system that incorporates all of this information. It is also very likely that gathering the information from various sources and entering it into the required forms will be difficult and time-consuming. Employers that have not done so already will want to discuss with their third-party payroll and benefits administration vendors the extent to which they can handle the required information gathering and reporting.

Reporting Requirement Still Applies to Mid-Size Employers

Although mid-size employers (between 50 and 99 full-time employees or equivalents) can take advantage of one year of transitional relief from the employer mandate requirements, delaying compliance until the first day of the employer's 2016 plan year, “these employers are still required to comply with the pay or play reporting requirement and the individual mandate reporting requirement, if the mid-size employer sponsors a self-funded group health plan,” advised law firm Miller Johnson. “In order to qualify for the transitional relief, mid-size employers must certify to the IRS that it meets the necessary requirements. Form 1094-C is used to certify that the mid-size employer meets these requirements.”

The firm added, “The good news is that these forms appear relatively simple to complete. The bad news, however, is that compiling the information necessary to complete these forms will likely impose significant administrative burdens.”

2015 Monthly Information

“This reporting and disclosure requirement is new for employers and may catch some employers off-guard,” warned an alert by benefits consultancy Hill, Chesson & Woody, which added that the reporting requirements include collecting and disclosing:

Social Security numbers of employees, spouses and dependents.

Names and employer ID numbers (EINs) of other employers within the reporting employer’s controlled group of corporations for each month of the calendar year.

Number of full-time employees for each calendar month.

Total number of employees (full-time equivalents) for each calendar month.

Section 4980H transition relief indicators for each calendar month.

Employees’ share of the lowest-cost monthly premium for self-only, minimum value coverage for each calendar month.

Applicable Section 4980H safe harbor for each calendar month.

“The first transmittal and returns will not be filed until January 2016, but much of the information must be reported for each calendar month of 2015,” the firm pointed out. “Ensuring internal time and attendance systems, record management, and payroll systems are capable of producing the required information is critical. Although there is much information left to be released by the IRS concerning the Code 6056 reporting requirement, employers subject to this requirement should begin preparing now.”

“The significant amount of information that is required to be reported to both employees and the IRS on these forms may factor in to an employer’s overall strategy for compliance with health care reform’s pay or play penalty requirement,” advised Miller Johnson.

Steps to Take

In light of the complexity of the new information reporting requirements, employers should take the following actions, advised McGladrey LLP in an alert:

Learn about the new information reporting requirements and review the IRS reporting forms.

Develop procedures for determining and documenting each employee's full-time or part-time status by month.

Develop procedures to collect information about offers of health coverage and health plan enrollment by month.

Review ownership structures of related companies and engage professionals to perform a controlled/affiliated service group analysis.

Discuss the reporting requirements with the health plan's insurer/third-party administrator and the company's payroll vendor to determine responsibility for data collection and form preparation.

Ensure that systems are in place to collect the needed data for the reports.


Four Steps Required Prior to ACA E-Filing

For calendar year 2015, applicable large employers must file Affordable Care Act Information Returns (Forms 1094-B, 1095-B, 1094-C and 1095-C) via paper returns by Feb. 29, 2016 (Feb. 28 being a Sunday) or via electronic returns by March 31, 2016, reports the International Foundation of Employee Benefit Plans (IFEBP). Any employers filing 250 or more forms must do so electronically.

Electronic returns will be filed through the new ACA Information Returns (AIR) system. The AIR system is specifically designed for the IRS to process these new ACA forms. Other IRS e-filing systems do not support the ACA Information Returns.

Prior to e-filing, applicable large employers must: (1) identify their responsible official(s) and contacts, (2) register with IRS e-services, (3) apply for the ACA Information Return Transmitter Control Code (TCC), and (4) participate in testing.

Social Security Numbers

Any entity that offers minimum essential coverage to its employees, members, or participants reports under Section 6055. Under Section 6055, among other things, names and Social Security numbers of all the individuals receiving minimum essential coverage, including any spouses and/or dependents receiving coverage, must be reported to the IRS, according to a subsequent post from IFEBP.

If the plan sponsor cannot obtain a covered individual’s Social Security number, that person’s date of birth may be used instead, as long as the reporting entity makes a reasonable effort to obtain the Social Security number. A plan sponsor should make a reasonable effort in order to avoid penalties for incomplete or incorrect reporting.

All applicable large employers, including those that provide insured plans, self-funded plans, and even those that do not provide minimum essential health coverage, must report under Section 6056. Names and Social Security numbers of all full-time employees must be reported, whether they received health coverage or not. Dependents and spouses do not need to be reported for this purpose.

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

Related SHRM Articles:

IRS Eases Penalties for Late ACA Reports, SHRM Online Legal Issues, July 2016

ACA Information Reporting: Insights for the Journey, SHRM Online Benefits, March 2016

ACA Employer Reporting Requires Coordinated Effort, SHRM Online Legal Issues, March 2015

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