Navigating ACA Reporting Forms 1094-C, 1095-C (2024)

November 30, 2021
Payroll and Tax Compliance, Year-End Processing

Learn about the different reporting methods for 1094-C and 1095-C ACA annual reporting so you can maintain compliance.

What You Need to Know About ACA Annual Reporting

On May 24th, 2021, the IRS released the drafts forForms 1094-Cand1095-C.While there are no changes toForm 1094-C reportingfrom 2021, there are changes to Form 1095-C. The IRS is planning to publish the final version of these forms in early 2022 for ALEs.

This annual Applicable large employers (ALEs) are required to handleAffordable Care Act (ACA) reporting. An ALE has50 or more full-time employees andfull-time equivalent employeesfor the tax year 2021.

What are Forms 1094-C and 1095-C?

Form 1094-C: Transmittal of Employer-ProvidedHealth InsuranceOffer and Coverage Information Returns is a form thataggregated large employers (ALE’s)submit to the IRS along with Form 1095-C.Employees do not receive a copy of the 1094-C.

Form 1095-C: Employer-ProvidedHealth InsuranceOffer and Coverage is a tax form that identifies the amount ofhealth coveragefull-time employees orfull-time equivalent employeesof ALEs receive. Employees receive a copy of this form from their employer. Employers file this form, so employees do not have to file it with their tax returns. Employees should, however, keep a copy of their financial statements.

What is the Difference Between 1094-C and 1095-C?

The main difference between Form 1094-C and 1095-C is who receives each form.Form 1095-C is sent to both employees and the IRSas it provides information about each employee’s health insurance coverage.Form 1094-C only gets sent to the IRS.It reports information about employer coverage and acts as a cover sheet to transmit Form 1095-C to the IRS.

Theinformation reported on Form 1094-C and Form 1095-Cdetermines whether an employer is potentially liable for payment under the employer shared responsibility provisions of section 4980H and the amount of the payment if any.

Have Questions about ACA Compliance & Reporting?

Our Employer Mandate Reporting provides an overview of the different ACA reporting methods to provide information to the IRS accurately. There’s also a handy list of FAQs to answer all your complex questions about all reports filed annually and providing health care to employees.

Download Your Free Guide

Changes to Form 1095-C for 2021 Reporting

The individual coverage HRA (ICHRA) is a new health reimbursem*nt account (HRA) introduced in 2020. The revisions previously required employers to alter existing reporting systems and add a second page to Form 1095-C.

But, the 2021 form asks for one page per employee of an ALE member. The IRS has publishedinstructions for Forms 1094-C and 1095-C reporting.Here are the changes to date:*

ADDED CODES ON FORM 1095-C

Codes 1T and 1U have been added to line 14 of the 2021 Form 1095-C to help employees to notify employees of a health coverage offer from an employer. Meanwhile, previously updated codes (1L – 1S) help employees understand how their employers determine affordability for ICHRA reporting. Here are the codes on Form 1095-C and what to report for each code:

Code 1T

Line 14 of Form 1095-C now includes Code 1T. IRS draft instructions imply that the code will be used when an employer offers an employee and their spouse(no dependents)an Individual Coverage Health Reimbursem*nt.Affordability of coverage gets determined by using the zip code of the employee’s primary address.

Code 1U

Code 1U is another change to Line 14 of Form-1095. This code also provides an employee and spouse with an Individual Coverage Health Reimbursem*nt. The only difference between code 1U and code 1T is how the affordability of coverage is determined. In Code 1U,affordability of coverage is determined by using the zip code of the employee’s primary worksite.

Note: Neither Code 1T nor Code 1U offer Individual Coverage Health Reimbursem*nts to dependents.

Other Codes:

Codes1V, 1W, 1X, 1Y, and 1Zare also on Line 14 of Form 1095-C. However, these codes are reserved for future use and await further IRS instructions. The IRS may use these codes for alternative coverage offers, but we will update this article when more information arises.

Codes1L, 1M, 1N, 1O, 1P, 1Q, 1R,1Swere released in 2020 and remain the same for 2021. Here’s a quick breakdown of each:

ACA REPORTING METHODS

Many employers working to accomplish Affordable Care Act (ACA) reporting are often confused by Line 22 on Form 1094-C. Line 22 asks which reporting method employers are using. There are three options for annual reporting available to employers. The method you choose depends on how many eligible employees receive health insurance coverage:

1. General Reporting Method

This method requires the most significant amount of information collection. Employers must file a transmittal Form 1094-C for the company and a Form 1095-C for each employee with the IRS. Employees must also receive a copy of Form 1095-C. In addition, ALE Members with employees participating in a self-insured plan can satisfy reporting requirements by filling out Part III of Form 1095-C.

2. Qualifying Offer Method

The Qualifying Offer Method requires less information collection. It is available for employers who offer a “qualifying offer” plan that provides minimum essential coverage and meets the minimum value requirement at a low rate. A qualifying offer plan is where the cost to the individual for employee-only coverage does not exceed 9.5% of the federal poverty level divided by 12. In addition, the employer must offer the plan to all members of the employee’s family to be eligible to use this reporting method.

Using this method, an ALE may provide a simplified statement of coverage to an employee who received a Qualifying Offer for all 12 months of a calendar year. You may use this simplified statement instead of providing a Form 1095-C filed with the IRS.

3. 98% Offer Method

This third method requires the least amount of information collection. It’s available for employers offering affordable coverage and providing minimum value to at least 98% of the company’s full-time employees and their dependents.

The ALE member must certify to the IRS that they met the above requirements. Employers must also file and provide Forms 1095-C for all full-time employees for one or more months of the calendar year.

Employer Reporting Requirements

ALEs are subject to theemployer shared responsibilitymandate of the ACA. Therefore, they mustfile a Form 1095-Cfor each employee who was a full-time employee orfull-time equivalent employeefor any month of the calendar year. A copy of Form 1095-C must be issued to each full-time employee by January 31st, 2022. Form 1095-C must get filed regardless of whether the ALE offers coverage or the employee enrolls in anyhealth plansoffered.

ALEs must fileForms 1094-C and 1095-C with the IRS annuallyno later than February 28th or March 31st if filing electronically.

Refer to theQuestions and Answers about Information Reporting by Employers onForm 1094-Cand 1095-Cpage on the IRS website for more information.

AFFORDABLE CARE ACT REPORTING SUPPORT

Ifyour broker or payroll provider does not provide ACA reporting support, it may be time to consider other options. Ideally, your broker or payroll provider will use a solution that provides the following functionality:

Automatic population ofForms 1094-Cand 1095-C with existing HR and payroll data
Intelligent algorithms that automatically check for errors in yourreport information
Electronic filingofACA information returns to the IRSon your behalf

If your broker or provider is not providing support for ACA reporting, it is critical to understand how to fill out the forms correctly. It is also essential to check your benefits data for any errors, so reporting is accurate.

COMMON FAQ FOR FORMS 1094-C AND 1095-C

We have compiled a list of commonly asked questions for Forms 1094-C and 1095-C to help you with the ACA annual reporting process.

WHAT IS FORM 1095-B?

Form 1095-B provides details about an employee’s actualhealth insurance coverageand includes any dependents covered under an employee’s health care plan. It is provided to the employee by the insurance carrier, not the employer.

Are 1095-C Forms Still Required?

Yes, 1095-C forms are still required for the 2021-2022 tax year. ALE members must use these forms to submit health coverage information to the IRS. However, it is good to remind your employees they do not need to wait for these forms to file their taxes.

Do Employers Have to File 1095 for 2021?

An ALE Member must furnish a Form 1095-C to each full-time employee by January 31, 2022, for the 2021 calendar year. For more information on alternative furnishing methods for employers, see Qualifying Offer Method.

WHAT IS AN ICHRA?

Independent Coverage HRAs (ICHRAs) were created in June 2019 by the IRS as a way for employers to contribute a set amount of tax-free dollars annually to eligible full-time employees. In addition, per President Trump’s Executive Order No. 13813, employers can reimburse employees for the cost ofhealth insurance coveragepurchased in the individualhealth insurancemarketplace using ICHRAs. Therefore, ICHRAs include premium reimbursem*nts for marketplace plans and private insurance.

ALEs can use ICHRAs as a way to comply with ACA health coverage regulations. If ALEs use ICHRA accounts, they must meet the ACA affordability threshold.

For 2021 that threshold meant policy premiums couldn’t exceed 9.83 percent of an employee’s income. That number has decreased in 2022 from 9.83% to9.61% of an employee’s income.

WHAT DEFINES A FULL-TIME EMPLOYEE?

A full-time employee is an employee who works30+ hoursper week or 130+ hours per month.

WHAT IS A FULL-TIME EQUIVALENT EMPLOYEE?

Full-time equivalent employeesare two or more part-time employees who combined worked the hours of a full-time employee. For example, if two part-time employees work 15 hours each, their combined hours worked for one week are 40 hours. Therefore, those two part-time employees would count as one full-time employee.