Employee Benefits Compliance, Exchanges / Marketplaces / Subsidies, Individual Mandate, Notices & Disclosures (Sample forms), Penalties, Reporting & Disclosure, Reporting Requirements, Subsidies, Taxes, Fees & Penalties

Must Employers Document which Employees had Group Health Coverage in 2014?

The short answer is No.  Large employers are NOT required to notify employees or the IRS about 2014 group health plan coverage, because this Affordable Care Act requirement has been delayed until 2015. Additionally, this requirement does not apply at all to small employers (defined as those with fewer than 50 full-time employees).

What does this mean for employees?  The Affordable Care Act (ACA) imposes a tax penalty on most taxpayers who did not have health insurance coverage in 2014; but taxpayers who had employer group health coverage in 2014 will likely not have documentation of their 2014 coverage.  It will just be the “honor system” — employees who had employer-provided coverage will check “Yes” on their 2014 Form 1040 and will have to provide evidence of coverage if they are audited.

A year from now, when taxpayers file their 2015 returns — in 2016– they will have to attach documentation of their health insurance coverage during each month of 2015.

Individuals who had coverage through a Health Insurance Marketplace (Exchange) in 2014 will receive 1095-A from the Marketplace, so they will be able to document their 2014 coverage.

If an employer wants to provide evidence of 2014 coverage, how could it do so?

  • 1095-C. Large (or small) employers who want to provide evidence of coverage could provide the Form 1095-C to all or some employees for 2014.  It is not required until 2016 (for the 2015 tax year), but an employer could complete the information and provide the form to all employees who want documentation of their 2014 coverage.
  • W-2 reporting. Large employers have been required since 2012 to report on employees’ W-2s each year the cost of health coverage under the employer-sponsored group health plan in the prior tax year.  (Large employers are those who issued at least 250 W-2s in the prior tax year.)  So, for employees of large employers, this information will be on their W-2s (Box 12, code DD), but it will not specify the months in 2014 for which they had coverage.
  • Exchange Notice, Part B. Employers who are subject to the Fair Labor Standards Act (FLSA) have been required since October 1, 2013 to provide all employees with an “Exchange Notice” (officially called “New HealthInsuranceMarketplaceCoverageOptionsandYourHealthCoverage”. Employers may better recognize this form as the Affordable Care Act Notice of Exchange that employers provided to ALL their employees by October 1, 2013 and continue to provide to new employees within 14 days of hire.  Part B of this notice provides information on health coverage offered by the employer, but it does not specify whether individual employees had coverage or for which months they had it.  However, an employer could add that information to Part B and provide the notice again to employees who request documentation of their 2014 group health coverage. (The notice is  available Here)


How can employees prove they had health insurance when they file 2014 tax returns?

  • Employees will simply tell their tax preparer (or tax preparation software) that they had health insurance in 2014, and the box will be checked on the Form 1040. Taxpayers who prepare their own taxes will check the box on their Form 1040. The box can be found on Line 61 of Form 1040, Line 38 of Form 1040A, and Line 11 of Form 1040EZ.
  • If an employee had employer group health coverage and received a Form 1095-C, the employee can use this as documentation.  However, since employers are not required to provide 1095-Cs until tax year 2015, very few (if any) are providing them for 2014.
  • Individuals who had health insurance from a Health Insurance Marketplace in 2014 will receive a Form 1095-A from the Marketplace, and the Marketplace also will provide information to the IRS about each individual’s coverage and premium tax credits.
  • Individuals who bought health insurance in the Health Insurance Marketplace and received a premium tax credit in 2014 must file a Form 8962 with their 2014 tax returns.  This form will determine whether the premium tax credit amount received was correct based on the taxpayer’s actual income for 2014. (Premium amounts were calculated when coverage was first effective based on the taxpayer’s estimated income for 2014.)
  • Individuals who had coverage in 2014 should have received an Evidence of Coverage (EOC) and/or a summary plan description (SPD), and those who actually submitted claims should have received an Explanation of Benefits (EOB). Individuals might want to keep copy of these with their 2014 tax documents in case of audit.

Individuals who believe they might qualify for an exemption from the individual mandate to buy health insurance will claim or report coverage exemptions on Form 8965.  For some of the exemptions, individuals just check off on their tax returns that they qualify, but for most of the exemptions individuals must apply for an exemption certificate number.

Additional details are available on the IRS website: Questions and Answers on the Individual Shared Responsibility Provision or ACA – What to Expect at Tax Time.  Individuals who use tax software (e.g., HR Block, TurboTax) can also get specific information on the software provider’s website.