Health Care Reform, Reporting Requirements, Small Employers

Small Employers: Information Reporting Required if You Sponsor a Level-funded Plan

Information reporting (1094/1095 forms) is required annually for many employers, under the Affordable Care Act (ACA). “Applicable large employers” (ALEs) must furnish information about the health coverage they offer to their employees and must file this information with the IRS. However, small employers (fewer than 50 full-time equivalent employees) are not required to report UNLESS they sponsor a self-funded plan. A level-funded plan is a self-funded plan, even if it “feels like” it is insured.

WHAT is Required?

Small employers who sponsor a self-funded or level-funded group health plan must report each year on the Minimum Essential Coverage (MEC) they offered the prior calendar year using the 1094-B and 1095-B forms. The B forms are much simpler than the 1094-C and 1095-C forms that large employers must use to report. This is because the B-series forms are completed by insurers and small employers with self-funded plans, and these entities are not required to offer health plans that meet ACA affordability and minimum value standards. However, employees of any size employer may be subject to the individual mandate tax if they do not enroll in coverage (MEC). Information reporting notifies the government whether an individual was enrolled in MEC. This is why insurers—and small employers who sponsor self-funded plans—must furnish and file the 1094-B and 1095-B forms.

The 1094-B form is called a transmittal sheet and is like a “cover sheet” that provides the IRS with some basic employer information. Each employer is required to complete and submit only one 1094-B form to the IRS.

The 1095-B form is provided to each covered employee and is also submitted to the IRS with the one 1094-B form.  The 1095-B form has four sections, but only parts 1, 3 and 4 are completed by small employers who must report.

  • Part 1 requests basic information about the employee
  • Part 3 includes basic information about the employer
  • Part 4 requires information about the specific covered individual and dependents including name, social security number (or date of birth if no SSN is available), and the months in which the individual was covered.

WHO is a Small Employer?

Since different forms are used for reporting depending on employer size, it is important to confirm employer size based on ACA rules.  To determine employer size correctly, a specific ACA calculation must be used. This includes averaging employees and hours over a full calendar year from January through December. Leavitt clients can contact their benefits advisor to request a copy of How to Accurately Calculate Employer Size under PPACA or for our ACA Employer Size Calculator.

To determine if an employer must report for a particular year, the ACA employer size calculation result from the PRIOR calendar year is determinative. For example, if the ACA employer size calculation based on information from January through December 2016 results in a number UNDER 50, the employer is small and need not submit forms in 2017 UNLESS it sponsors a self-funded or level funded plan. If the specific calculation for size from January through December of 2016 results in a number of 50 or more, the employer is large and must report whether self-funded or insured. However, a large employer would furnish and file the “C” series (1094-C and 1095-Cs), whether its plan is insured or self-funded.

If, using the ACA calculation method, the result for a particular year is fewer than 50 employees, the employer is small. Small employers do not have to comply with the Employer Shared Responsibility provisions of the ACA, and only small employers who sponsor a self-funded or level-funded plan must comply with information reporting requirements. Small employers who have an insured plan need not report –because the insurer will report. Note that a level-funded plan is not an insured plan, even if it “feels like” is it.

WHEN is Information Reporting Required?

Information reporting is effective now. The first reporting forms were submitted in 2016 based on 2015 calendar year information. Forms were also due earlier this year (in 2017) based on 2016 calendar year information. Reporting on 2017 information will be due by January 31, 2018 (furnish forms 1094-B to employees) and by February 28th or March 31st for filing 1095-Bs with the IRS (the earlier date for hard-copy forms and the later for electronically filed forms). If an employer should have provided the forms for these prior years but has not yet, the forms should be completed and submitted as soon as possible. News articles in the past few weeks report that the IRS intends to start sending out penalty notices in November to employers who failed to comply with information reporting requirements over the past two years. Employers will likely be better off if they make a good faith effort to file, even if late, rather than not filing at all.

WHY is Information Reporting Required?

The U.S. Department of Treasury (IRS) is tasked with administering the ACA’s Individual Mandate and Employer Mandate provisions. The Individual Mandate requires that most individuals purchase and maintain health coverage for themselves and their dependents or they pay a penalty on their taxes. The Employer Mandate (technically called “Employer Shared Responsibility”) exposes large employers to possible significant penalties unless they offer affordable, minimum value health coverage to full-time employees. Therefore, the IRS needs information about what employers are offering health coverage, what individuals are enrolled in health coverage, and which employers and/or individuals may be exposed to penalties for failing to do so.

Congress has not enacted legislation to repeal information reporting requirements, nor to repeal the individual mandate or the employer mandate.  Even if future legislation repeals some of the ACA, it is likely that some form of information reporting will remain.

LINKS to Current Forms 1094-B and 1095-B and Instructions

2017 Instructions for 1094-B and 1095-B: https://www.irs.gov/pub/irs-pdf/i109495b.pdf

Form 1094-B :  https://www.irs.gov/pub/irs-pdf/f1094b.pdf

Form 1095-B: https://www.irs.gov/pub/irs-pdf/f1095b.pdf

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