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ACA-1095-instructions

Payroll Taxes

ACA 1095-C Instructions Made-Easy.

March 2nd, 2016

As part of the implementation of the ACA (Affordable Care Act), any employer with more than 50 full-time employees is required to issue a form 1095-C to its employees and report the information and a 1094-C to the IRS.  Form 1095-C and 1094-C includes information about the health insurance coverage offered to employees and, if applicable, their family.

The form 1095-C information reporting is mandatory starting in 2016 to be Affordable Care Act compliant.  Because it is relatively new, the IRS extended the original due dates to allow extra time for employers to issue 1095-C and 1094-C forms to employees and file reports to the IRS.

Tax year 2015 ACA reporting Original deadline Extended deadline
1095-C Form due to employee 2/1/2016 3/31/2016
1095-C/1094-C paper filing to IRS 2/29/2016 3/31/2016
1095-C/1094-C e-File to IRS 3/31/2016 6/30/2016

There are three parts of data on the form 1095-C.

  • Part I is the basic company and employee information.
  • Part II is the insurance offer by the company to the employee, the minimum premium and whether the employee accepts the offer or not.
  • Part III is required if the insurance is self-funded by the company.

Below is a very simplified view of the information required, the source of data and how to prepare the forms.

Information Required/Source of Data HR/benefits Payroll Dept Insurance agent
Employer EIN, name, address, etc. Yes Yes Yes
Employee name, address, SSN, etc. Yes Yes Yes
Insurance offer starting, terminating dates Yes Yes
Insurance offer code (1-series code) Yes  Yes
Employee’s portion of insurance cost Yes Yes
Employee participation code (2-series code) Yes
Dependent name, tax ID (or birthday), etc. Yes

As you can see, the information mostly resides with the HR and benefits department and not with payroll.  Although the HR department have all information, it may be easier to get certain information from the insurance agent.  Here are the suggested steps of gathering information to prepare the 1095-C and 1094-C forms effectively.

  1. If you are not sure, contact the insurance agent to confirm if your company health plan is self-funded.  If it is, you need to enter Part III of the form (dependent information).
  2. Ask the insurance agent to provide the billing history, this helps confirm employee health plan participation status, beginning & ending dates, etc.  If your company does not keep dependent information, the billing history will provide all information that is required (name, participation, birth date, etc.).
  3. Calculate, or receive from the insurance agent, the employee’s portion of the premium required.  Do not include any payment for dependent.  Report only the amount that the employee needs to pay for his or her own insurance.  This is used to determine if the insurance is “Affordable” to the employee.
  4. Prepare an Excel worksheet with form 1095-C Part I and Part II information.  Focus on form 1095-C line 14, offer code, line 15, employee share of lowest premium and line 16, employee participation status.  Basically, form 1095-C line 14 describes company’s insurance offer to the employee, line 15 determines the premium burden to the employee and line 16 shows the employee participation.  If no offer is available to the employee, form 1095-C line 16 code is entered to explain and defend the company with respect to its shared responsibilities.
  5. Read the IRS instructions and choose the appropriate series 1 code and series 2 code to describe the company’s offer and coverage.  If the employee qualifies but does not participate in the insurance plan, leave line 16 blank.
  6. Form 1095-C part III, if required, needs to include the employee in addition to all others that are covered with the employee participation.
  7. With the form 1095-C part I, II and part III information in Excel worksheet, you can easily upload the data, create 1095-C forms for print and distribution and eFile the forms, 1095-C/1094-C, to the IRS at our website, www.1099manager.com.

We have been an IRS authorized 1099, W2, etc. eFile service provider for many years and we have been approved to process and eFile 1095-C/1094-C for print and eFile for 2015 reports.

However, we are not an expert on the ACA laws nor can we interpret all ACA regulations.  The steps above merely describe the basics for gathering and preparing the forms and filing to the government.  To understand the details about how to determine the full-time equivalent, the minimum essential coverage, penalty or waiver, etc., you should review IRS publications and visit its website for the most complete and accurate information.

Once you have gathered the information, you can easily put them into on Excel worksheets.  Then you can upload to create the 1095-C forms to print and distribute.  It is not very different from that for W-2 or 1099s.

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