How to Navigate ACA Reporting Forms 1094-C and 1095-C
Understanding the reporting requirements for Forms 1094-C and 1095-C is essential for Applicable Large Employers (ALEs) to comply with the Affordable Care Act (ACA). These forms are critical components of ACA compliance, as they provide the IRS and employees with detailed information about the health insurance coverage offered by employers. Navigating these forms can be complex, especially with the periodic updates made by the IRS.
This blog will guide you through the essentials of these forms, highlight the critical differences between them, explain the available reporting methods, and ensure you meet all necessary deadlines to avoid penalties.
Understanding the ACA Reporting Landscape
ALEs, defined as employers with 50 or more full-time employees or full-time equivalent employees, must file Forms 1094-C and 1095-C to comply with ACA mandates. These forms help determine whether employers meet the requirements for offering health coverage and whether they are liable for penalties under the employer-shared responsibility provisions.
What is Form 1094 C?
Form 1094-C: The Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns is submitted by ALEs along with Form 1095-C to the IRS. This form acts as a cover sheet and summarizes the information provided on Form 1095-C. If you’re wondering, “What is 1094c?” or “What is a 1094 c?”, it’s a crucial form for transmitting health coverage information.
What is Form 1095 C?
Form 1095-C: The Employer-Provided Health Insurance Offer and Coverage is sent to employees and the IRS. This form details the health insurance coverage offered to full-time employees, including whether it meets the ACA’s minimum essential coverage and affordability requirements.
What is the Difference Between 1094-C and 1095-C?
Many employers want to understand a 1094-c vs 1095-c. The primary difference between IRS Form 1094-C and Form 1095-C lies in their recipients:
- Form 1095-C is distributed to both employees and the IRS. It provides detailed information on each employee’s health coverage, including the months they were covered.
- Form 1094-C is sent exclusively to the IRS and serves as a summary of the information in Form 1095-C. It also includes critical data such as the employer’s certification of eligibility for certain reporting relief.
This comparison helps clarify the difference between 1094 and 1095 forms, a common question among employers.
Vital Considerations for 1094-C and 1095-C Reporting
The IRS regularly updates ACA reporting requirements to reflect current regulations and standards. Employers must use the most recent forms and guidelines to avoid compliance issues.
- Finalization of Forms 1094-C and 1095-C: The IRS periodically releases finalized versions of these forms, and it’s important to use the most recent ones.
- Affordability and Minimum Value Standards: Employers must offer health coverage that does not exceed the updated percentage of an employee’s income, as determined by the ACA’s affordability threshold. The IRS provides ongoing guidance on how employers can accurately determine and report this information.
- Reporting for Individual Coverage Health Reimbursement Arrangements (ICHRAs): Employers offering ICHRAs must report this on Form 1095-C using the correct codes (e.g., Codes 1T and 1U) to reflect the type of coverage offered and how affordability is determined. Employees offered an ICHRA that meets the ACA’s definition of “affordability” cannot collect any premium tax credits. However, if either HRA is considered “unaffordable,” they can collect tax credits with some additional coordination.
ACA Reporting Methods
Employers can choose from three primary reporting methods for ACA compliance:
1. General Reporting Method
This method requires comprehensive data collection and applies to most ALEs. Employers are required to file Form 1094-C and provide a Form 1095-C to each full-time employee. This method involves detailed reporting of each employee’s coverage status.
2. Qualifying Offer Method
This method, also known as the qualified offer method or the ACA qualifying offer method, is available for employers who provide a “qualifying offer” that meets minimum essential coverage and affordability requirements.
A qualifying offer is one where the cost for employee-only coverage does not exceed a specific percentage of the federal poverty level. Employers using this method may provide a simplified statement instead of the entire Form 1095-C.
3. 98% Offer Method
The most streamlined reporting option, the 98% Offer Method, also known as the 98 Offer Method, is available to employers who offer affordable, minimum-value coverage to at least 98% of their full-time employees and dependents.
Employers must certify compliance with this requirement to the IRS, which means they need to provide evidence that they meet the 98% coverage threshold.
What Are the Deadlines for Forms 1094-C and 1095-C in 2025?
Meeting the filing deadlines for Forms 1094-C and 1095-C is critical to complying with ACA requirements. Here are the deadlines for 2025:
- Form 1095-C Distribution to Employees: Employers must distribute Form 1095-C to each full-time employee by January 31, 2025. This form provides employees with detailed information about the health insurance coverage they received during the previous year.
- Forms 1094-C and 1095-C Filing with the IRS:
- Paper Filing Deadline: If you choose to file by paper, Forms 1094-C and 1095-C must be submitted to the IRS by February 28, 2025.
- Electronic Filing Deadline: If you file electronically, which is required for employers with 10 or more forms, the deadline is March 31, 2025.
Please Note: Employers who fail to meet these deadlines may be subject to penalties. Therefore, it is advisable to plan ahead so that all necessary documentation is prepared well before the due dates.
The Importance of Accurate ACA Reporting
Accurate ACA reporting is not just critical, but a matter of compliance and avoiding potential penalties. The IRS uses the information on Forms 1094-C and 1095-C to determine if an employer is subject to penalties under Section 4980H.
Failure to file accurate forms or meet deadlines can result in significant fines. This underscores the importance of precision and diligence in your reporting process. Check that the following information is accurate:
- Verify employee eligibility for health coverage
- Double-check the affordability calculations
- Keep abreast of any changes to ACA regulations
Common Pitfalls in ACA Reporting
Employers often encounter challenges in ACA reporting, such as:
- Incorrect Codes: Misapplying the IRS codes for health coverage can lead to incorrect reporting and potential penalties. Verify that your HR or payroll software is up-to-date with the latest ACA reporting requirements.
- Missed Deadlines: The deadlines for distributing Form 1095-C to employees and filing forms with the IRS are strict. Mark your calendar for the January 31st deadline to issue 1095-C forms to employees and the February 28th (or March 31st for electronic filing) deadline for submission to the IRS.
Leveraging Technology for ACA Compliance
The use of advanced HR and payroll software can streamline ACA reporting. Look for solutions that:
- Automatically populate Forms 1094-C and 1095-C with accurate data.
Include built-in checks for errors. - Provide electronic filing capabilities directly to the IRS.
These tools can significantly reduce the administrative burden and ensure your organization complies with ACA regulations.
Streamlining 1094-C and 1095-C ACA Reporting
Staying compliant with ACA reporting is essential for any ALE. Understanding “What is a 1094c?”, the differences between Forms 1094-C and 1095-C, staying updated with the latest IRS regulations, and choosing the correct reporting method—whether it’s the qualifying offer method for ACA, the 98% offer method, or another—can help your organization meet its obligations while avoiding penalties.
Consider consulting with ACA compliance experts or utilizing comprehensive HR and payroll software to effectively navigate the complexities of ACA reporting.
For more information, refer to the IRS’s Questions and Answers about Information Reporting by Employers on Form 1094-C and 1095-C page.
Common FAQs For Forms 1094-C and 1095-C
Employers must file information on Form 1095-B, which provides details about an employee’s actual health insurance coverage and includes any dependents covered under the employee’s health care plan. The insurance carrier, not the employer, provides this form to the employee.
The primary difference between Form 1094-C and Form 1095-C is their purpose and recipients. Form 1094-C is a transmittal form that ALEs submit to the IRS along with Form 1095-C. It acts as a cover sheet summarizing the information provided on the 1095-C forms. Form 1095-C, on the other hand, is sent to both employees and the IRS, detailing the health insurance coverage offered to full-time employees.
Form 1095-C is more specific to individual employees, whereas Form 1094-C provides an overview of the employer’s compliance with ACA requirements. This information should help clarify a 1095 vs 1094.
Yes, 1095-C forms are still required. ALE members must use these forms to submit health coverage information to the IRS. Remind employees that they do not need to wait for these forms to file their taxes but should retain them for their records.
Yes, an ALE Member must furnish a Form 1095-C to each full-time employee by January 31st for the previous calendar year. This requirement applies regardless of whether the ALE offers coverage or the employee enrolls in any health plans offered.
Independent Coverage HRAs (ICHRAs) are health reimbursement arrangements allowing employers to contribute tax-free dollars annually to eligible full-time employees. ICHRAs can be used to reimburse employees for the cost of health insurance coverage purchased in the individual insurance marketplace. ALEs that use ICHRAs must meet the ACA affordability threshold, which changes annually.
A full-time employee is generally defined as someone who works 30 or more hours per week or 130 or more hours per month.
Full-time equivalent employees are calculated by combining the hours of two or more part-time employees to equal the hours of a full-time employee. For example, if two part-time employees work 15 hours each in a week, their combined hours (30) would count as one full-time employee.
The deadlines to file Forms 1094-C and 1095-C are critical for ensuring compliance with ACA reporting requirements. Employers must distribute Form 1095-C to employees by January 31 of the following year. When filing with the IRS, the deadlines are as follows:
- February 28 if you are filing by paper.
- March 31, if filing electronically, is required for employers submitting 10 or more forms.
Meeting these deadlines is essential to avoid potential penalties and ensure accurate reporting.
Sources
- Information Reporting by Large Applicable Employers
- Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C
- About Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
- About Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
- Health Reimbursement Arrangements (HRAs)
- How HRAs affect premium tax credit eligibility
