Since the passage of the Patient Protection and Affordable Care Act(ACA) in 2010, businesses owners in America have been required to follow federally mandated guidelines to ensure their ACA compliance with the Employer Shared Responsibility Provision, also known as the "employer mandate." As a result, employers have been required to fill out IRS forms 1094-C and 1095-C to provide details about the health coverage they offer their full-time employees.
These two forms continue to be part of a small business owner's annual tax responsibilities.
Which businesses are required to submit forms 1094-C and 1095-C?
Any company with at least 50 full-time employees is designated as an "applicable large employer" (ALE), making these forms a requirement. When the ACA was passed 10 years ago, forms 1094-C and 1095-C were optional filings for coverage year 2014, and were made a requirement for coverage years starting in 2016.
With the responsibility landing on employers to provide the ACA's minimum essential coverage to at least 95% of the workforce, these two forms are a way for those employers to prove their offerings to the IRS.
Your business must submit both documents as each serves as individual portions of your overall ACA reporting requirements. If your company has 50 or more full-time employees, or your small business is part of a controlled and affiliated service group for its healthcare coverage, it's imperative that you not only realize the importance of these two forms but also understand how they are filed.
Editor's note: Looking for the right health insurance plan for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.
Why are 1094-C and 1095-C important?
When the ACA was officially signed into law by then President Barack Obama, it was the culmination of years of a political back-and-forth over the future of the American healthcare system. For the president and his Democrat allies in Congress, the goal was to reduce healthcare costs while also providing coverage to more Americans, including those with pre-existing conditions. Republicans, however, wanted to either keep things as they were or further privatize healthcare.
What the country ended up getting was a compromise of sorts. The ACA – commonly referred to as Obamacare – left the existing system intact and added an option for workers to seek coverage from the government's health insurance marketplace. To keep costs down, the ACA required everyone to have health coverage for at least nine months out of the year. Forms 1094-C and 1095-C were used to prove that employers provided health insurance or that an individual had health insurance under their own plan. Companies that failed to meet ACA reporting requirements would incur penalties in the form of an additional tax.
Though that tax penalty has since been eliminated by the Tax Cuts and Jobs Act of 2017, the forms are still required by the IRS.
What is Form 1095-C?
Required by sections 6055 and 6056 of the Internal Revenue Code, Employer-Provided Health Insurance Offer (Form 1095-C) is filled out by an employer for each of its employees. According to the IRS, this form is required for each person who was a "full time employee of the ALE member for any month of the calendar year, including any employee who was treated as a full time employee for one or more months of the calendar year" under the "employer mandate." If an applicable large employer helps cover an employee's self-insured health plan, they must also file a 1095-C for each person under those plans, regardless of whether they were a full-time employee or not.
Ultimately, the form is required by the IRS so it can determine whether an employer is meeting ACA guidelines. If a business is required to provide health insurance coverage but doesn't, it can be liable to pay a penalty, though the IRS can offer penalty relief if certain conditions are met. The reporting form also lets the IRS know who has employer-provided health coverage and who doesn't. For those that don't have such coverage, the IRS can locate them and provide a "premium tax credit" to help get them insured.
What is Form 1094-C?
Form 1094-C is a supplemental transmittal form to accompany the 1095-C. Described by Intuit as a "cover sheet" for the 1095-C, this form provides general information about an employer's minimum essential coverage.
Employers use the 1094-C form to provide the IRS with the following:
- Identifying information about the employer, including address, phone number and employer identification number
- Number of employees
- Name of a contact person at the company that the IRS can reach
- Number of 1095-C forms that will accompany the 1094-C
Filing Forms 1094-C and 1095-C
When it comes time to file both forms, it's important to remember some easily overlooked requirements. First, and most importantly, an employer that fits the ALE description must file a 1095-C for every employee covered under the ACA. While that may sound like a time-consuming task for companies with 50 or more employees, most modern business tax software handles this process automatically.
Second, companies are barred from filing their separate 1095-C forms with the IRS without including a 1094-C. Omitting Form 1094-C does not provide the IRS with the aforementioned summary information surrounding a company's ACA requirements.
Finally, companies are required to file their forms at different times of the calendar year depending on how they're filed. If submitting paper documents, they must be sent to the IRS by the end of February. Companies that file electronically must send their documents by the end of March. Employers with fewer than 250 forms to send can do so through a paper filing, though employers with more than that are required to file electronically. Furthermore, the filing deadline for employers to send their 1095-C forms to employees is the end of January.
1094-C and 1095-C vs. 1094-B and 1095-B
If you've done some preliminary research, you may have noticed that some businesses are required to file 1094-C and 1095-C, while others must file 1094-B and 1095-B. While both sets of documents perform similar functions, the difference lies in which businesses are eligible for the B version versus the C version.
The biggest difference between the two types of forms is that the B-variant applies to self-insured plans for small groups not covered under the "employer mandate."
According to the IRS, all businesses receive the 1095-B form, which is completed by the healthcare carrier or sponsor and provided to employers. This is a major difference from 1095-C, which is always filled out and submitted by ALEs and members of ALE groups to prove that they provide the minimum essential coverage to their employees.