ACA: What Small and Large Employers Need to Know To Comply in 2015– January 05, 2016 by Maura Corrigan

When we hear about the Affordable Care Act (ACA), the conversation usually takes a negative tone. But, when we look at where healthcare is today since the ACA was passed, we can’t ignore that some benefits are being realized, as reported by the Department of Health and Human Services:

  • Approximately 16.5 million Americans who were previously uninsured now have coverage, due to expanding programs such as Medicaid and allowing younger adults to stay on their parents’ policies longer.
  • For those with lower annual incomes, the government is giving higher tax credits to help pay for their premiums.
  • Exchanges are gaining popularity for businesses, offering more competition to help insurance costs decrease over time.
  • The growth of health care costs has slowed sharply since the ACA went into effect.

But in terms of employer reporting requirements, things are heating up now! Employers need to understand their reporting requirements and the potential for penalties, including the latest changes to information reporting deadlines as stated in the recent IRS Notice 2016-4.

2015 Requirements and Transitional Relief for Applicable Large Employers
Individual taxpayers began reporting health insurance coverage to the government in 2014. However, the employer reporting mandate for applicable large employers (ALEs), those with 50 or more employees including full-time equivalents, starts with the 2015 tax year.

There is some transitional relief. In 2015 only, ALEs that have more than 50 but fewer than 100 employees will not be assessed a penalty if they are not yet offering insurance. Also in 2015, instead of the requirement to offer coverage to 95% of employees, ALEs will only need to cover 70% to avoid penalties.

Small Employers May Have Requirements, Too
Small employers (those with 50 employees or fewer, including full time equivalents) are not completely off the hook. First of all, when doing the calculation to determine your small employer status, it is critical to ensure you’re using the right time period for the type of employer that you are for ACA purposes. Employers should be using the 2014 year for the 2015 determination. If you’ve already done the calculation, do it again to make sure it’s correct.

Once you know you qualify as a small employer, you still must determine if you have a filing requirement. Generally, small employers do not have an information filing requirement. However, if a small employer provides coverage, the employer IS REQUIREDto file.

As a reminder, small employers can offer coverage and can access health insurance on the SHOP exchange. Those purchasing insurance on the SHOP exchange also may qualify for the small business health care tax credit. Costs on the exchange are competitive and employer contributions are discretionary.

Aggregation Rules
Don’t forget about the aggregation rules, which should also be a concern for employers. If you have other entities under common control, you must aggregate and use all of those employees from the preceding calendar year in your calculation.

Reporting Forms: B-Series and C-Series
These are forms certain employers must file beginning with the 2015 tax year. Employers either will need to fill these out themselves or will need to confirm the information being filed on their behalf is accurate — starting with Forms 1094-B and 1095-B to report the coverage they offer to employees:

  • Form 1094-B – This is the transmittal form. This generally will be filed by health insurance issuers and carriers, except for those from the Exchange Marketplace; plan sponsors, if self-insured; the executive agency of a government-sponsored program, such as Medicaid or Medicare; or any person providing coverage to an individual.
  • Form 1095-B – There will be a Form 1095-B for every employee for whom you provided coverage. Health insurers (unless self-insured) will prepare these, but it is the employer’s responsibility to ensure the information is correct. So you will need to allow time to review.

Forms 1094-C and 1095-C are more complex but are also required to be filed by ALEs.

  • Form 1094-C– This is the transmittal form. An employer may choose to file multiple Forms 1094-C for some of its employees. For example, if a single employer has several divisions, each division can file a 1094-C (along with its respective 1095-Cs). But there must be at least one 1094-C authoritative transmittal for each employer. The authoritative transmittal will include all of the aggregate employer-level data that is reported in Parts II, III and possibly section IV of the form. Form 1094-C also asks for certifications of eligibility for transitional relief. So, if a relief measure applies to you, be sure to reflect that information on the authoritative transmittal as well.
  • Form 1095-C is the form employees and the IRS will receive and includes employee and ALE (member) information, as well as information related to employee coverage and covered individuals (dependents of the employee).

Important Deadlines
Note that the following deadlines for the 2015 tax year are later due to IRS Notice 2016-4 granting an extension to help employers and insurers comply in the first year of reporting. Filing deadlines in effect for years 2016 and beyond are noted below as well.

Filing with the IRS

  • If you are paper filing, all forms are due May 31, 2016. (For tax years 2016 and beyond the deadline will be February 28 of the following year.)
  • E-filing, which is required if there are more than 250 1095s, is due June 30, 2016. (For 2016 and beyond the deadline will return to March 31 of the following year.)
  • Note thatNO automatic or permissive extensions are available for the 2015 tax year. However, with either filing method, beginning with the 2016 tax year you will be able to get an automatic extension for 30 days by filing Form 8809. A second extension will be available only if there is an extreme hardship.

Providing information to responsible individuals

  • Deadline, whether sent via paper or electronically, is March 31, 2016. (For 2016 and beyond the deadline will return to January 31 of the following year.)
  • If you wish to send the information electronically, you must receive affirmative consent by the individual before sending.
  • Note thatNO extensions are available for the 2015 tax year. However, beginning with the 2016 tax year an extension will be available but will not be as easy to obtain as with IRS filing. You will need to send a letter to the IRS explaining your reason for the delay.

The Potential for Penalties
For failure to timely file or to include all required information, or for giving incorrect information on the return:

  • Penalties range from $50-250 for each incorrect return, depending on when or if the failure is corrected.
  • The maximum penalty for 2015 is $3 million ($1 million for filers with average annual gross receipts of $5 million or less).

For failure to furnish an accurate copy of the form to the responsible individual:

  • Penalties range from $50-250 for each incorrect return, depending on when or if the failure is corrected.
  • The maximum penalty for 2015 is $3 million ($1 million for filers with average annual gross receipts of $5 million or less).

For 2015 only, the IRS will not assess these penalties if the reporting entity makes a good faith effort to comply. This relief does not apply to a failure to timely file or if no effort is made to comply at all.

The ACA, as we all know, is complex. The 2015 tax year is critical as many of the filing requirements and associated penalties start now. Consult with your tax and legal advisors to ensure you are in compliance.

Click here to view the presentation from our recent ACAUpdate webinar.

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