Understanding the Affordable Care Act (ACA) filing requirements can induce headaches for employers both large and small. Which forms do you need to file with the IRS? Which forms do you need to furnish employees? Here’s what you need to know about ACA filing requirements for employers in 2020.
Who needs to file ACA forms (and who doesn’t)?
If you have 50 or more full-time employees (or full-time equivalent employees), you’re considered an Applicable Large Employer (ALE) and must file Forms 1095-C (Employer-Provided Health Insurance Offer and Coverage) and 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns), whether you offer an insured or self-insured plan or do not offer group health insurance. Forms must be filed and furnished for each employee, regardless of whether they accept coverage.
If non-employees such as directors, retirees and individuals on COBRA are enrolled in self-insured health plans, companies may report these non-employees on Forms 1095-B and 1094-B instead of Forms 1095-C and 1094-C.
NOTE: If your company is a member of a controlled or affiliate group that has at least 50 full-time employees as a collective total, the IRS classifies you as a member of an Applicable Large Employer Group (ALEG). Companies that have owners in common, provide services for each other or work together to provide services to third parties may be considered ALEG members. All companies under an ALEG “umbrella” are required to file Forms 1095-C and 1094-C according to the rules for large employers, even if you do not have 50 FTE’s under your division.
If you have less than 50 full-time employees and offer a self-insured plan, you must file Forms 1095-B (Health Coverage) and 1094-B (Transmittal of Health Coverage Information Returns) for each employee who accepts coverage. Health insurance companies must also file these forms to report anyone covered by employer-sponsored group health plans and small employer self-insured health plans. Furnish covered employees with a copy of their 1095-C. You do not need to report employees who decline coverage.
If you have less than 50 full-time employees and do not offer health insurance, you do not need to report anything. However, if you have fewer than 25 employees you might be able to take advantage of tax credits if you do offer insurance.
ACA filing by the numbers
Here’s a quick review of who needs to file what forms by the numbers:
|FORM||WHO NEEDS TO FILE||WHO RECEIVES THE FORM|
|1094-B||Companies with less than 50 full-time employees, health insurance companies, government agencies and other entities that offer group health plans or self-insured health plans||IRS (only for employees who accept coverage)|
|1095-B||Companies with less than 50 full-time employees, health insurance companies, government agencies and other entities that offer group health plans or self-insured health plans||IRS & Employees (only for employees who accept coverage)|
|1094-C||Companies with 50 or more full-time employees and ALEG members||IRS (for all employees, regardless of coverage or full-time status)|
|1095-C||Companies with 50 or more full-time employees and ALEG members||IRS & Employees (for all employees, regardless of coverage or full-time status)|
Do you have 50 full-time employees (or full-time equivalent employees)?
The IRS defines a full-time employee as anyone who works 30 hours or more per week (or 130 hours or more per month). Companies that have less than 50 full-time employees (or equivalents) are considered small employers; 50 or more, large employers.
The distinction is clear for many businesses. However, if you have part-time employees or a fluctuating employee count that hovers around the 50 mark, you need to use the IRS’s formulas to determine workforce status.
Full-time equivalent employees
A full-time equivalent employee is a combination of employees who do not work full-time but whose contributions add up to full-time status (each employee works less than 120 hours per month). Use the IRS’s formula to calculate your number of full-time equivalent employees as follows:
(TOTAL NUMBER OF HOURS WORKED BY NON-FULL-TIME EMPLOYEES )/120
So, for example, if you have four employees who each work 60 hours per month, your math should look like this:
60 + 60 + 60 + 60 = 240 (total number of hours worked by non-full-time employees)
240/120 = 2 (number of full-time equivalent employees)
In this scenario, you would need to add two full-time equivalent employees to your total full-time employee count.
Total number of full-time employees
To determine your total number of full-time employees, add your number of full-time employees for each month to your number of full-time equivalent employees for each month, then divide by 12:
(FULL-TIME EMPLOYEES + FULL-TIME EQUIVALENT EMPLOYEES)/12
For example, let’s say you have 48 full-time employees six months out of the year and 36 full-time employees the other six months. You also have four full-time equivalent employees per month.
Your math would look like this:
(48 X 6) + (36 X 6) = 504 (full-time employees for the year)
4 X 12 = 48 (full-time equivalent employees for the year)
504 + 48 = 552 (total full-time employees for the year)
552/12 = 46 (total full-time employees for reporting)
In this scenario, you would report has having 46 full-time employees, and you would be considered a small employer.
Understanding what needs to be reported can be complex. If you have any questions, Deluxe Payroll is here to help.
Editor’s note: This blog post was deemed accurate at the time of publication and does not constitute legal or tax advice. Always consult with your tax adviser and/or legal counsel on the regulations and obligations that pertain to your situation.