Health Care Law Reporting Requirements for Employers
Form W-2 Reporting, Form 1095-C and More
The new health care law (the Affordable Care Act) includes several provisions relating to reporting by employers to employees. Some of the requirements are for all employers, and some additional requirements are for larger employers. The IRS administers the processes and reports under this law.
The provisions of the Affordable Care Act (ACA) are complex and detailed and there are tax consequences to these reports. Take the time to review your understanding of requirements with your tax or legal advisors before making any decisions or sending out any reports.
Reporting Requirements for All Employers
The IRS requires all employers to report the cost of health care coverage to employees on Form W-2, the annual wage report distributed to employees and the Social Security Administration each year. If you miss this on the original W-2, you must file a correction form W-2C to include this information.
Specifically, the ACA "requires employers to report the cost of coverage under an employer-sponsored group health plan." The requirement applies to "all employers that provide "applicable employer-sponsored coverage."
The W-2 report must be included on each employee's W-2 form, using Code DD - Cost of employer-sponsored health coverage. When reporting, include the value of any medical, dental and vision coverage you may pay for. Include both the employer and employee portions of the cost; in other words, the total cost of the plan, no matter who pays for it.
This chart by the IRS shows all the types of health coverages that must be included in the total on Form W-2.
Read more details about this reporting requirement from the IRS on this questions and answers page. According to the IRS, costs paid by employers for health insurance are not taxable to the employees, for either income taxes or FICA taxes (Social Security and Medicare).
Reporting Requirements for Large Employers
If your business has 50 or more full-time equivalent employees, you are considered an "Applicable Large Employer" (ALE) for the purpose of reporting and for the purposes of Employer Shared Responsibility. For this purpose, full-time employees are those who work, on average, at least 30 hours per week.
If your business is an ALE, you must either:
- Offer "affordable" health care coverage to full-time employees. That coverage must provide "minimum value," or
- Make an employer shared responsibility payment (ESR) to the IRS. This payment must be made if at least one full-time employee receives a premium tax credit for buying individual coverage on an Exchange.
In addition to the reporting requirements described above for all employers for including health care costs you Form W-2, you must report whether or not you offered health care coverage to employees.
Here are the details on what you must report and when:
- A statement to employees about health insurance coverage offered to employees. This statement, on IRS Form 1095-C, must be (a) given to each employee on and (b) reported to the IRS.
- If your business self-insures its health care plan, you must provide a statement to the IRS about this coverage. You will need to use Section III of the 1095-C form for this purpose.
Filing 1095-C Forms Electronically
If you are filing fewer than 250 of the 1095-C forms, you don't have to file them electronically. If you are filing more than 250 forms, you must file them electronically. The IRS has a special user interface system for Affordable Care Act Information Returns that you can use.
Reports on Form 1095-C are due for the previous calendar year. For example, the form must be filed with the IRS by February 28, 2019, for 2018.
Reporting to employees: You must give each employee a copy of Form 1095-C by January 31, for the preceding calendar year.
Reporting to the IRS: IRS Form 1095-C must be filed with the IRS before February 28 (March 31 if filed electronically).
Form 1095-C Details
Form 1095-C requires the following information:
- Employee name, address, and tax ID number
- Employer name address, contact information, and EIiN
- Employee offers of coverage, total year and month by month
- Employee required contribution, total year and month by month
- For self-insured plans; covered employees, identification, and months of coverage
The Instructions for Form 1095-C give more details on the requirements for this form.
Disclaimer: The information about employer requirements of the Affordable Care Act is complicated and the effective dates and transition relief are confusing and constantly changing, and each business situation is unique. Be sure to check with your tax, insurance, and legal advisors before you implement any of these reporting requirements.