Affordable Care Act (ACA) 1094-C/1095-C Reporting and Employer Mandate Update

1094-C/1095-C 2018 Deadlines

            Similar to notices issued in prior years, the IRS has once again issued a notice granting an extension for providing employees a copy of Form 1095-C. In Notice 2018-06, the IRS extended the deadline for giving Form 1095-C to employees from January 31, 2018 to March 2, 2018.  The ACA mandates that all Applicable Large Employers (ALEs)—employers with 50 or more full-time employees plus Full-Time Equivalent employees—fill out Form 1095-C for all employees who work full-time hours (130 hours) in at least one calendar month. Employers must distribute Form 1095-C to employees and file the form with the IRS, along with the Form 1094-C. Both the Form 1095-C and 1094-C provide information to the IRS about the health coverage the employer offered to employees. 

            This extension does not apply to filing the forms with the IRS.  Employers have until February 28, 2018 (if filing by paper) or April 2, 2018 (if filing electronically) to submit Forms 1094-C and 1095-C to the IRS. If an employer needs additional time to file the forms with the IRS, employers may request a 30-day extension by completing Form 8809.

            Notice 2018-06 also extends transition relief from reporting penalties through 2018 for employers that can show they made good faith efforts to comply with the reporting requirements. The relief applies to incomplete or incorrect information reported on the forms, but is not available for forms filed late.  As a result, employers should be sure to file all IRS forms on time.

Employer Mandate Penalties

            The IRS started issuing Employer Mandate penalties (officially referred to as Employer Shared Responsibility Payments (ESRP)) for the 2015 calendar year.  Under the ACA, ALEs must offer their full-time employees minimum essential health coverage that is both affordable and meets ACA minimum value standards, or face a potential ESRP. An employer may be liable for an ESRP if the IRS determines one or more of the employer’s full-time employees received a premium tax credit for purchasing coverage on the Individual Health Insurance Marketplace or state exchange.

             The IRS will determine liability for an ESRP after reviewing the employer’s Form 1095-C and 1094-Cs and employees’ individual income tax returns. If the IRS determines the employer is liable for an ESRP, the IRS will notify the employer by sending Letter 226-J. This letter will include a table showing a breakdown of the proposed penalty, a list of employees who received a premium tax credit, and the months employees received a premium tax credit.

            Upon receiving Letter 226-J, employers have 30 days to submit a response.  It is extremely important for employers to immediately begin preparing a response if they do not agree with the ESRP.  In some instances, an incorrect code on a Form 1094-C or 1095-C could result in the IRS assessing an ESRP even when the employer complied with all requirements of the ACA.  In such cases, the employer must respond to the IRS letter to avoid the ESRP becoming final.  If an employer needs more time to respond to Letter 226-J, they should call the IRS at (877) 571-4712, during business hours, to request an extension.

            If you have questions regarding this article, or need help responding to Letter 226-J, please contact Caitlin Andersen (candersen@seatonlaw.com or 952-921-4619) or any other attorney at Seaton, Peters & Revnew, P.A.

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