Demystifying Forms 1094-C and 1095-C: Essential Knowledge for Employers and HR Professionals

Employers and HR managers, have you ever felt overwhelmed by the myriad of tax forms and reports you must file each year? You’re not alone. Among the sea of paperwork, Forms 1094-C and 1095-C are two documents that often cause confusion and concern. Understanding these forms is crucial for maintaining compliance with pertinent healthcare reporting requirements under the Affordable Care Act (ACA). Let’s break down these key forms to ensure that you’re well-prepared for the reporting season.

What Is Form 1094-C?

Form 1094-C, often referred to as the “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns,” serves as a cover sheet for the 1095-C forms sent by large employers (those with 50 or more full-time employees, including full-time equivalent employees). This form reports summary information for each employer, and it provides the IRS with a snapshot of the company’s adherence to the ACA’s employer mandate.

What Is Form 1095-C?

Form 1095-C, titled “Employer-Provided Health Insurance Offer and Coverage,” is a tax form that provides detailed information about the health insurance coverage offered and provided by an employer to its employees. It includes information about the type of coverage offered, the cost to the employee, and the months during which the coverage was available. Each employee who was full-time for one or more months of the calendar year should receive a Form 1095-C.

Digging Deeper: The Elements of Form 1094-C

Form 1094-C comprises several parts, including:

  • Part I: This section collects the employer’s basic information, like the name, Employer Identification Number (EIN), and address.
  • Part II: Here, the employer provides information about the total number of 1095-C forms submitted, the full-time employee count for each month, and overall workforce size.
  • Part III: This section, only to be completed by employers who offered self-insured plans, lists the aggregate group health plan data.

Understanding the Sections of Form 1095-C

Form 1095-C consists of three parts:

  • Part I: Records employee identification information and details about the employer.
  • Part II: Shows the offer of coverage (codes for the type of coverage), the employee’s share of the monthly premium for lowest-cost, minimum-value coverage, and the applicable IRS safe harbor codes.
  • Part III: Completed only by employers who offer a self-insured plan, displays covered individuals’ months of coverage.

What it means for employers

For employers, Forms 1094-C and 1095-C are more than just tax documents; they represent a crucial component of the ACA’s employer mandate compliance. Here’s what they mean for employers:

  • Compliance: Non-compliance can result in significant penalties. Employers need to accurately report the health coverage they offered to avoid fines.
  • Administrative Duties: Employers should establish effective systems for tracking and managing employee coverage information throughout the year.
  • Time Sensitivity: There are strict deadlines for submitting Forms 1094-C and 1095-C to the IRS and distributing Form 1095-C to employees.

What it means for employees

For employees, Form 1095-C is a transparent record of the health insurance offered by their employer. It plays a vital role in helping them understand:

  • Coverage Options: Employees can see the insurance options available to them and whether those options meet minimum essential coverage standards.
  • Tax Filing: This form is essential for employees when they file their personal income taxes, particularly if they are claiming premium tax credits or confirming that they have met the individual mandate for having health insurance.

Reporting Deadlines to Remember

Employers must be cognizant of the reporting deadlines associated with these forms to avoid penalties:

  • Form 1095-C copies must be distributed to employees by January 31 following the reporting year.
  • Form 1094-C and all copies of Form 1095-C must be filed with the IRS by February 28 if submitting on paper or by March 31 if filing electronically.

Best Practices for Reporting

To manage reporting effectively:

  • Start Early: Gather and verify employee data throughout the year instead of waiting until reporting season.
  • Stay Informed: Keep abreast of any changes in reporting requirements each year.
  • Seek Assistance: Consider using software solutions or consulting with tax professionals to ensure accurate reporting.

More Than Just Forms: Strategic Implications

Beyond compliance, the information from Forms 1094-C and 1095-C helps employers analyze their healthcare offerings, potentially reconsidering plan designs and employee contributions to ensure competitiveness and affordability. They also enable employers to make informed decisions concerning workforce management and benefits strategy.

Conclusion

Forms 1094-C and 1095-C are vital for employers to navigate the intricacies of the ACA and maintain compliance. Understanding and accurately completing these forms is crucial for business owners, executives, and hiring managers to avoid penalties and provide clarity and transparency to employees about their health coverage. By staying informed and preparing throughout the year, HR professionals and employers can master the challenge of these forms, turning a complicated process into a streamlined part of their annual routines.

About the Author:

Kyle Bolt
Kyle Bolt, the founder of Crew HR - Simple HR Software, brings a wealth of expertise with over 15 years in Human Resources. Kyle has dedicated his career to building high-performing teams and fostering workplace cultures that drive business success. His hands-on experience has made CrewHR a trusted partner for businesses looking to simplify and streamline their HR processes.
Kyle Bolt
Kyle Bolt, the founder of Crew HR - Simple HR Software, brings a wealth of expertise with over 15 years in Human Resources. Kyle has dedicated his career to building high-performing teams and fostering workplace cultures that drive business success. His hands-on experience has made CrewHR a trusted partner for businesses looking to simplify and streamline their HR processes.

Simple HR Software 

CrewHR brings staff scheduling, time & attendance, and your HR processes together in one easy-to-use platform.