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Obamacare IRS Employer Reporting: File or Risk Penalties

Employers with 50 or more full-time employees (including full-time equivalent employees) that are required to offer health insurance coverage and report enrollment information for their employees under the Affordable Care Act (ACA), file Internal Revenue Service (IRS) Forms 1094 and 1095.

  • Form 1095-C provides information about health insurance; the employer sends the completed form to both employees and the IRS.
  • The 1094-C acts as a cover sheet for Form 1095; the employer or its vendor sends the completed form only to the IRS.

The deadline for filing these forms is March 31st.

Do you have a 1095/1094 solution?

At a recent ACA employer reporting webinar, participants were asked what percentage of employers with 50 to 300 employees have a 1095/1094 reporting solution. Of the 586 respondents, 32% responded “less than 60%” and only 11% responded “100%.”  Assuming there are approximately 450,000 businesses with 50 to 300 employees, that means at least 150,000 employers lack a 1095/1094 solution.

Let’s say half of these employers “wake-up” and find a solution. That still leaves the other half at risk. Suppose the average employer has 100 employees and the non-filing penalty is $260 per employee. That translates to an average penalty of $26,000. This amount is actually doubled, as the penalty applies to 1) the actual 1095-C form and 2) the IRS filing vis-à-vis the 1094-C. Hence, the average penalty is actually $52,000, which is not tax deductible. And the penalties would be materially higher for non-filing entities that fail to offer health insurance to ACA-eligible employees.

75,000 non-filing employers averaging a $52,000 penalty translates to $3.9 billion. But this is actually a conservative estimate, because the Congressional Budget Office anticipates $9 billion in ACA non-compliance penalties in 2017 based on 2016 activity.

Are you at risk?

You may be thinking that there’s nothing to worry about because the IRS hasn’t issued any employer penalties yet and is unlikely to do so. Experts believe the IRS will in fact issue penalties sometime in 2017.

Get your filings under control

Internal controls are a very important part of the 1095/1094 process. Employers should:

  1. Review human capital metrics (e.g., number of recipients compared to employees)
  2. Confirm that all ACA eligible employees received an offer of coverage
  3. Confirm that line 14 Offer-of-Coverage codes are accurate
  4. Confirm that line 16 Safe Harbor codes are accurate

Here’s the bottom line. No one knows with any certainty what’s going to happen. We do know that the ACA IRS Employer Reporting requirements are still in force. The IRS filing deadline (March 31) is right around the corner. If you’re unsure about your 1095/1094 reporting obligations, please contact Warady & Davis LLP at (847) 267-9600.


This publication is distributed with the understanding that the author, publisher and distributor are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and accordingly assume no liability whatsoever in connection with its use. ©2017