Large employers with 50 or more full-time employees in 2017, including full-time equivalents, are required to comply with certain reporting requirements under Section 6056 of the IRC for calendar year 2018. The employer must complete and distribute a Form 1095-C by March 4, 2019, to each employee who was full-time for at least one month in 2018. If filing by paper, the employer must file those forms and the transmittal Form 1094-C with the IRS by Feb. 28, 2019; if filing electronically, the deadline is April 1, 2019. Employers filing 250 or more forms are required to file electronically.
As this is the fourth year of reporting and the IRS has begun enforcement, there are some common errors made by employers that can be identified:
Failure to file. Remember that size is determined in the previous calendar year and is based on the total size of all related employers. Thus, if a small employer is part of a controlled group and the total number of full-time employees across the group is 50 or more, then all employer members of a controlled group are subject to the employer mandate and reporting requirements.
If an employer discovers that they were delinquent in a previous year, they should work to correct the failure as soon as possible. This would include both filing the late forms with the IRS and distributing the forms to full-time employees. Failure to file can carry a penalty of $540 per form with possible increased penalties for willful neglect.
Qualifying Offer. The code 1A used on Line 14 of the Form 1095-C and the related “Qualifying Offer Method” on Line 22 of the Form 1094-C are often misunderstood. Many think that if they complied with the employer mandate by providing minimum value and affordable coverage then they use this code and check that box. But the term “qualifying offer” is very specific and most employers will not qualify for this method. A qualifying offer means that the employer’s offer is not only of minimum value but also that it is affordable per the federal poverty level safe harbor. In order to qualify, the employee’s required cost for self-only coverage must have been $96.71 or less per month in 2018. If the employee’s cost of coverage was more, that does not necessarily mean that the coverage was not affordable or that the employer did not comply with the mandate. It simply means that the employer may need to use 1E on Line 14 and the cost of coverage may have been affordable using one of the other two affordability safe harbors: rate of pay or Form W-2.
Failure to review forms prior to submission. In Column (a), Part III of the Form 1094-C, large employers must indicate whether they offered minimum essential coverage to substantially all of their full-time employees for every month in 2018. Substantially all means at least 95 percent of full-time employees.
In previous years, many employers who indeed complied with the requirement indicated a “No” response in the column. In many cases, this error was due to how data was processed either by the software or the vendor that was utilized for reporting. Remember that even if there is a third party completing the reporting on behalf of the employer, the employer is ultimately responsible for the accuracy of the information and any associated penalties for failures.
A “No” response in Column (a), Part III of the Form 1094-C can result in Penalty A being assessed against the employer by the IRS, which is $2,320 ($193.33 prorated monthly) multiplied by the total number of full-time employees minus the first 30 employees. Thus, it is crucial for an employer to review all forms for accuracy prior to filing with the IRS and distributing to employees.
NFP has many resources to assist employers with their filing requirements. Please contact your consultant with any questions.