Understanding Form 1094-C
This year companies with over 50 full-time equivalent employees are on the hook to prove compliance with the ACA’s Employer Mandate, or face penalties (even those with 50-99 FTEs that aren’t subject to penalties this year still need to file). If your company is considered a large employer under the ACA, you’re probably using a lot of your free time trying to get your head around Forms 1094-C and 1095-C. This blog breaks down the ACA Form 1094-C, the company transmittal that goes with your employee Forms 1095-C.
When reviewing, remember the context
Your filings (both Forms 1094-C and 1095-C) will do more than fulfill your company’s compliance obligation. Since the ACA carries tax implications for most individuals and many businesses operating in the U.S., the IRS is using these forms (and a few others) to ensure compliance for everyone. They need to know:
- Is your company an ALE or member of an ALE aggregated group (shared ownership) and subject to shared responsibility?
- Did your company offer minimum essential coverage with minimum value to everyone eligible?
- Did your company qualify for and declare transition relief or simplified reporting?
- Are your employees compliant with the Individual Mandate (remember, the 1040 will be further updated to reflect mandatory coverage or they face a penalty too)? What about their dependents and spouse?
- Is anyone claiming tax breaks in the marketplace even though they were offered coverage through his / her employer?
1094-C Who must file
All Applicable Large Employers (ALE) and members of ALE Aggregate Groups must file a 1094-C and Forms 1095- C for eligible employees. Every employer and ALE member must file an authoritative transmittal. Here’s the exact IRS language, “An employer may choose to file multiple Forms 1094-C, accompanied by Forms 1095-C for some of its employees, provided that a Form 1095-C is filed for each employee for whom the employer is required to file. In the case of an Aggregated ALE Group, each separate employer (referred to in these instructions as an ALE Member or employer) must file its own Authoritative Transmittal. Although an employer may file multiple Forms 1094-C, one ‘Authoritative Transmittal’ Form 1094-C, identified on line 19, part I…must be filed for each employer, even if multiple Forms 1094-C are filed by and on behalf of a single employer.”
Short version – every company with an EIN files an Authoritative Transmittal. You may file more forms if your organization is really large and responsibility is dispersed, but you still must have “one form to rule them all” (for all you Lord of the Rings fans out there).
There are no exceptions to who must file if you have over 50 FTEs – even if you offer benefits through a third party (for example, you’re covered under a collective bargaining agreement and benefits are administered by the union), you still have to file. What will change is WHAT you claim on your forms.
If you’re reading this as a small employer (under 50 FTEs) but you’re self-insured and heard you need to file the 1094, you’re looking for the 1094-B. If you’re a large employer and self-insured, you’re still filing the 1094-C.
Taking the 1094-C Line by Line
Lines 1-6: Make sure your address lines up with the employer address used on the Forms 1095-C for employees. You might want to consider multiple forms 1094-C if your employer data sources matches employees with satellite office addresses or home addresses if they’re remote.
Line 7 – 8: This is the name and number of the person to contact with any questions. Even if you work with a partner to handle your filings, this contact should be someone within your organization who can speak authoritatively to any questions the forms may raise (think transition relief claims or minimum essential coverage questions). There’s another line you can use for your partner (i.e. a company like Sentric filing on your behalf) to answer questions about the forms themselves.
Lines 9-14: Most companies will leave these blank, unless you have a designated government entity filing on behalf of the employer. Full DGE definition is covered in question 24 of the IRS FAQs on the ACA.
Lines 15 -16:This line is where you’ll indicate who is the right person to contact for any questions relating to your Form 1094-C. This might be your third party partner who filed your forms on your behalf.
Line 17:Congrats, you get to skip this one. It’s reserved for future use.
Line 18: Total number of Forms 1095-C (those going to employees) associated with this form. Remember, the address on this form must be the same as the Forms 1095-C associated with this form.
Line 19: Confirm whether this is the authoritative transmittal. If yes, you’ll need to complete parts II, III and IV, to the extent applicable. If you check no, sign the form at the bottom of page 1 and leave the rest blank. The instructions also reiterate here how authoritative forms should be treated, “There must be only one Authoritative Transmittal filed for each employer. If this is the only Form 1094-C being filed for the employer, this Form 1094-C must report aggregated employer-level data for the employer and be identified on line 19 as the authoritative transmittal. If multiple Forms 1094-C are being filed for an employer so that Forms 1095-C for all full-time employees of the employer are not attached to a single Form 1094-C transmittal (because Forms 1095-C for some full-time employees of the employer are being transmitted separately), one of the Forms 1094-C must report aggregate employer-level data for the employer and be identified on line 19 as the authoritative transmittal.”
Part 1 Complete, Bring On Part II
Time to keep pushing through. Part 1 was easy. You can grab a glass of wine once we get through Part II.
Keep in mind Part II only gets completed on the authoritative form.
Lines 20-21:Line 20 is that aggregated data mentioned above. So it’s possible that this form has 40 Forms 1095-C associated with it as entered on line 18, but as the Authoritative transmittal, you’re going to represent all the Forms 1095-C associated with your EIN on any other 1094-C, so this number in line 20 might be completely different from what you entered earlier. The number you enter on line 20 needs to include the number you entered on line 18.
In line 21, you’re going to clarify if during ANY MONTH of the calendar year the employer was a member of an Aggregated ALE Group. If you check yes, you must complete the “aggregated group indicator” in Part III and fill out part IV. The good news is that if you were not a member of an Aggregated Group for ALL 12 months of the year, you’re in the home stretch.
Line 22:It seems the IRS wanted to make things a little easier on employers who were already giving qualified coverage to full-time employees or were using an Affordability Safe Harbor. And it also needed a place to let companies who had Transition Relief for this year declare their eligibility. Enter Line 22. In question 15 of its FAQ, the IRS describes the alternative / simplified reporting methods you may claim here.
If you are claiming a Certificate of Eligibility, it will impact the coverage codes and calculations on Lines 14, 15 and 16 of the Forms 1095-C you file for employees. This is not a mandatory section, but you’ll want to spend time here if you have 50-99 employees and want to claim Transition Relief or if you’re using the Affordability Safe Harbors (W-2, Rate of Pay, or Federal Poverty Rate) in your Forms 1095-C. If you’re claiming Safe Harbors this year, make sure you have solid records on which employees’ Forms 1095-C are affected, the corresponding certificates you’ll want to select in line 22 of the 1094-C and the applicable coverage codes in Line 16 of the 1095-C.
Keep in mind, the Certificates of Eligibility are “and / or,” meaning it may be appropriate to claim more than one.
Part III, Take a Nap or Go on a Walk. We’ll Wait.
If you’ve documented your Certificates of Eligibility and which employees are impacted and which coverage codes you’ll need to use on the 1095-C, it’s time to move on to Part III of the 1094-C.
Lines 23 – 35.
In column A, Minimum Essential Coverage Offer Indicator, you don’t need to count any employees during their limited non-assessment period in making the following calculations/selections:
- If the employer offered minimum essential coverage to at least 95% of its full-time employees and their dependents for the entire calendar year, enter “X” in the “Yes” checkbox on line 23 for “All 12 Months” or for each of the 12 calendar months.
- If the employer offered minimum essential coverage to at least 95% of its full-time employees and their dependents only for certain calendar months, enter “X” in the “Yes” checkbox for each applicable month.
- For the months, if any, for which the employer did not offer minimum essential coverage to at least 95% of its full-time employees and their dependents, enter “X” in the “No” checkbox for each applicable month.
- If the employer did not offer minimum essential coverage to at least 95% of its full-time employees and their dependents for any of the 12 months, enter “X” in the “No” checkbox for “All 12 Months” for each of the 12 calendar months.
- However, an employer that did not offer minimum essential coverage to at least 95% of its full-time employees and their dependents but is eligible for certain transition relief described in the instructions later under Section 4980H Transition Relief for 2015 should enter an “X” in the “Yes ”checkbox for Part III, line 23, column (a), as applicable.
Column b & c. In b, enter the number of full-time employees, but don’t include anyone in a limited non-assessment period. In c, enter the total number of all employees (this time count those in the limited non-assessment period, part-time, seasonal, etc.).
You also don’t need to fill in b if you selected box D on line 22.
In column c, you have options for which day the month starts – first day of the month, last day of the month, the 12th, first day or the last day of the first payroll of the month. This provides some flexibility to you in how you pull the data.
Column d: If you checked yes in line 21, choose the months of the year your company was a member of that ALE group.
Column e: Only fill this out if you selected box C in line 22. If you’re under 100 EEs, select code A, over 100 is code B.
If you’re a member of an aggregated ALE group, enter the information about your sibling organizations here. You can include up to 30. If there are more than 30, use those with the highest average monthly EE count. Make sure you’ve also filled out column d in part III for the applicable months.