Form 1095

How to determine ACA affordability?

Affordability refers to whether an individual's share of the self-only premium for the lowest-cost minimum essential coverage does not exceed a specific percentage of the individual's household income. Here's how affordability is commonly determined:

1. Calculate Household Income: This includes not only the individual's income but the combined income of everyone in the household. The Modified Adjusted Gross Income (MAGI) is usually considered.
2. Identify the Lowest-Cost Plan: Look at the lowest-cost self-only minimum essential coverage that's available either through the employer (for Form 1095-C) or through the Health Insurance Marketplace (for those not covered by an employer's plan).
3. Calculate the Percentage: Divide the employee's share of the premium for the lowest-cost option by the household income and multiply by 100. Compare this percentage to the affordability threshold set by the ACA, which may vary from year to year.
4. Consider Subsidies and Credits: If purchasing through the Marketplace, individuals may qualify for subsidies or credits, such as the Premium Tax Credit, based on their income. These can affect the affordability calculation.

ACA Reporting Deadlines Important dates

Various deadlines must be met by employers and other reporting entities. If these deadlines are not met, then filers may be subject to ACA penalties. These deadlines include the following:

• Furnishing Form 1095 to Employees/Individuals::
  • Form 1095-B (Health Coverage): Typically due to the covered individuals by March 2nd.
  • Form 1095-C (Employer-Provided Health Insurance Offer and Coverage): Typically due to employees by March 2nd.
• Filing with the IRS:
  • Paper Filing
    • Form 1094-B and 1095-B: Due by February 28
    • Form 1094-C and 1095-C: Due by February 28
  • Electronic Filing
    • Form 1094-B and 1095-B: Generally due by March 31
    • Form 1094-C and 1095-C: Generally due by March 31

Please note that if you are filing 10 or more of any particular form, electronic filing is required. Also, the deadlines for furnishing forms to individuals may be extended by the IRS in certain circumstances.

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Who is required to report under the Affordable Care Act?

Under the ACA, several entities are required to report health coverage information. This reporting helps the IRS enforce the ACA's individual mandate and employer mandate and assists individuals in complying with their own tax responsibilities. Here's an overview of who is required to report:

• Health Insurance Marketplaces: Marketplaces must report information about the coverage they provide, using Form 1095-A.
• Insurance Providers: Insurance companies that provide minimum essential coverage (including insurers that offer coverage on the individual market outside of the Marketplace) must report this coverage using Form 1095-B.
• Self-Insured Employers: Employers that provide self-insured health coverage must also report this coverage using Form 1095-B.
• Applicable Large Employers (ALEs): Employers with 50 or more full-time employees, including full-time equivalents, are considered ALEs. They are required to report information about the health care coverage they offered (or did not offer) to their full-time employees using Form 1095-C.
• Certain Other Providers: Some other entities, like government-sponsored programs (e.g., Medicaid, Medicare), are also required to report using Form 1095-B.

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Calculating full-time equivalents for ACA reporting

Calculating full-time equivalents (FTEs) is a crucial step for employers in determining whether they are considered an Applicable Large Employer (ALE) under the Affordable Care Act. ALEs are subject to specific reporting and coverage requirements. Here's how to calculate FTEs for ACA reporting:

• Identify Full-Time Employees: Under the ACA, full-time employees are those who work an average of 30 or more hours per week, or at least 130 hours in a calendar month.
• Calculate Part-Time Employees' Hours: Add up the total number of hours worked in a month by all part-time employees (those working fewer than 30 hours per week).
• Determine Full-Time Equivalents from Part-Time Hours: Divide the total part-time hours by 120. This figure represents the number of FTEs derived from part-time employees. For example, if part-time employees worked a combined 600 hours in a month, that would equate to 5 FTEs (600 ÷ 120 = 5).
• Add Full-Time Employees and FTEs: Add the number of full-time employees to the number of FTEs derived from part-time employees. The sum will give you the total FTE count for ACA purposes.
• Annual Calculation (if needed): If calculating for the entire year, perform the above steps for each month, and then divide the total by 12 to get the average FTEs for the year.
• Determine ALE Statu: If the average number of FTEs is 50 or more, the employer is generally considered an ALE and is subject to ACA reporting and coverage requirements.

Note that the calculation can vary depending on specific situations and changes in regulations. Special rules may apply to seasonal workers, new employees, or employees with variable hours.