Employees covered by employers’ health plans, and individuals covered by Individual and Family Plan health insurance policies (purchased through an individual health insurance broker, Covered California, Nevada Health Link, etc.) are beginning to receive copies of their Internal Revenue Service (IRS) Forms 1095, in accordance with Affordable Care Act (ACA) law.
Forms Similar, But Different
IRS Forms 1095 contain similar, yet different, information about a person’s health insurance coverage in the previous (2021) tax year. The forms provide information about the health coverage a person had or was offered in the prior year, and provide information a person may need when filing individual income tax returns. Many taxpayers receive multiple IRS Forms 1095 from different entities, and are often confused about them, what the forms are, and what to do with them.
Word & Brown has developed an employee-facing reference to explain IRS Form 1095 to employees, available in multiple languages: English, Spanish, Chinese, Korean, and Vietnamese.
The IRS also has an information page containing Questions and Answers about Health Care Information Forms for Individuals, which includes more detail on these forms, as well as additional ACA reporting requirements and considerations for employers sponsoring self-funded health insurance plans.
1095-C: The coverage offered to an employee by an Applicable Large Employer (ALE), if applicable:
ALEs are employers that average 50 or more Full Time (FT) + Full Time Equivalent (FTE) employees, as of January 1 annually, according to all 12 months of the preceding tax year. ALEs must comply with the ACA’s employer mandate and must report on compliance (or non-compliance) with the ACA employee mandate at the conclusion of each corresponding tax year.
Under the employer mandate, employers are required to offer qualified medical coverage to eligible FT employees. Employers that were considered ALEs for the 2021 tax year are now reporting compliance to the IRS in accordance with the mandate. ALEs must generate a Form 1095-C for any person employed FT for at least one calendar month in 2021 as part of this reporting requirement.
Copies of IRS Form 1095-C must be submitted by ALEs to the IRS by February 28, 2022 if submitting by paper, or March 31, 2022, if submitting electronically. Copies must be distributed to employees by March 2, 2022. A person employed FT by multiple ALEs in 2021 should receive multiple IRS Forms 1095-C from different employers. These forms relate to the ALE’s compliance with the ACA’s employer mandate, and generally are sent to employees for informational purposes only; they are not filed with a person’s tax returns. Taxpayers are advised by the IRS to keep Forms 1095-C with other important tax documents.
1095-B: The coverage maintained by each taxpayer in 2021:
Health insurance carriers are required to produce IRS Form 1095-B for all persons covered by their health plans in 2021. These forms contain information about who was covered, the type of coverage maintained, and when. These forms are submitted to the IRS to help enforce the ACA’s Individual Mandate, which requires all United States taxpayers to maintain Minimum Essential Coverage (MEC), although there is currently no individual penalty for non-compliance at the federal level.
California and several other states not including Nevada (MA, NJ, VT, RI, and DC) have state individual mandates that do carry non-compliance penalties. These Forms 1095-B are also submitted to those state/D.C. governments (California Franchise Tax Board in CA), as applicable, for enforcement of state mandates upon residents in those states.
Taxpayers use IRS Form 1095-B to verify that the taxpayer, spouse, and dependents had coverage for each month of the 2021 tax year. The form is utilized when completing federal and/or state tax returns where applicable. Persons insured by multiple carriers will likely receive multiple Forms 1095-B. Due to a recent change in ACA law, some carriers make Forms 1095-B available electronically, in lieu of printing and mailing forms to taxpayers. Like IRS Form 1095-C, taxpayers do not submit Forms 1095-B with their tax returns. Taxpayers are advised to store Forms 1095-B with other important tax documents.
1095-A: Health coverage attained through a state Marketplace (exchange) such as Covered California, Nevada Health Link, etc.:
These forms are generated by state exchanges, and are only sent to individuals who enroll (or have enrolled a family member) in coverage through a state exchange. These forms provide information about Marketplace coverage, and are used to complete IRS Form 8962 for Premium Tax Credit (PTC) eligibility.
PTCs are available to taxpayers whose health insurance coverage premiums (attained through a state exchange) fall between certain federal affordability thresholds (usually 138-400% of Federal Poverty Level (FPL), though PTCs in California are available up to 600% of the FPL. IRS Form 1095-A provides information to persons insured through an exchange, including whether the taxpayer and his or her family members had Minimum Essential Coverage that satisfies the Individual Mandate provisions of the ACA, and state mandates if applicable.
Word & Brown is committed to your success in all facets of your business, including challenging compliance areas of the ACA and other laws. We will continue to keep you updated on compliance changes, and continue developing resources such as these Word & Brown exclusive employee-facing IRS Form 1095 references to help you navigate compliance with your clients.