5 Must-Know Obamacare Obligations for Every Entrepreneur


Obamacare or ACA compliance is real, it’s complicated and it’s here to stay. Business owners today face a new challenge to be at par with ever changing rules and their interpretations and to also act accordingly to track and report to the IRS.

Below we present a couple of factors that are a good start for analyzing the current status of a business owner in terms of liability towards ACA.

1. What are the Current Obligations?

As per the ACA rules employers having more than 50 full-time employees (including full-time equivalents) and less than 100 are required to offer healthcare coverage to all full-time employees in 2015. For this, it is also necessary for the sake of calculations that the employer count their employees from 2014.

As per the ACA rules employers having more than 50 full-time employees (including full-time equivalents) and less than 100 are required to offer healthcare coverage to all full-time employees in 2015. For this, it is also necessary for the sake of calculations that the employer count their employees from 2014.

A majority of employers are not aware that they need to calculate their full-time employees and FTEs from last accounting year to know if they fall into the category for compliance with the ACA (for healthcare coverage). Not only that, they need to keep a track on current year employee numbers to know their liability for the next accounting year.As per the ACA definition, employees who have worked 30 hours a week on an average are classified as Full-time employee. Obama care (ACA) makes it mandatory for business owners to offer healthcare coverage to their FTEs also.

2. What are Full-Time Employees? (Definition)

As per the ACA definition, employees who have worked 30 hours a week on an average are classified as Full-time employee. Obama care (ACA) makes it mandatory for business owners to offer healthcare coverage to their FTEs also.

Since many definitions exist for the full-time employee classification and all categorize them as someone who has worked for more than 40 hours per week, the new classification of a full-time employee who works 30 hours per week is a new one and strictly from the ACA. This also means that now the employers have to offer health care coverage to more number of employees.

Read Also: IRS Health Care Tax Considerations for Small Employers with Fewer than 50 Employees

3. Health Care Coverage – At Least to a Minimum Percentage of Full-Time Employees

All large employers should identify their full-time employees as they have to offer healthcare coverage to a fixed percentage of the full-time employee base, failing in which they are liable of $2,000 penalty from the IRS for each full-time employee.

ACA states that the large employers are supposed to offer healthcare coverage to at least 70 percent of their full-time employees in 2015. And that was still beneficial for the employers in 2015 as from 2016 ACA mandates that the large employers offer healthcare coverage to at least 95 percent of their full-time employee base or else face a penalty of $2,000 per full-time employee.

Related: Health Insurance Providers Must Report Certain Information to the IRS and Covered Individuals

4. Employers must Offer Affordable Coverage Options

Once the initial screening of healthcare compliance is done, the employer is then required to ensure that the coverage provided is of Minimum Actuarial Value (MAV) and also that the coverage is affordable by their employees. MAV is defined as the value which is at least 60 percent of the total benefits cost mentioned in the medical plan.

Providing with healthcare coverage is not enough, the employer has to make sure that it is affordable too. If this is not the case and the employee gets coverage from state health care exchange where they can earn tax credit the employer is liable to be penalized for $3,000 per case.

5. Healthcare Coverage – Tracking and Reporting

Things beyond providing healthcare coverage are bit more intricate as it involves tracking and reporting that are in compliance with the IRS.

From the reporting perspective Form 1095-C, the employee statement is a lengthy document. And employers have to track, calculate and report all the pertinent data points accurately. For a small business owner, that’s a lot of paperwork.

The uncertainty around the health care coverage complicates the issue, resulting in employer’s compliance checks because of legal penalties around the healthcare reforms.

It is highly suggested that small business owners either go through the ACA document with diligence or automate the process with ACA 1095 software. The filing done using 1095 software is IRS compatible and accurate. The 1095 software comes loaded with all the latest tax and filing rules, so you can be assured of correctness. Or else, the business owner may hire a CPA who specializes in this field.

With all the spiraling ACA intricacies, compliance check involves gathering and calculations of many years. And this makes it extremely difficult for small business owners.

Health Insurance Providers Must Report Certain Information to the IRS and Covered Individuals

Health Insurance Providers

With the new directives from the IRS, providers of minimum essential coverage are required to report certain information not only to the individual about their health coverage but also to the IRS, starting 2016.

To stay in-line with the individual shared responsibility criteria Taxpayers use the information stated in Form 1095-B, Health Coverage Information Return Form 1095-C, Employer-sponsored health offer and coverage whenever they file their tax returns. IRS would use this information to ascertain the number of months the individual has health coverage.

Self-insured group health plans details are to be reported by the Employers individually to the IRS. This would include all employers of any workforce size who are sponsoring a self-insured group health plan. Employers falling in the category of ALE (Applicable Large Employer) are supposed to file Form 1094-C and Form 1095-C for transmittal of employer-sponsored health insurance coverage information returns and for reporting information of the employees who got enrolled in the employer-sponsored health coverage plan. Employers not falling in the category of ALE are not supposed to file Form 1094-C and Form 1095-C but are supposed to file Form 1094-B and Form 1095-B for the same purposes to the IRS. The deadlines for 2015 filing are February 29, 2016, for manual filing with the IRS and March 31 for Electronic filing.

Apart from this, any other entity that provides the essential coverage will file Form 1094-B and form 1095-B. For all such categories, the deadline for filing the forms with the IRS are February 29, 2016, and March 31, 2016, for manual and electronic filing respectively. To make things further clear the filed form must include name and identification number of the taxpayer. It should also clearly describe the details of the months for which the individual was covered.

Health coverage providers should also send out the Form 1095-B to the responsible individual. IRS defines a responsible individual as the one who enrolls one or more individuals into the coverage program.

To know more information, please read the deadlines for 1095 filing for the year 2016.

IRS Health Care Tax Considerations for Small Employers with Fewer than 50 Employees

aca tax provisions

Health care tax, which is often known as Affordable Care Act (ACA) or ObamaCare not only affects individuals and families but also small and large businesses in the United States. The law was signed by President Barack Obama on March 23, 2010. However, the rules are a bit different for small and large businesses.

As of now, a small business with less than 50 employees can visit the dedicated health insurance marketplace called Small Business Health Options Program or generally known as SHOP, to compare and purchase affordable health plans for their employees.

A recent article from IRS indicates some of the tax provisions of ACA, which are only applicable for employers with fewer than 50 full-time or equivalent (FTEs) employees. The said employers should be aware of the following tax provisions or consideration to save time and money and abide the ACA and IRS laws. The tax considerations are:

  • Employers with less than 50 full-time employees or equivalent are not subjected to employer shared responsibility provision. According to IRS, more than 95 % of employers have less than 50 full-time employees in the US.

(FYI, Under the Affordable Care Act’s employer shared responsibility provisions, only larger businesses should either provide affordable insurance to their employees, which meets a minimum value standard, or if one of their employee gets a better deal in the individual marketplace. The latter is referred to as “the employer mandate” or “the pay or play provisions.”)

  • For these businesses, it is extremely important to calculate the number of employees accurately and precisely throughout the year. Moreover, the responsibility for those businesses, whose employees fluctuates throughout the year, is increased furthermore in order to fall under this tax consideration category.
  • As mentioned above, they can purchase health insurance coverage through the SHOP for their employees.
  • As for the employers with less than 25 employees with average annual wages of less than $50,000 are concerned, they are qualified for the small business health care tax credit only if they cover minimum 50 % of their full-time employees’ premium costs. In addition, they should get coverage only through the SHOP.

All the employers regardless of the size of their businesses, who are providing self-insured health coverage to their employees, MUST annually file information returns for their covered individuals with the IRS and furnish statements to the said individuals. The first information returns should be filed in 2016 for the calendar year 2015 before February 29, 2016. If the employers are E-Filing, then the last date is March 31, 2016. However, the first individual statements must be furnished on or before January 31, 2016.

The cost or amount of these health care benefits, wherein both the portions should be paid by the employer and the employees, should be reported in box 12 of the Form W-2, with Code DD to identify the amount. As for the health FSA (Flexible Spending Account) is concerned, the amount reported should not include the amount of any salary reduction contributions.

In addition, the Internal Revenue Service offer respite for the smaller employers, who files less than 250 W-2 forms, by making this requirement optional for them until further guidance is issued.

If you have not yet filed the ACA information, then you can easily report ACA requirements based on health care coverage provided to employees by using CheckMark 1095 Software.

1095 Filing – Deadlines for 2016

Self-insured employer, government agencies, issuer of health insurance and any other business entity that provides health coverage to a full-time employee are required to report the details of the coverage provided to the IRS. Business entities that are ALE’s (Applicable Large Employer) are supposed to report all the coverage information to the IRS that is pertinent to its full-time employees. IRS categorizes ALE’s (Applicable Large Employer) as one who has minimum 50 full-time employees.

1095 Filing Deadlines for 2016

You may file the 1095 Forms to the IRS using CheckMark 1095 software. The due dates for 1095 Filing as released by IRS are given below. Make sure that you mark them as reminders in your calendar. As per the requirements and conditions stated in this article you may decide to use CheckMark 1095 software with either the print or with E-Filing capability –

  • Companies handing over Forms 1095-B and 1095-C to individuals by Feb. 1, 2016.
  • Companies filing the Forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS not later than Feb. 29, 2016 if filing on paper and March 31, 2016, if filing electronically.

ACA 1095 Deadlines

Health Coverage Providers – Reporting

Companies providing minimum essential health coverage for the calendar year must report an information return and a transmittal to the IRS. Mostly for this purpose transmittal Form 1094-B and information return Form 1095-B will be used. However, employers (including government employers) supporting self-insured group health plans will report about the coverage in Form 1095-C.

Employers having less than 50 full-time employees and who do not sponsor the employer shared provisions for health coverage, but do sponsor self-insured group health plans, should use Forms 1094-B and 1095-B to report coverage information about individuals.

As one of the striking features of CheckMark 1095 software – it is super easy to create as many employee entities in its database as you want at lightning fast speed.

Applicable Large Employers – Reporting

Business entities with 50 or more full-time employees (full-time equivalent employees) should use Form 1094-C for transmittal and Form 1095-C for reporting information required under ACA (Affordable Care Act) about various offers on health coverage and enrollment in health coverage of their employees.

Additionally, to report the health coverage that the employers offer, ALE’s (Applicable Large Employers) sponsoring self-insured health plans are supposed to use the Forms 1094-C and Forms 1095-C for reporting about the coverage that they provide to their enrolled employees.

Affordable Care Act – Explained

With Affordable Care Act (ACA) aka Obamacare in place certain employers are required to offer health insurance coverage to their full-time employees. These employers should send an annual statement to all the employees eligible for this coverage. The statement describes the insurance available for them.  Internal Revenue Service (IRS) Form 1095-C is used as that statement.

Who should file Form 1095-C?

The ACA clearly defines which employers have to offer health insurance to their employees. ACA refers to them as “applicable large employers,” (ALEs). A company/organization is an ALE if it has minimum 50 full-time employees. Full-time employee, as per ACA, is someone who works minimum 30 hour/week. Only ALEs are required to file Form 1095-C.

What is 1095-C
Employee of an ALE who is eligible for insurance should receive the form 1095-C. Eligible employees but declining to participate in employer provided health plan will still receive a 1095-C. The form typically includes:

  • Details of the employee and the employer.
  • Months of the accounting year the employee was eligible for insurance.
  • Cheapest premium cost that the employee could have paid.

1095-C will indicate the fact if an ALEs does not offer its employees with insurance coverage. But such ALEs may be subject to financial penalties.

When does 1095-B comes into picture

Where 1095-C only describes what kind of insurance coverage was made available to a full-time employee, form 1095-B contains the details about the employee’s actual coverage, including the details of the employee’s family dependents that are included in this insurance coverage. Form 1095-B is sent out by the insurance provider and not the employer.

Some companies pay medical bills for their employees themselves, meaning they are self-insured-

  • For such cases employer is the insurance provider, so it will send out 1095-B forms.
  • For such cases “B” and “C” forms can be combined and sent together by the employer.

When 1095-C is supposed to go
Starting 2015 tax year sending out 1095-C forms has been made mandatory. Employers have to send these out to their full-time employees and also to the IRS. Employees should receive them by the end of January — so in January 2016, forms for 2015 tax year will be sent.

Employers filing paper forms will have time till February 2016 and if they are filing electronically will have time till March 2016. Employers having employees 250 or more have to file the forms to IRS electronically only and those who have full-time employees less than 250 have the option to file in paper or electronically. Dates have to be maintained strictly to avoid any kind of penalty from IRS.