Tax time can quickly become overwhelming for employers, especially when it comes to health insurance paperwork. Forms 1095-A, 1095-B and 1095-C are all health coverage-related documents that contain similar information. However, each document is managed differently and will directly impact how the filer’s taxes are completed. Learn more about each of these common tax forms and the differences between them.
What Is Form 1095-A And How Is It Used?
Form 1095-A is sent to individuals who had a Marketplace plan in the previous year. Also known as a Health Insurance Marketplace Statement, Form 1095-A must be mailed to recipients no later than mid-February. Taxes should not be filed before receiving a 1095-A as it contains important tax information, similar to W-2 forms and other tax records.
The purpose of Form 1095-A is to report certain information to the Internal Revenue Service (IRS) about individuals who have enrolled in a qualified health insurance plan through the Health Insurance Marketplace. Form 1095-A is also delivered to individuals to allow them to receive the premium tax credit.
Form 1095-A contains information about Marketplace health insurance plans that any member of the household had in the previous year. The form includes the total amount of premiums paid, the premium tax credits used and a figure referred to as “second lowest cost Silver plan (SLCSP). This refers to the second-lowest priced Marketplace plan in the Silver category. This figure is required to determine the final premium tax credit.
Consumers are required to use the information found on Form 1095-A to complete the IRS tax Form 8962. Once Form 8962 is completed, it must be filed with the individual’s federal income tax return if they wish to claim the premium tax credit, or if they have received assistance through advance payments of the premium tax credit (APTC).
Employers are not required to send employees 1095-A forms. Instead, the insurance company in the healthcare exchange is responsible for sending out this form to the enrolled individual. If a person who received health coverage through the Marketplace, did not receive a 1095-A form, they should contact the Marketplace coverage provider.
What Is Form 1095-B And How Is It Used?
Form 1095-B is a tax form that reports health coverage information, including the type of plan, period of coverage and any dependents covered by the insurance policy. Consumers must have this form to verify on their tax return that they and their dependents had at least minimum qualifying health insurance coverage in the previous year.
Tax Form 1095-B: Health Coverage is sent to taxpayers, their spouse and their dependents if they were enrolled through a self-insured employer or insurance provider in the previous year. Under the Affordable Care Act (ACA), individuals are required to maintain minimum essential coverage as part of a mandate for health insurance. Most types of health insurance plans offered by employers, as well as most government-sponsored plans, will qualify as minimum essential coverage.
Employers, including government employers, are required to report information about health coverage if they offer employer-sponsored health coverage to non-employees who enroll in health coverage.
Most employers with 50 or more full-time employees or full-time equivalent employees are subject to employer-shared responsibility provisions. Small employers who are not subject to employer-shared responsibility provisions sponsoring self-insured group plans will either use Form 1094-B or 1095-B when reporting information about covered employees.
Form 1095-B provides a range of information about the insured’s health coverage. This form has four main components:
- Part I – Identifies the person whose name is on the health insurance plan.
- Part II – Identifies the employer if coverage is provided by a business.
- Part III – Identifies the insurance company that is providing health coverage.
- Part IV – Lists each member of the household who is receiving coverage.
Having Form 1095-B provides proof that a person had a specific type of health coverage required by the ACA. There is currently no federal tax penalty for not having health coverage but some states still enforce penalties for lack of health insurance.
What Is Form 1095-C And How Is It Used?
The Affordable Care Act includes both an individual mandate and an employer mandate. The employer mandate requires all employers with 50 or more full-time or equivalent employees to provide healthcare coverage to workers, or face a penalty. The IRS uses information reported on Form 1095-C to determine if an employer or employee is responsible for any fines for failure to comply with the ACA.
Applicable large employers (ALEs) are required to send Form 1095-Cs to all full-time employees who work 30 hours or more per week who were enrolled in an employer-sponsored health insurance plan in the previous year. Employers are required to send out Form 1095-Cs to applicable employees by January 31st of the year that follows the year in which Form 1095-C relates.
Form 1095-C includes similar information to Forms 1095-A and 1095-B. The form includes the employee’s name and the name of the employer. It should also include the months during the previous year in which the employee was eligible for coverage. Finally, it should include the cost of the least expensive monthly premium that an employee could pay for health coverage under their employer’s health plan. If an employer did not offer health coverage to its full-time employees, Form 1095-C should indicate this.
While it is not necessary for employees to send in a copy of their 1095-C when they file their taxes, they should store it with their tax records as proof that they had health coverage for a given year.
Schedule A Consultation With The Business Benefits Group
Tax time can become complicated for employers, particularly when faced with similar tax documents such as 1095-A, 1095-B and 1095-C. Working with a benefits consultant with experience in health insurance coverage can help ensure that employers remain in compliance. To learn more about the differences between these three tax documents, or to speak with a knowledgeable benefits consultant, contact the experts at the Business Benefits Group (BBG).