The Affordable Care Act, or Obamacare, requires certain employers to offer health insurance coverage to full-time employees and their dependents. Further, those employers must send an annual statement to all employees eligible for coverage describing the insurance available to them. The Internal Revenue Service (IRS) created Form 1095-C to serve as that statement.
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Form 1095-C, titled Employer-Provided Health Insurance Offer and Coverage, is a statement of health coverage offered to eligible employees.
Sending out 1095-C forms has been required since the 2015 tax year.
The health care law defines which employers must offer health insurance to their workers. The law refers to them as “Applicable Large Employers,” or ALEs. A company or organization is an ALE if it has at least 50 full-time workers or full-time equivalents. A full-time worker, according to the law, is someone who works at least 30 hours a week.
A full-time equivalent, meanwhile, is two or more part-time employees whose hours add up to a full-time load. Two workers who each put in 15 hours a week, for example, would make up one full-time equivalent (15 x 2 = 30 = 1 FTE). Only ALEs are required to file Form 1095-C.
Every employee of an ALE who is eligible for insurance coverage should receive a 1095-C. Eligible employees who decline to participate in their employer’s health plan will still receive a 1095-C.
The form identifies:
If an ALE does not offer its employees insurance, the 1095-C will indicate that fact. ALEs that don't offer coverage may be subject to financial penalties.
Form 1095-B provides details of the employee's actual insurance coverage and is sent out by the insurance provider rather than the employer.
Form 1095-C merely describes what coverage was made available to an employee. A separate form, the 1095-B, provides details about an employee’s actual insurance coverage, including who in the worker’s family was covered. This form is sent out by the insurance provider rather than the employer.
However, some companies are “self-insured,” meaning that they pay their workers’ medical bills themselves, rather than paying premiums to an insurance company.
Sending out 1095-C forms became mandatory starting with the 2015 tax year. Employers send the forms not only to their eligible employees but also to the IRS. Employees are supposed to receive them by the end of January—so forms for 2023 would be sent in January 2024.
Employers typically have until the end of February to send them to the IRS if filing paper forms, or until the end of March if filing electronically. Employers with 250 or more forms must file them electronically. Those with fewer than 250 have the option of filing paper forms or filing electronically.
Businesses that are categorized as ALEs are required to issue a 1095-C to all applicable employees to remain in good standing with the IRS and be ACA-compliant. You have until the end of February if you’re filing with paper forms or the end of March if you’re filing electronically.
If you don’t meet these deadline requirements, you may be subject to penalties . If you’ve missed the deadline, you might be eligible for a waiver of the penalties. Speaking with a tax professional can help you determine what next steps to take to rectify the situation.
When you send the 1095-C forms for your business to the IRS, they should be accompanied by Form 1094-C .
Form 1094-C, titled Transmittal of Employer-Provided Health Insurance Offer and
Coverage Information Return, is used to provide an IRS summary of the 1095-C forms you’re sending to the IRS on behalf of your business.
Together, these forms help the IRS determine whether your business owes payment and if employees are eligible for the premium tax credit.
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