The 4 Essentials of the 1095
(and why everyone is talking about them)
I have some version of the conversation below at least a dozen times a week. It continues to surprise me how few business owners have had someone take the time to simply explain to them what “1095 reporting” is and what they need to be doing about it.
I’ve broken the 1095 form in to 4 main components you need to understand. Once we look through the form together, we see pretty quickly why we NEED a system that can manage this for us!
If you’re interested in the full instructions – check those out here.
The 1095 is how the IRS wants employers to report on benefits that employees were eligible for in a calendar year. So, in January of each year, we’ll be providing a 1095 form to each one of our employees that average more than 30 hours for any single month this year. We’ll also file a single 1094 form that will provide our company totals to the IRS. That’s why we don’t want to wait until 2016 to get started on this!
Part 1 of the 1095 is a piece of cake – name, address, company name, FEIN, etc. Piece of cake, right? We’ve got this under control.
Part 2 of the 1095 is where is gets scary. Take a look at the form below and what I’ve got to report on for every one of my full-time employees:
I have to designate by month whether coverage was OFFERED. Notice, not whether it was elected, but simply if they were eligible. Now, you’d think a simple checkbox would do the trick right? Wrong. The IRS has provided a list of 9 possible codes to enter for each month. These codes tell the IRS not only whether coverage was offered, but also if dependents were eligible, whether it met minimum coverage requirements, etc. Check out this link if you’re interested in what the different codes are and what they mean.
It’s usually around this point that someone tells me,
We don’t have very many people that elect insurance so this shouldn’t be too difficult.
Well, remember that very first item – it’s like a W2 so I have to generate one of these for EVERY full-time employee.
And remember that with the Affordable Care Act, the definition of “Full Time Employee” has changed. So, even my people that are Part Time Employees still have to be measured for their lookback period to ensure they don’t meet the federal definition of a Full Time Employee. Someone has to keep a running calculation of that!
Next, I’ve got to designate what the lowest cost employee-only coverage available was and then choose from another list of 9 possible codes to designate whether the coverage was “affordable” or not. There’s a little more to it than that, but that gives you a decent overview.
The last section is only for companies that are self-insured. If you are self-insured, you’ll also need to report on dependents that were actually covered by the plan.
First of all, don’t wait any longer to figure out what your plan is for 1095 reporting. The filing isn’t due until January of 2016, but you will be reporting on hours worked from January 2015. If you’re just now reading this article, you’re already behind the 8 ball. You’re not alone in that though. Lots of companies haven’t been tracking this because no one has sat down and explained any of this to them. Your best course of action is to decided to do something NOW! Every month you delay just gets you further behind on the tracking you’ll need to do the 1095 reporting.
Next, find a system that does Benefits Administration AND Payroll in a single system – NOT two systems that are “integrated” together. We all know how well “integration” works right? As you can see, we need to be tracking hours worked right next to benefit plans offered, so the ONLY way to administer this without manual intervention is to find a system that handles both sides of the equation. Stand Alone benefits products and payroll products won’t get you where you need to be. Here’s another great article on why you need a single system to tackle this.
As helpful as I hope this article is, if this is the first time you’re hearing about this form and your responsibility, someone has not been doing their job to serve as your advocate and advisor.
It’s not too late to do something about 1095 reporting for January 2016. Don’t wait any longer to find a tool that can help you administer this well.