ACA Filing Requirement for ICHRAs: IRS Form 1094 and IRS Form 1095
The Affordable Care Act (ACA) requires all companies that sponsored an Individual Coverage Health Reimbursement Arrangement (ICHRA) during the past year to file tax forms 1094 and 1095 with the Internal Revenue Service (IRS) each year the ICHRA is offered. They must also make this information available to persons covered under that ICHRA.
In general, these tax forms show the health coverage a company offered and enrollment status for each employee (Form 1095) and the company as a whole (Form 1094). The IRS then uses this information to determine the eligibility of employees for Premium Tax Credits.
ACA Filing Requirements for ALEs: Form 1094-C & Form 1095-C
Applicable Large Employers (ALEs) need to file Forms 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) and 1095-C (Employer-Provided Health Insurance Offer and Coverage) with the IRS.
An employer is considered an ALE when they had 50 or more full-time employees, including full-time equivalent employees, at any time during the year. Find more information on determining if a company is an ALE on irs.gov.
An ALE must satisfy the employer mandate regarding employee health coverage as outlined in the ACA or face penalties. There are two requirements: (1) offer enough full-time employees’ health coverage (the requirement is at least 95%) and (2) offer coverage that is affordable.
An ICHRA is considered affordable if the monthly premium for the lowest-cost silver plan for self-coverage only (on the exchange in the employee’s primary site of employment), minus the monthly amount made available to the employee under the ICHRA (not including any increased amount made available under the ICHRA based on the number of covered dependents), is less than 9.61% of 1/12 of the employee’s annual household income. This percentage rate applies in 2022 and is indexed yearly.
The ICHRA affordability equation in a graphical format is:
*There are additional safe harbors for calculating affordability on irs.gov.
Employers will have to determine the affordability of their ICHRA before filling out the 1095-C form.
They will also need to enter a code that reflects the coverage offered to the employee and how affordability was determined. If an ICHRA was offered, one of the following codes will have to be used for each employee:
- 1L – ICHRA offered to the employee only, with affordability determined using the employee’s primary residence ZIP code.
- 1M – ICHRA offered to the employee and dependent(s) (not spouse) with affordability determined using the employee’s primary residence ZIP code.
- 1N – ICHRA offered to the employee, spouse, and dependent(s) with affordability determined using the employee’s primary residence ZIP code.
- 1O – ICHRA offered to the employee only, using the employee’s primary employment site ZIP code affordability safe harbor.
- 1P – ICHRA offered to the employee and dependent(s) (not spouse) using the employee’s primary employment site ZIP code affordability safe harbor.
- 1Q – ICHRA offered to the employee, spouse, and dependent(s) using the employee’s primary employment site ZIP code affordability safe harbor.
- 1R – ICHRA that is NOT affordable offered to the employee; employee and spouse or dependent(s); or employee, spouse, and dependents.
- 1S – ICHRA offered to an individual who was not a full-time employee.
- 1T – ICHRA offered to employee and spouse (no dependents) with affordability determined using the employee’s primary residence ZIP code.
- 1U – ICHRA offered to employee and spouse (no dependents) using the employee’s primary employment site ZIP code affordability safe harbor.
*Note: Codes above pulled from Form 1095-C draft instructions. When filing, reference finalized instructions for Form 1095-C when using these codes to ensure no changes were implemented.
The employer will have to create a Form 1095-C, including Part III regarding the self-insured plan (the ICHRA) for each employee that worked at the company for at least one month that year. It must show the coverage information specific to that employee and family members. Then, the employer must send a copy to each employee and to the IRS.
Deadlines for the 1094-C and 1095-C Forms
The deadlines for the 1094-C and 1095-C forms are:
For employees: Each employee must be sent a copy via first class mail to arrive by Mar. 2, 2023
For the IRS: When filing electronically, Mar. 31, 2023 (deadline is Feb. 28, 2023, when submitting via paper)
*Note: These dates were pulled from draft instructions for forms 1095-C and 1094-C. When finalized, they are subject to change. Please reference the final instructions to ensure you meet the appropriate deadlines.
Non-ALEs: Form 1094-B & Form 1095-B
For its ICHRA, a small employer files using Form 1094-B (Transmittal of Health Coverage Information Returns) and 1095-B (Health Coverage).
It is important to note that even small employers that are not ALEs must also file. There is no exception to the ACA annual reporting requirements for a small employer. All providers of minimum essential coverage (MEC) to an individual during a calendar year must file an annual report on Form 1094-B/1095-B. An HRA, including an ICHRA, is a self-insured group health plan that is MEC. An employer that sponsors an ICHRA is a “provider” and must file.
Completing the 1094-B/1095-B Forms is not as involved as the 1094-C/1095-C Forms but still requires collecting information about the employer, the plan and the persons covered under the plan.
Deadlines for 1094-B and 1095-B Forms
The deadlines for the 1094-B and 1095-B forms are:
For employees: each employee must be sent a copy via first class mail to arrive by Mar. 2, 2023
For the IRS: when filing electronically, Mar. 31, 2023 (deadline is Feb. 28, 2023, when submitting via paper)
*Note: These dates were pulled from draft instructions for forms 1095-B and 1094-B. When finalized, they are subject to change. Please reference the final instructions to ensure you meet the appropriate deadlines.
Need Help Filing?
Need help filing your Form 1094 and 1095? FlexSource specializes in helping companies with benefits administration and can help you. Contact them now.
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