Running a business comes with many responsibilities, and staying compliant with health care laws is one of them. If you’re an employer with 50 or more full-time employees, you’ve probably heard of Form 1095-C, but understanding what it is and why it matters is critical. Whether you’re a small business owner or an HR manager trying to stay compliant, this form can bring up a lot of questions.
At Paper Trails, we understand the challenges of navigating payroll, HR, and compliance. Our goal is to support small businesses like yours by providing clear, actionable guidance. In this article, we’ll break down Form 1095-C, explain who needs to file it, what information it contains, and how to ensure compliance with IRS regulations. By the end, you’ll feel more confident in handling this requirement. Let’s go!
What is Form 1095-C?
Form 1095-C is an IRS document that Applicable Large Employers (ALEs) must provide to their full-time employees upon request. It details the health insurance coverage offered by the employer and helps the IRS determine whether the employer has met the requirements of the Affordable Care Act (ACA). The form serves as proof that the employer has offered qualifying health coverage, and it provides employees with essential information they may need when filing their taxes.
What businesses need to file Form 1095-C?
Employers classified as Applicable Large Employers (ALEs) are required to file Form 1095-C. A business is considered an ALE if it has 50 or more full-time or full-time equivalent (FTE) employees.
- Full-time employees work at least 30 hours per week.
- Full-time equivalent employees (FTEs) are part-time employees whose combined hours equal a full-time workload.
If your business meets these criteria, you’re required to file Form 1095-C for every full-time employee, even if they declined health coverage.
Are we required to provide these forms to our employees?
Effective for the 2024 reporting year, employers are no longer required to distribute Form 1095-C to all full-time employees. Instead, these forms only need to be provided upon request. You are still required to prepare and file Form 1095-C with the IRS.
What information is on Form 1095-C?
Form 1095-C is divided into three parts, each containing specific details about the employer, the employee, and the coverage offered.
- Part 1: Employee and Employer Information: This section provides identifying details for both the employer and the employee.
- Part 2: Offer and Coverage Details: This section reports the health coverage offered, its affordability, and whether the employee accepted or declined it. It includes critical IRS codes that explain the coverage provided. See below for an explanation of the codes used in Part 2 of Form 1095-C.
- Part 3: Covered Individuals: If the employer offers a self-insured health plan, this section lists the employees and their dependents who were covered during the year.
Understanding the codes on Form 1095-C
The form uses specific codes to explain the type of coverage offered and employee participation. Let’s break down two important sections: Line 14 and Line 16.
Line 14: Offer of Coverage
This line reports whether an employer offered coverage and to whom. The codes include:
| Code | Meaning |
| 1A | Your employer made a qualifying offer of healthcare coverage that is affordable based on the federal poverty line to you, your spouse, and your dependent(s), if any. |
| 1B | Your employer made a qualifying offer of healthcare coverage to you. |
| 1C | Your employer made a qualifying offer of healthcare coverage to you and your dependent(s). |
| 1D | Your employer made a qualifying offer of healthcare coverage to you and your spouse. |
| 1E | Your employer made a qualifying offer of healthcare coverage to you, your spouse, and your dependent(s). |
| 1F | Your employer made an offer of healthcare coverage to you, your spouse, and your dependent(s), if any, that does not qualify as providing “minimum value”. |
| 1G | You were not a full-time employee but were enrolled in healthcare coverage. |
| 1H | Your employer did not make an offer of coverage or the offer was not a qualified offer. |
| 1J | Your employer made a qualifying offer of healthcare coverage to you and a conditional offer of coverage to your spouse. |
| 1K | Your employer made a qualifying offer of healthcare coverage to you and your dependent(s) and made a conditional offer of coverage to your spouse. |
| 1L | Your employer offered you an Individual coverage HRA using your primary residence ZIP code. |
| 1M | Your employer offered you and your dependent(s) an Individual coverage HRA using your primary residence ZIP code. |
| 1N | Your employer offered you, your dependent(s), and spouse an Individual coverage HRA using your primary residence ZIP code. |
| 1O | Your employer offered you an Individual coverage HRA using your primary employment site ZIP code. |
| 1P | Your employer offered you and your dependent(s) an Individual coverage HRA using your primary employment site ZIP code. |
| 1Q | Your employer offered you, your dependent(s), and spouse an Individual coverage HRA using your primary employment site ZIP code. |
| 1R | Your employer offered you, and spouse or dependents an Individual coverage HRA that is NOT affordable. |
| 1S | Your employer offered you an Individual coverage HRA when you were not a full-time employee. |
Line 15: Employee Contribution
This line reports the lowest-cost monthly premium for self-only qualifying coverage offered to the employee. Line 15 will show an amount only if code 1B, 1C, 1D, 1E, 1J, 1K, 1L, 1M, 1N, 1O, 1P, or 1Q is entered on line 14. If coverage was free, the form will show “0.00.”
Line 16: Reason for No Offer or Coverage
This section explains why coverage was or wasn’t provided. These codes include:
| Code | Meaning |
| 2A | You did not work any day in the month. |
| 2B | You were not full-time during the month. |
| 2C | You were enrolled in coverage for the entire month. |
| 2D | You were in a waiting period and not yet eligible for coverage per the Affordable Care Act regulations. |
| 2E | You were covered by a Union plan. |
| 2F | Your employer offered you coverage that was considered affordable based on your W-2 wages, but you did not enroll. |
| 2G | Your employer offered you coverage that was considered affordable based on the federal poverty line, but you did not enroll. |
| 2H | Your employer offered you coverage that was considered affordable based on your rate of pay, but you did not enroll. |
Deadlines for submission
Employers must adhere to strict deadlines when submitting Form 1095-C to avoid penalties:
- January 31: Deadline to provide employees with their Form 1095-C.
- February 28: Deadline to submit paper forms to the IRS.
- March 31: Deadline to submit electronic forms to the IRS.
Failing to meet these deadlines may result in penalties, though employers may qualify for extensions under certain circumstances.
Conclusion
Staying compliant with IRS regulations can be challenging, but understanding Form 1095-C is crucial to keeping your business on track and avoiding penalties. Whether you’re handling it in-house or partnering with a payroll provider, ensuring accurate and timely filing is essential. At Paper Trails, we’re committed to helping small businesses tackle payroll, HR, and compliance with confidence. If you have questions about Form 1095-C or need assistance with filing, we’re here to guide you every step of the way.