What Is Form 1094-C and Which Employers Must File It?

What Form 1094-C is

It is the transmittal for Forms 1095-C. It reports your employer information, total number of 1095-C forms and whether you offered qualifying coverage.

Under the ACA, large employers must report to the IRS whether they offered health coverage to full-time employees and what it cost. Each employee gets a Form 1095-C. The IRS gets copies of those forms along with one Form 1094-C, which works like a cover sheet and a summary.

The 1094-C also includes information that the IRS uses to determine whether you owe an employer shared responsibility payment. It is related to the W-2 and W-3 relationship: individual forms to the person, summary to the agency. See what Form W-3 is.

Who must file

Applicable large employers, generally those with 50 or more full-time employees including full-time equivalents in the prior calendar year.

The ACA defines a full-time employee as someone averaging at least 30 hours a week (or 130 hours a month). To count full-time equivalents, add the hours of part-time staff and divide by the standard amount set in the rules. Related companies under common ownership may be combined when counting.

If you are close to 50, run the numbers carefully, including seasonal and variable-hour workers, because special rules apply. Employers with fewer than 50 are not subject to the employer mandate. Small employers that self-insure have different reporting duties. Confirm your status with your accountant or benefits adviser, since this is a technical area. Our explainer on types of employment helps you sort workers by hours.

What goes on the form

Employer identity, contact person, total 1095-C count, and certifications and monthly counts that show whether you offered coverage.

Key parts of the form include:

• Your name, EIN and address, and a contact person
• The total number of Forms 1095-C you are submitting
• Whether this is the authoritative transmittal for a group of related employers
• Certifications of eligibility, such as qualifying offer method or the 98 percent offer method, if used
• Monthly counts of full-time employees and total employees

The detailed offer codes are on each employee's 1095-C, not on the 1094-C. Your payroll or benefits system usually generates both. Verify that the EIN and legal name match your payroll filings. See business tax ID numbers.

Deadlines and how to file

Employees receive their 1095-C early in the year, and the IRS filing date is typically the end of February for paper or the end of March for electronic filing. Confirm each year.

Dates can shift, and the IRS has extended employee-statement deadlines in the past, so check the current instructions. Employers filing 10 or more information returns of certain types in a year are generally required to file electronically, and the threshold has been revised in the past, so verify the current rule.

A basic annual checklist:

1. Track hours monthly, not only at year end.
2. Record each offer of coverage and the employee's share of cost.
3. Generate 1095-C forms and a 1094-C.
4. Deliver employee copies on time.
5. E-file with the IRS through the ACA Information Returns system or a vendor.
6. Keep copies. See how long to keep business records.

Penalties and common errors

Late, missing or incorrect filings can lead to penalties per return. Mismatched employee data and miscounted hours are the common causes.

The IRS can assess penalties for failing to file correct returns and for failing to furnish statements to employees. Amounts are adjusted for inflation, so we do not state them here. Check the current figures with the IRS or your accountant.

Frequent errors:

• Wrong or missing Social Security numbers
• Using the wrong offer code on the 1095-C
• Misclassifying employees as contractors, which hides them from the count
• Failing to combine related businesses when determining large-employer status
• Missing the e-filing requirement

The cost side of benefits as a business grows

Crossing the 50-employee line changes your obligations and your costs. Budget for coverage, administration and reporting before you hire past it.

Reporting adds administrative work, but the bigger issue is the cost of offering affordable coverage. See how much benefits cost per employee and employee benefits for planning. Plan plan-year cash needs: premiums are due monthly even when sales are low.

If growth requires hiring faster than revenue arrives, run the payback math first. Illustrative example: ten new hires at $4,500 monthly total cost is $45,000 a month, so you need enough new gross profit to cover it. ROI Funder can place working capital or a line of credit for businesses with 500+ FICO, 6+ months in business and $20,000+ monthly revenue, with total cost shown before you sign.