Know the Basics: Form 1094-C

With the Affordable Care Act comes the necessary paperwork that the IRS has to collect. Doing so ensures that employers are providing a sufficient option of healthcare for its employees.

We’ve covered the Form 1095-C, which is meant to lay out the offered insurance to each individual employee. The 1094-C must be filed with the Form 1095-C, but it acts as a sort of cover sheet that sums up all the 1095-Cs.

As stated above, the primary goal for the IRS with these forms is to determine whether you have satisfied the Employer Mandate, whereby you offer sufficient insurance.

If you don’t satisfy the Employer Mandate, there are fines. Further, if you don’t file your paperwork, there are compliance fines, which can cost anywhere from $250 per penalty up to $6 million.

The Employer Mandate is entirely related to how many full-time equivalent employees are on your team.

What is Form 1094-C?

The IRS Form 1094-C can be a little confusing because of rules pertaining to aggregate employees. If you’ve read our coverage of the Affordable Care Act, you know the concept of a full-time employee and the fact that the magic number is between 50-100. If you have 50 or more full-time employees (or up to 100 in certain states), you are an applicable large employer, which means these rules apply. Further, if you have part-time employees, you combine the total hours that they worked, divide that by 30, and that number is how many additional full-time equivalent employees you have.

Related article: Part Time vs Full Time Employees: What Are the Qualifying Hours?

But aggregate employees have to do with related companies. According to the IRS, “companies with a common owner or that are otherwise related under certain rules of section 414 of the Internal Revenue Code are generally combined and treated as a single employer for determining ALE status.”

What this means is that if there are five companies with a common owner or related in ways found in section 414 that, when their employee numbers are combined to be over 50, each company is considered an applicable large employer. The following is an example:

Corporation Alpha completely owns Corporation Bravo and Corporation Charlie, but Corporation Alpha doesn’t have any employees. Corporations Bravo and Charlie each have 60 full-time employees. These three corporations are now considered a controlled group of corporations because Corporation Alpha owns the other two. Because Corporations Bravo and Charlie have 120 employees, all three corporations (since they are a controlled group) are considered an ALE together. Corporations Bravo and Charlie are then considered ALE members, while Corporation Alpha doesn’t because it doesn’t have employees.

All told, each one of these companies will need to submit a 1094-C. If there are 100 companies that would be considered a controlled group, then each of those companies needs to send in a 1094-C.

Now that we understand what the form is, let’s break it down.

Filling Out Form 1094-C 

The document is broken up into four parts.

1. The Applicable Large Employer Member (ALE Member) section, which breaks down the basic information about the company.

2. The ALE Member Information.

3. The ALE Member Information – Monthly section, which breaks down whether essential coverage was offered each month.

4. The Other ALE Members of Aggregated ALE Group, which combines all the companies together.

The following is a breakdown, line by line, of the form:

• Line 1: Name of ALE Member (Employer). This would be Corporations Bravo or Charlie.

• Line 2: Employer identification number

• Line 3: Street Address

• Line 4: City/Town

• Line 5: State/Province

• Line 6: Country and ZIP

• Line 7: Name of Person to Contact: If the IRS has any questions, who at the company should they reach out to?

• Line 8: Contact telephone number

Lines 9-16 are only necessary if you are a designated government employer, which is simply a government entity that is filing for a sister-agency. If you’re not related to the government, skip this part. Lines 9-16 are identical to lines 1-8 and only one of those sections should be filled in. 

• Line 17: Ignore this. The IRS doesn’t like to create entirely new forms if it needs to make changes, so it reserves a line just in case.

• Line 18: Because the 1094-C is like a cover sheet for the 1095-C, you calculate how many total 1095-Cs you are submitting with this specific cover sheet and put that number here.

• Line 19: When you fill out this form, determine whether you have all of the corresponding 1095-Cs attached. If yes, check this box. If no, don’t check this box. If yes, continue. If you realize after filing your 1094-C and 1095-C that you missed a 1095-C, submit that one with its own 1094-C, but don’t check this box. You’ve already submitted an authoritative transmittal.

• Line 20: Line 20 equals Line 18.

• Line 21: Remember the use case with Alpha, Bravo, and Charlie? If you are a ALE Member, (Bravo or Charlie) check this box. If you’re not, Part IV of this document is unnecessary for you. If you are, you’ve got more work.

• Line 22: There are four options here where any and all can be checked. These offer certain relief cases for employers that might not have the resources to do in depth paperwork, but are more than compliant with the Affordable Care Act. It’s best to talk to an accountant to determine whether any of these apply for you. Once you determine your selections, make sure you sign it. The first two are very closely related. The latter two are completely different. The options are:

• Line 23-35: This information is broken down by month, with Line 23 being all 12 months. There are six columns in total that need to be filled in:

• Line 36-65: List the largest sister-ALE members that are associated with your company. The largest means the companies with the most full-time employees. Put their name and their EIN.

And now you’re done. This is an entirely new form that the IRS is mandating companies complete. And it can be very confusing. Whenever it comes to doing taxes, it is always advisable to reach out to an accountant to ensure you’re maximizing your returns and also reporting all the correct information.

Also, a PEO like Justworks can help to ensure that all the paperwork gets to the government on time to ensure that you avoid fines. As stated above, the compliance fines for these forms can go as high as $6 million. Avoid that and use the Justworks platform.