Forms 1095-B and 1095-C: Which Form Must Employers Provide?
While Forms 1095-B and 1095-C both relate to health coverage, they serve different purposes and apply to different types of employers and health plans.
Using an outside service provider generally does not transfer legal responsibility for ACA compliance.
Many employers rely on professional employer organizations (PEOs), payroll providers, benefits administrators, and third-party reporting vendors to manage their Affordable Care Act (ACA) compliance obligations. While outsourcing these functions can simplify administration, employers should understand that using an outside service provider generally does not transfer their legal responsibility for ACA compliance.
Under the ACA, Applicable Large Employers (ALEs), generally employers with 50 or more full-time employees, including full-time equivalents, must comply with the employer shared responsibility provisions. ALE members generally must report information about their offers of health coverage to full-time employees using IRS Forms 1094-C and 1095-C.
Employers may engage third parties to collect data, determine employee eligibility, prepare forms, and submit required filings. However, the employer generally remains responsible for ensuring that its ACA reporting obligations are satisfied, even when a service provider performs the administrative work.
Different service providers may handle different aspects of ACA administration. Payroll providers typically maintain employee compensation, hours worked, and employment dates. Benefits administrators track enrollment, eligibility, coverage elections, and effective dates. ACA reporting vendors compile information from these systems to prepare and file the required forms.
PEOs may provide a broader range of services, including payroll processing, benefits administration, and ACA reporting. However, the use of a PEO does not automatically transfer the employer’s ACA obligations. Reporting responsibility generally depends on which entity is the common-law employer and the applicable ACA rules.
Employers using PEOs should understand which entity is responsible for ACA reporting, whose employer identification number will appear on the forms, and who will respond to IRS inquiries or proposed penalties.
One of the most common challenges with outsourced ACA administration is ensuring that information remains accurate and consistent across multiple systems.
For example, an employee may change from part-time to full-time status, but that change may not be communicated to the benefits administrator. A termination may be recorded in payroll but not reflected in the enrollment system. An employee may receive an offer of coverage that is not properly documented for ACA reporting purposes.
Other potential issues include incorrect hire or rehire dates, missing coverage information, inaccurate employee classifications, and discrepancies between payroll and benefits records.
These errors can result in inaccurate ACA reporting even when each service provider performs its assigned responsibilities correctly. An ACA reporting vendor generally relies on the information it receives and may not have the ability to independently identify missing or incorrect employment or coverage information.
Employers should establish clear procedures for coordinating ACA responsibilities among HR, payroll, benefits administrators, and reporting vendors. Important practices include:
Employers should also review their service agreements to understand which ACA-related functions are included and which responsibilities remain with the employer.
Outsourcing ACA administration can reduce the workload for HR departments, but employers should not assume that engaging a third party eliminates their compliance responsibilities. Accurate reporting requires more than preparing and submitting forms. It depends on timely data collection, consistent employee records, proper eligibility tracking, and effective coordination among service providers.
BAS can help employers manage these challenges through its ACA data collection and reporting services. BAS works with employers and their existing payroll providers, PEOs, benefits administrators, and other vendors to coordinate the collection and exchange of information needed for ACA reporting. By bringing together employment, eligibility, and coverage data from multiple sources, BAS helps employers streamline the reporting process, identify potential data discrepancies, and reduce the administrative burden on HR teams.
Whether an employer uses a single provider or multiple systems, BAS can support a coordinated approach to ACA reporting without requiring employers to replace their existing service providers.
Contact BAS at solutions@basusa.com to learn how our ACA data collection and reporting services can help your organization coordinate information across vendors, simplify reporting, and support ongoing ACA compliance.
Benefit Allocation Systems (BAS) provides online solutions for: Employee Benefits Enrollment; COBRA; Flexible Spending Accounts (FSAs); Health Reimbursement Accounts (HRAs); Leave of Absence Premium Billing (LOA); Affordable Care Act Record Keeping, Compliance & IRS Reporting (ACA); Group Insurance Premium Billing; Property & Casualty Premium Billing; and Payroll Integration.
MyEnroll360 integrates with major insurance carriers for enrollment eligibility management (e.g., Blue Cross, Blue Shield, Aetna, United Health Care, Kaiser, CIGNA and others), and with leading payroll platforms for enrollment deduction management (e.g., Workday, ADP, Paylocity, PayCor, UKG, and others).
This article is for informational purposes only and is not intended as legal, tax, or benefits advice. Readers should not rely on this information for taking (or not taking) any action relating to employment, compliance, or benefits. Always consult with a qualified professional before making decisions based on this content.