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End-of-Year Reporting Checklist to Help Business Owners Through New Health Care Reform Provisions

December 16, 2014

Woman at a desk looking over papers.

In preparation for the highly anticipated IRS year-end reporting for the Employer Shared Responsibility (ESR) provision under the Affordable Care Act (ACA), Paychex, Inc., one of the nation’s leading providers of payroll, human resource, insurance, and benefits outsourcing solutions for small- to medium-sized businesses, today released a checklist to help guide business owners through this uncharted territory.

Employer Shared Responsibility (ESR) provisions, which require IRS year-end reporting from subject business owners, are in place to determine if full-time employees are offered adequate and affordable health care coverage. From reporting the number of full-time employees to tracking personnel changes that may push a business above the 50+ full-time employee (including full-time equivalent) threshold, IRS year-end reporting could be a daunting task for any small business owner.

Beginning in January 2016 for the tax year 2015, businesses with 100+ full-time employees, including full-time equivalents, may be subject to ESR penalty assessments. Businesses with 50-99 full-time employees in 2014, including full-time equivalents, may be eligible for relief from ESR penalties for the year 2015, but only if they meet specific qualifications. Such employers must still complete IRS year-end reporting requirements in order to certify their eligibility for such exemption.

While the tax filing is not required until early 2016, it is important to act now. Below is a checklist to help guide business owners through IRS year-end reporting:

Prepare now to avoid playing catch-up later.  It is critical to have at least 12 months of payroll information tracked as businesses are expected to use historical hours and wages – by month – for every employee to determine (1) if you are considered an Applicable Large Employer (ALE), (2) which employees are considered full-time based on 30 hours per week, not 40, and (3) whether the coverage offered to those full-time employees is considered adequate and affordable. 

Determine if you are an Applicable Large Employer (ALE).  ALEs in 2015 consist of 50 or more full-time employees, including full-time equivalents (FTE), based on your 2014 calendar year workforce. Full-time employees are defined as working an average of 30 hours per week, or 130 hours per month in the calendar year. FTEs are calculated by using the hours of service for all employees (including seasonal workers) who were not full-time employees in any given month capped at 120 hours per employee, divided by 120. 

Determine your full-time employees.  ESR guidance provides business owners multiple methods to measure their employees’ hours of service. Hours can be measured on a monthly basis during the calendar year or throughout a pre-determined “look back” period, which affords employers a more predictive model for determining which of their variable hour employees may be considered full-time. Every employee who was determined to be full-time for at least one month during the calendar year must be provided IRS Form 1095-C. .

Review your plan coverage information.  ACA Section 6056 requires ALEs to file information returns with the IRS and provide statements to their full-time employees about the health insurance coverage the employer offered. This requires information pertaining to the medical coverage offered to full-time employees on a monthly basis throughout the calendar year. ALEs must determine and also report that the coverage they offer meets the minimum actuarial value (MAV) standards, as well as affordability requirements, outlined in the ESR provisions. 

Complete and submit forms 1094-C and 1095-C.  These IRS forms provide certification as to whether you offered full-time employees the opportunity to enroll in insurance that provides Minimum Essential Coverage at a MAV of 60 percent for each month of the year. Form 1094-C and Form 1095-C are transmittal and employee statements, respectively, filed by the employer with the IRS. Additionally, employers must provide Form 1095-C to their full-time employees. Draft instructions for both forms can be found on

Be on time.  Year-end reporting timelines are similar to W-2 forms. Form 1094-C and 1095-C must be filed with the IRS each year no later than February 28 or, if filing electronically, by March 31 following the end of the calendar year for which the return applies. Form 1095-C must be provided to full-time employees on or before January 31 following the end of the calendar year for which the statements apply.Understanding and complying with these new health care reform requirements may be overwhelming for business owners to handle on their own. With this in mind, beginning in tax year 2015, Paychex will offer IRS year-end reporting assistance through its Employer Shared Responsibility Services to help ease the burden of these new requirements.