OBAMACARE IRS 1095-C/1094-C Reporting – Action Plan

  1. Would you like to help your clients comply with Obamacare IRS Reporting and mitigate non-compliance penalties?
  2. Do you need an action plan to avoid last minute reporting headaches?

If you answered “yes” to either of these questions then please keep reading.

Step 1 – Find a 1095-C/1094-C Vendor. Given the ACA rollercoaster since November 2016 fewer 1095-C/1094-C vendors are in business today.  To compound the matter, the recent security breach at Equifax and the price gouging by big outsourcing companies make it more difficult to find a proven, credible and affordable solution.  The good news is a handful of boutique firms now offer standalone and easier-to-use solutions.  

The best solutions:

  1. Only require about 18 data elements (demographic, hire date, end date and benefit dates)
  2. Are HIPAA-compliant
  3. Calculate the line 14 and line 16 codes
  4. Embed internal controls
  5. Provide dedicated account managers
  6. Offer data management (since clients often struggle combining payroll and benefits data)
  7. Understand the importance of QA

“Standalone” is the critical item here since there are so many different payroll systems.  To that end, a good choice would be a system that can accept data from any system.  Equally important, the vendor should offer data management services if the client has data management challenges.

Step 2 – Help your client prepare its data.  Preparing data doesn’t have to be as challenging as it has been in the past.  You no longer need to manually figure out the respective line 14 and line 16 codes manually on a month-by-month basis.  Smart1095 for example, only requires 18 data elements for insured plans.  Most of the required data resides in your client’s payroll system.  Benefits data including Benefits Start Date and Benefits End Date is available in most benefits systems or carrier enrollment files.

The good news is you don’t need a programmer if you know how to use VLOOKUP tables in Excel.  Simply connect the data using a common employee identifier, such as SSN and you now have a forms-ready data file!

If you don’t know which employees are ACA eligible, eligibility can be determined using timekeeping software, including TSheets.   Hours worked transactions can be easily imported into any ACA hours tracking software.

Step 3 – Document your Client’s Efforts

Like other important financial reporting it is very important to document all steps.  This will provide an audit trail in the event of an audit.  Even though the industry is speculating 1095 audits are months away as more time passes the likelihood of knowing what was done and how it was done will be a fleeting memory.  As a result, an audit will be even more painful if steps are not properly documented.

Step 4 – Get Ready for Marketplace Subsidy Notice Appeals.  Since Obamacare remains the law of the land, it is likely considerably more Exchange Subsidy Notices will be sent to your clients.  These letters pertain to employees that erroneously purchased health insurance on www.Healthcare.Gov even though they were not eligible to do so.

In the event the employee was not in fact eligible for a subsidy because he/she was offered employer-based insurance, the IRS will use this to claw back the subsidy from the employee. It is important to note these notices are sent to the employee’s work location which may be different that where your client’s CFO is located.  Hence, each worksite location should be notified to be on the look-out for these notices as the employer only has 90 days to appeal.  To appeal your client will need copies of all documentation showing offers of coverage and other pertinent information.  Employees are also given the opportunity to appeal your client’s appeal.  Once a determination if made it is final.  If decided in the employee’s favor, this could trigger a 1095 audit for your client.

Step 5 – Prepare for a 1095 Audit.

The likelihood of a 1095 audit increases for non-filers.  In fact, according to a recently published U.S. Treasury audit which evaluated the ability of the IRS to enforce the Employer Shared Responsibility Provision, the IRS is now prepared to start mailing audit notices to non-filers.  Since about $20 billion in non-filing penalty revenue could be recognized by the IRS this will further fuel penalty notice efforts.


Moreover, given the wide variety of content that is contained on a 1095-C form an audit will likely include reviewing the supporting insourced and outsourced processes and technologies used in the payroll, HR, benefits and health insurance areas.  As a result, a 1095 audit can cost even more than the IRS penalties since the outcome could also include business process improvements and technology upgrades.

More specifically, the scope of a 1095/1094 audit could include:

  • Related business entities
  • ACA eligible employees
  • 1095-C recipients
  • Dependent SSNs (for self-insured plans)
  • 1095-C offer of coverage accuracy
  • 1095-C safe harbor/status accuracy
  • Affordability
  • 1094-C IRS filing


More about each of these will be forthcoming in a 1095 audit article which is scheduled to be published Fall 2017.  For more information please visit www.1095audit.com.



As previously stated Obamacare does remain the law of the land.  To that end, employers must continue to comply with the Employer Mandate.   Applicable Large Employers (employers with 50 + FTEs) continue to have the opportunity to comply using affordable, accurate and secure 1095/1094 reporting technology.  The longer you wait, the bigger the penalty.  Help protect your clients – take action now.


Howard M. Gerver


ACA Managed Services

Leave a Reply

Your email address will not be published. Required fields are marked *