ACA and tax-related reporting

ACA guidance for state agencies and institutions of higher education

Affordable Care Act federal reporting overview

The Patient Protection and Affordable Care Act (PPACA, or ACA for short) is the comprehensive health care reform law enacted in 2010.

The ACA created new information reporting requirements for employers known as Employer Shared Responsibility Payment (ESRP), and Minimum Essential Coverage reporting. Under these reporting requirements, Internal Revenue Service (IRS) requires large employers (all state agencies, institutions of higher education, and commodity commissions) to send a Form 1095-C if, for at least one month of the tax year, the employee or former employee was either:

• Considered “full-time” under IRS rules.
• Enrolled in Uniform Medical Plan (UMP) coverage (which is considered “self-insured” coverage under the regulations).

The Washington State Health Care Authority (HCA) is assigned by the Governor as the Designated Government Entity (DGE) responsible for Form 1095-C reporting for all state agencies, higher education institutions, and commodity commissions. HCA collaborates with agency representatives to successfully perform reporting tasks.

• 26 U.S.C 4980H Shared Responsibility for Employers Regarding Health Coverage
• Treasury Department Final Regulations (TD 9655) (February 12, 2014)
• Employer Shared Responsibility Provisions
• Q&As on Employer Shared Responsibility Provision under the ACA
• PPACA Reporting and Penalties: HCA Analysis and Assumptions (August 12, 2014)

Employer Shared Responsibility Payment (ESRP) reporting

Under the Affordable Care Act’s employer shared responsibility provisions, large employers must either offer coverage that is “affordable” and that provides “minimum value” to their “full-time” employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS. The employer shared responsibility provisions are sometimes referred to as “the employer mandate” or “the pay or play provisions.”

HCA will send Form 1095-C to any employees determined “full-time” for at least one month of the report year, and to IRS.

• Section 6056 Final Regulations: Information Reporting by Applicable Large Employers on Health Insurance Coverage Offered Under Employer Sponsored Plans
• IRS: Questions and Answers on Reporting of Offers of Health Insurance Coverage by Employers (IRC Section 6056)

Information reporting of Minimum Essential Coverage (MEC)

All employers who offer “self-insured” coverage (which is any PEBB Uniform Medical Plan, or UMP coverage) also have information reporting responsibilities for employees and former employees enrolled in UMP coverage. A subscriber’s enrollment (and any enrolled dependents) will be summarized on Form 1095-C and sent by HCA to the subscriber and to IRS.

HCA will send Form 1095-C to any subscriber enrolled in self-insured PEBB UMP coverage for at least one month of the report year, and to IRS.

• Section 6055 Final Regulations: Information Reporting of Minimum Essential Coverage
• IRS: Information Reporting by Applicable Large Employers
• IRS: Questions and Answers about Information Reporting by Employers on Form 1094-C and Form 1095-C

Forms 1095-C and 1094-C samples and guidance

As the Designated Government Entity (DGE) for ACA reporting, HCA produces and delivers Forms 1095-C on behalf of all state agencies, higher education institutions, and commodity commissions to meet ESRP reporting and Information Reporting of MEC requirements. HCA also produces Forms 1094-C

Links to current year IRS forms and instructions:

• IRS Instructions for Forms 1094-C and 1095-C
• IRS Form 1094-C
• IRS Form 1095-C

The documents below provide information about the actual Forms 1095-C produced for your employees or former employees. Learn about the nature of the data reported in the 1095-C, what the codes mean, and what enrollment data is reported:

• Decoding 2020-2024 Forms 1095-C
• Decoding 2015-2019 Forms 1095-C

Need a reprinted Form 1095-C?

PEBB Benefits Administrators may receive requests from employees or former employees for a reprinted copy of a previously provided Form 1095-C. Handling these reprint requests varies based on employer type.

State agency, community or technical college, or commodity commission employers

Request a reprinted Form 1095-C through HCA Support:

• Provide the individual’s name and Taxpayer Identification Number (e.g., SSN, ITIN).
• Identify which tax year(s) for the requested Form(s) 1095-C.
• Provide the recipient’s current mailing address.
• HCA Support Request Example: Please provide a reprinted Form 1095-C for 2022 tax year for John Smith, SSN 555-44-3333. The current mailing address is 123 Main Street Apt 98, Olympia WA 12345.

University employers

The PEBB Program provides emails .PDF copies of all Forms 1095-C produced for their employees and former employees each month, for any form years an original or corrected Form 1095-C was produced.

If an employee requests a reprint, the university employer should:

• Reprint the Form 1095-C (see Procedure 90-0-703)
• Deliver the Form 1095-C to the employee (e.g., mail, hand delivery)

If a former employee or an individual the university employer is unable to identify as an employee or former employee requests a reprint, the university employer should verify the recipient’s mailing address (if possible), and request a reprinted Form 1095-C through HCA Support:

• Provide the individual’s name and Taxpayer Identification Number (e.g., SSN, ITIN).
• Identify which tax year(s) for the requested Form(s) 1095-C.
• Provide the recipient’s current mailing address.
• HCA Support Request Example: Please provide a reprinted Form 1095-C for 2022 tax year for John Smith, SSN 555-44-3333. The current mailing address is 123 Main Street Apt 98, Olympia WA 12345.
• Procedure 90-0-703: University Reprints
• Procedure 90-0-704: Locating a copy of a recipient’s mailed Form 1095-C

Employers must assign/update ACA Employee Status Codes

The Affordable Care Act (ACA) requires employers to report whether new employees, returning employees, or employees who experience a change in employment status, are anticipated to average 130 or more hours of service per month over the next 12 months.

HCA has created ACA employee status codes that are used to identify the average hours of service per month, the employer anticipates the employee will work over the following 12 months. Codes will either be manually entered or automatically calculated in the payroll system, based on the payroll system’s chosen method.

Detailed ACA Employee Status Code Instructions provide complete guidance for how to determine the appropriate ACA Employee Status Code; these instructions should be reviewed by any staff assigning these Codes. Common employment examples specific to each employee type (e.g., employee, educational organization employee, seasonal employee) are provided in the instructions.

The PEBB newly eligible and regaining eligibility worksheets include sections for documenting the ACA Employee Status Code selected by an employer (but this Code does not influence PEBB eligibility in any way). An additional worksheet (A-0) has been created that only includes the ACA requirements, which can be used for employees who are specifically excluded from eligibility for PEBB benefits (e.g., certain students or board members).

• ACA Employee Status Code Instructions
• PEBB Eligibility worksheets webpage

Premium tax credit employer notification letters from an HBE

Periodically, employers may receive notification letters from a health benefit exchange (HBE) such as Washington Healthplanfinder, saying that an employee was determined eligible for a health insurance premium tax credit.

This may occur because the employee is not eligible for PEBB employee coverage and enrolled in health benefit exchange coverage (which is not an issue) but it may also occur if a benefits eligible employee waives employee medical coverage and then enrolls health benefit exchange coverage (which is an issue because an eligible employee is not allowed to waive PEBB medical coverage for health benefit exchange coverage under PEBB rules).

It is important for the employer to promptly review these letters and contact the health benefit exchange if the employer offered the employee coverage for two reasons.

If the health benefit exchange reports to IRS that the employee received a premium tax credit, IRS may assess the employer an Employer Shared Responsibility Payment (ESRP) penalty.

And, if the employee was offered PEBB employee coverage they are not eligible for a premium tax credit. Contacting the health benefit exchange that issued the notice to confirm the details of the employer’s offer of coverage will allow the exchange to revoke the premium tax credit.

We also recommend that the employer contact the employee to be able to answer any questions the employee might have about their offer of eligibility for employee coverage, and when they will be allowed to next enroll in employer coverage (e.g., the next open enrollment, or in the case of a special open enrollment that allows them to return from waived enrollment).

• Sample HBE Notice to Employers
• Guidance for HBE Letters Sent to Employers
• Letter from the Employer Template

Notice of Health Insurance Marketplace Coverage

Under Affordable Care Act regulations, employers must provide every new employee a Notice of Health Insurance Marketplace Coverage Options within 14 days from their date of hire regardless of benefit eligibility status or of part-time or full-time status.

• US Department of Labor: Notice to Employees of Coverage Options
• US Department of Labor: Notice of Coverage Options FAQ
• Employer Notice of Marketplace Coverage: Template
• Employer Notice of Marketplace Coverage: Questions and Answers

ACA guidance for PEBB participating employer groups

This section contains general information about legal and tax matters. The information is not legal or tax advice and should not be treated as such. You should not rely on this information as an alternative to obtaining legal or tax advice from a licensed attorney or tax specialist. We encourage you to consult with your legal or tax advisors on all aspects of the Affordable Care Act and how it impacts you as a unique employer.

Employer shared responsibility

Employer shared responsibility provisions were added under Internal Revenue Code section 4980H by the Affordable Care Act. Under these provisions, certain employers (called applicable large employers or ALEs) must either offer health coverage that is “affordable” and that provides “minimum value” to their “full-time” employees (and offer coverage to the full-time employees’ dependents), or potentially make an employer shared responsibility payment to the IRS.

Whether an employer is an ALE depends on the size of its workforce. In general, employers employing 50 or more full-time employees including full-time equivalent employees are ALEs.

• 26 U.S.C. 4980H Shared responsibility for employers regarding health coverage
• Final Rule: Shared Responsibility for Employers Regarding Health Coverage
• Employer Shared Responsibility Provisions
• Q&As on Employer Shared Responsibility Provision under the ACA

Large employers must report offer of coverage information

Applicable large employers (ALEs) are required to report information about whether they offered coverage to employees and if so, information about the offer of coverage. ALEs are required to send this information to the IRS and employees. IRS uses this information to determine whether an ALE owes a payment under the employer shared responsibility provisions.

• IRS Section 6056 final regulations
• Instructions for Forms 1094-C and 1095-C
• Form 1094-C
• Form 1095-C

All employers must report "self-insured" (UMP) coverage

All employers that offer “self-insured” health coverage have information reporting responsibilities to the IRS. PEBB Uniform Medical Plans (UMP) are self-insured coverage. Under IRS regulations, employers who participate in PEBB (a multiple employer organization) are considered plan sponsors that are responsible for reporting self-insured enrollment of employees and former employees, and their enrolled dependents to both IRS and employees (and former employees).

• IRS Section 6055 final regulations
• Instructions for Forms 1094-C and 1095-C
• Form 1094-C
• Form 1095-C
• Instructions for Forms 1094-B and 1095-B
• Form 1094-B
• Form 1095-B

Note: Employer groups typically only use Forms 1094-B and 1095-B if they are not considered a “large” employer that reports using Forms 1094-C and 1095-C.

Most employers must electronically file ACA Forms with the IRS

Beginning in 2024 (for 2023 Forms 1095), employers who are required to file 10 or more of any tax form must send Forms 1094 and 1095 to the IRS electronically. Previously, the electronic filing requirement was for employers filing 250 or more forms.

The IRS “aggregation of returns” rule means that all Forms 1094, 1095, 1099, W-2 (and others) go into the count of ten, so even employers with very few employees may need to electronically file forms.

The new regulations continue to permit the IRS to grant exceptions to the electronic filing requirements in cases of undue hardship. If approved, the employer can continue to file on paper. To apply for a hardship waiver, employers can file IRS Form 8508. The IRS asks employers who are applying for a waiver to file Form 8508 at least 45 days before the due date of returns.

• IRS and Treasury issue final regulations on e-file for businesses
• Treasury Decision 9972: Electronic-Filing Requirements for Specified Returns and Other Documents
• IRS Form 8508: Application for a Waiver from Electronic Filing of Information Returns
• Affordable Care Act Information Returns (AIR)

How does HCA support your IRS reporting requirements?

Annual enrollment data reports

To complete Internal Revenue Service (IRS) 2023 Form 1095 reporting, your employer group will need PEBB medical enrollment data. HCA provides this data annually by [SECURE] email on or before January 10^th of each year (for the prior year).

Sometimes, enrollment data we provide may later change due to additions (e.g., retroactive enrollment), changes (e.g., corrections to previously keyed data), or deletions (e.g., retroactive termination). When this occurs, we will provide an amended data file that describes any changes to data previously provided.

Who at your employer group will receive enrollment data files?

Enrollment data files are sent to the contact person designated by your employer group. Near the end of each year (before sending enrollment data), we will confirm contact information by email.

Enrollment data supporting documents

• EG Medical Enrollment Data Dictionary
  • This document describes the layout of enrollment data files. The first page provides a simple record layout, file type, file naming convention, and data distribution schedule. The following pages provide definitions of all data fields.
• PEBB Highlighted Instructions for Sample Amended EG Files
  • This document provides color-coded crosswalks between PEBB Sample Amended EG File records and PEBB Sample Full Year EG File records.
• PEBB Sample Full Year EG File
  • A sample .txt data file with three scenarios:
    • Jonathan Q Public – An enrolled employee who retired at the end of February 2023
    • Jane A Doe – An enrolled employee who added a spouse to coverage effective October 1, 2023
    • Sheila S Newby – An enrolled employee whose coverage began in December 2023
• PEBB Sample Amended EG File
  • A sample .txt data file that provides examples of four common scenarios where previously provided 2023 enrollment data record(s) would be amended by new 2023 enrollment data record(s). In all cases when an amended record is provided, it replaces the previously provided record.
• Opening a TXT file in Microsoft Excel
  • Instructions on how to open a “pipe-delimited” .txt file in Microsoft Excel. To practice, open the PEBB Sample Full Year EG File.

Enrollment data report webinar

A recorded webinar is available, which will help introduce you to both the Form 1095 reporting requirements and the enrollment data supporting documents. The webinar was provided in advance of 2020 reporting, so references to the tax year are dated, but the information is still relevant through tax year 2023 reporting.

• Minute 00:00: Introductions and housekeeping items
• Minute 02:40: Form 1095-B and Form 1095-C reporting information
• Minute 27:45: Review of enrollment data supporting documents distributed by HCA

Notifications of missing Taxpayer Identification Numbers (TINs)

A Taxpayer Identification Number (TIN) can be a Social Security Number (SSN), an Individual Taxpayer Identification Number (ITIN), or an Adoption Taxpayer Identification (ATIN).

In certain circumstances, a subscriber is permitted to enroll eligible dependents using a "temporary SSN" (e.g., 999-99-0001). The intent is for enrolled dependents to be able to access coverage without delay when the dependent’s SSN is not available at the time of enrollment. Temporary SSNs are not intended to be used permanently instead of a dependent's valid SSN and should be corrected as soon as possible.

In other cases, an SSN may be keyed that is simply invalid (e.g., all 9 numbers the same, invalid range of numbers) and should be corrected as soon as possible.

Missing TIN impact on Form 1095 reporting

Temporary and invalid SSNs should not be used on Forms 1095 because they are not the dependent’s valid SSN. IRS considers these "missing TINs." Regulations instruct employers to use a dependent's birth date instead of a "missing TIN." Using a birth date instead of a valid SSN may result in IRS penalty assessments (for submitting an incomplete Form 1095).

Resolving Missing TINs

Given the risk of IRS penalty assessments, employees should be encouraged to provide valid SSNs for all dependents enrolled under a temporary or invalid SSN as soon as possible.

The PEBB program requests valid SSNs from employees with missing TINs every other month by mail until a valid TIN is provided.

Periodically, the PEBB program will ask employers to reach out to employees who have a dependent enrolled under a temporary or invalid SSN to request a valid TIN. When this occurs, the employer will first receive an informational email and then a [SECURE] email that identifies each dependent enrolled with a temporary or invalid SSN. The employer should contact the Subscriber, request the valid SSN for the listed Dependent, and update the dependent record per your usual process.

In a small number of cases, the identified subscriber may be a former employee. It is important to reach out to former employees to solicit the valid SSN to ensure information used for Form 1095 reporting is as accurate as possible. If the former employee transferred to a different PEBB employer or terminated and was later hired at a different PEBB employer, you may need to request assistance from Outreach & Training staff to update the dependent’s SSN.

Other guidance documents

• IRS Form 1095 Matrix
  • This document describes which Form 1095, if any, a subscriber or employee should receive.

Health Benefit Exchange (HBE) notifications

An employer shared responsibility penalty is only triggered if a “full-time” employee who wasn’t offered medical coverage enrolls in coverage through an HBE and receives a health insurance premium tax credit.

When an employee applies for HBE coverage and is determined eligible for a health insurance premium tax credit, the HBE will notify the employer in writing. The employer who receives this letter should verify that PEBB eligibility was determined correctly for the employee (the employee may or may not be eligible for PEBB coverage; just verify that the employer’s determination was accurate). If employer-sponsored coverage was offered to the employee, the employer should follow up with the HBE (to let them know employer coverage was offered) and the employee (to let them know the employer will be contacting the HBE and that they may not be eligible for the premium tax credit due to the employer offer of coverage).

• Sample HBE Notice to Employers
• Letter from the Employer Template
• Employer Notice of Marketplace Template

Tax-related guidance

The following sections contain information and guidance for the reporting of employer-sponsored medical and dental costs on employee W-2 Forms, and for correcting tax issues related to nontax qualified dependents who are enrolled in PEBB benefits.

Reporting the cost of employer-sponsored health care on IRS Form W-2

Federal requirements for reporting on W-2s

Federal law requires reporting of employer-sponsored medical and dental costs on employee W-2 Forms. Employers are required to determine and report three numbers:

1. Employee contributions toward medical and dental insurance premiums.
2. The cost of employer-sponsored medical and dental care.
3. The cost of employer contributions and optional employee contributions through payroll deduction to a Health Savings Account (HSA) (if employee is enrolled in a CDHP).

For state agencies, Enterprise Services produces the W-2s and addresses this reporting. Payroll offices need to be aware of the reporting requirements in the event manual adjustments are required for an employee's year-to-date balance.

Yearly IRS Form W-2 reporting guidance

The W-2 reporting guidance provides employers with the calculations to complete the IRS Form W-2 reporting of health care. Use the guidance provided in the table below to report the cost of employer-sponsored health care coverage on IRS Form W-2.

State agencies and institutions of higher education	PEBB participating employer groups
2024 W-2 reporting guidance (for W-2s issued in January 2025) 2023 W-2 reporting guidance (for W-2s issued in January 2024) 2022 W-2 reporting guidance (for W-2s issued in January 2023) 2021 W-2 reporting guidance (for W-2s issued in January 2022) 2020 W-2 reporting guidance (for W-2s issued in January 2021) 2019 W-2 reporting guidance (for W-2s issued in January 2020)	2024 W-2 reporting guidance (for W-2s issued in January 2025) 2023 W-2 reporting guidance (for W-2s issued in January 2024) 2022 W-2 reporting guidance (for W-2s issued in January 2023) 2021 W-2 reporting guidance (for W-2s issued in January 2022) 2020 W-2 reporting guidance (for W-2s issued in January 2021) 2019 W-2 reporting guidance (for W-2s issued in January 2020)

Tax issues related to nontax qualified dependent insurance

Employees adding a dependent who does not qualify as a dependent for tax purposes under IRC Section 152, as modified by IRC Section 105(b), will have additional taxable income, which needs to be taxed and reported.

Examples of dependents who do not qualify include:

• State-registered domestic partner
• State-registered domestic partner's child

Employees with dependents who do not meet the Section 152 definitions may continue to make premium contributions for their own insurance coverage with pretax payroll deductions but contributions for the dependents must be deducted on a posttax basis.

When adding a dependent who does not qualify as a dependent for tax purposes to their employer-sponsored insurance, employees are required to complete and submit the Declaration of Tax Status form to their benefits administrator. The IRS provides information on how to determine a dependent’s tax status. The employee may use the Worksheet for Determining Support in IRS Publication 501, available on the IRS website, to assess whether a dependent qualifies as a dependent for tax purposes.

The Health Care Authority (HCA) recommends that employees enrolling nontax qualified dependent, review their tax status declaration annually during the PEBB annual open enrollment period (November 1-30). The declaration requires the employee to anticipate the dependency status of their dependent for the upcoming year.

The annual resources below provide additional guidance for the employer, examples of status changes, and instructions for making corrections.

• 2024 Nontax qualified dependents
• 2023 Nontax qualified dependents
• 2022 Nontax qualified dependents
• 2021 Nontax qualified dependents
• 2020 Nontax qualified dependents