What Do I Need to Know About ICHRA Reporting Requirements?
One of the features about ICHRAs is that reimbursements are free of payroll taxes (for employers and employees) and from income tax (for employees). In light of that, there are no W-2 reporting requirements for employers. But that doesn’t mean you get off scot-free. There are other reporting requirements for employers that administer an ICHRA, depending on the size of your business.
(Irrelevant aside: The phrase “scot-free” did not originate in Scotland. It comes from medieval England when there was a municipal tax called a “scot,” and if someone avoided paying it, they were said to have gotten off scot-free. We don’t recommend trying that in this case, however, as neglecting to fulfill these requirements can mean hefty penalties. More on that below.)
Anyway, here are the reporting requirements for companies that offer an ICHRA, based on the size of the employer. Small employers are considered those with fewer than 50 full-time employees (or full-time equivalents). Large employers are those with more than 50 employees (or FTEs) at any time during the year.
Form 1094/1095 reporting
Small employers must:
- Submit Forms 1094-B and 1095-B to the IRS for every employee who had an ICHRA in the previous year. This form provides information about the coverage an employer offers to its employees.
- Send employees Form 1095-B, which informs employees how the employer calculated affordability. This form goes to all employees who were full-time for at least one month out of the year. Completing these forms requires collecting information about the employer, the plan, and the people covered under the plan.
Due dates: Employers have until Jan. 31 to mail these forms to employees. Paper copies must be mailed to employees, unless they opt in to receiving them electronically. The deadlines for filing with the IRS are Feb. 28 for paper filers and March 31 for electronic filers.
Large employers must:
- Submit Form 1095-C to the IRS for every employee who was employed full time in the previous year, and for every part-time employee who was enrolled in an ICHRA. This form provides information about the coverage an employer offers to its employees.
- Send employees Form 1095-B, which informs employees how the employer calculated affordability. This form goes to all employees who were full-time for at least one month out of the year.
Due dates: Employees are to receive these forms by March 2. The deadlines for filing with the IRS are Feb. 28 for paper filers and March 31 for electronic filers. (Employers who submit at least 250 of these forms must file electronically.) Paper copies must be mailed to employees, unless they opt in to receive them electronically.
Penalties: Fines levied for both large and small employers for filing Form 1095-B late can add up quickly:
- Up to 30 days: $50 per return
- 31 days late, through Aug. 1: $100 per return
- After Aug. 1: $250 per return
All employers that have self-insured plans, such as an ICHRA, must pay a yearly fee for the Patient-Centered Outcome Research Institute (PCORI), regardless of the size of the company. The PCORI fee is paid directly to the IRS.
Due date: The PCORI fee is due by July 31 of the year following the plan year, at least through 2029, unless that date falls on a weekend or federal holiday.
Penalties: Failing to file can mean penalties as high as 5% of the amount due per month (with a cap of 25% of the amount due).
Under ERISA, a Form 5500 is required for any welfare benefit plan, including ICHRAs, but only for companies with 100 or more employees.
Due date: Form 5500 is due on the last day of the seventh month after the plan year ends. If the plan follows a calendar year, that would be July 31 for the previous year.
Penalties: Significant penalties apply if Form 5500 is not filed, is filed but incomplete, or is filed late. A penalty of up to $2,233 could be assessed for each day a plan administrator fails to file a complete and accurate report.
For a deeper dive: 5500 Reporting: When and How Do I File?
Keep in mind that we are not tax professionals. If you have more specific questions about tax reporting, contact an accountant for more detailed tax information. If you need help in any of these areas, we can guide you in the right direction.